The Abu Dhabi Global Market (ADGM) is an international financial centre, offering many options for licensing regulated and non-regulated structures, besides initiatives for tech-startups and fintech companies.
Another initiative of the ADGM is the Special Purpose Vehicles (SPV) regime. The SPV regime is open to a wide variety of uses, from investor-friendly holding structures, to asset separation and transfer.
What is the ADGM?
The Abu Dhabi Global Market is an international financial centre for local, regional and international institutions, established in Abu Dhabi, the capital of the United Arab Emirates, and operational from 2015. It has been voted the ‘Financial Centre of the Year (MENA)” and has continuously brought out innovative solutions for the growing financial services market in the region.
ADGM has three independent authorities – the Registration Authority, the Financial Services Regulatory Authority (FSRA) and ADGM Courts. ADGM entities are established under Common Law. Whereas other jurisdictions codify the English common law, the ADGM has adopted it completely in its original form. This is implemented to help facilitate ease of doing business for foreign investors – a first in the region.
What is an SPV?
SPVs are usually established to isolate financial and legal risk by ring-fencing assets and liabilities. SPVs can be established as subsidiaries, project or joint venture vehicles to ensure that only those assets related to a transaction are exposed to the liabilities associated with that transaction. You can read more about ADGM SPVs here.
Features of an ADGM SPV:
An ADGM SPV offers multiple classes of shares, including fractional shareholding, a first for the region. Coupled with an option to completely customise the Memorandum, the ADGM SPV provides a viable option for a range of holding and investment structures.
Other salient features include:
- No attestations for corporate documents – certified copies suffice
- No restrictions on nationality of ownership
- Minimum requirement of just 1 shareholder and 1 director – can be non-resident
- One GCC-resident authorised signatory required
- No minimum share capital
- No maximum number of shares
Here are some specific advantages of establishing in the Abu Dhabi Global Market:
- The legal framework supports cross-border activities
- 100% foreign ownership permitted, no restrictions on capital repatriation
- No restriction on foreign employees
- Zero tax for 50 years on profits, capital or assets
- Zero tax on personal income
- Well regarded, independent regulator
- Independent, English-speaking, common law judicial system
- Distinct from the UAE civil courts
- Risk-based regulatory approach
- High prominence in deal making in the region
- Concentration of international financial institutions
- World-class regional and international professional services
- A growing fund domicile in the region
- Management offices, holding companies and family offices are located closer to the assets they own or manage
- The Middle East, Africa and South Asia (MEASA) is increasingly the center of gravity for the global economy
- The UAE plays a central role in the growing South-South trade, principally between Asia and Africa
- Well-positioned to harness the potential of emerging markets.
Nexus requirements for ADGM SPVs:
One of the requirements for registration is to demonstrate a connection or nexus to the UAE and/or the GCC region. This can be demonstrated as follows:
- at least one of the authorised signatories will have to be a GCC-resident and
- the SPV will have to hold some assets within the GCC. This can be in the form of shares in an underlying UAE-based free zone entity, or any underlying entity in the GCC countries.
All shareholders and directors can be resident outside the UAE, provided at least one of the authorised signatories is a UAE-resident. The authorised signatory is able to sign singly or jointly on all official documentation and can be appointed to operate the bank account as well (should the shareholders prefer). Do note that most UAE-based banks require at least one of the shareholders to be resident in the UAE.
The ADGM SPV can also hold shares in UAE-based mainland and free-zone entities. In case of free zone entities, this can be upto 100%, and in the case of mainland entities, upto the extent allowed by the Economic Department of the particular emirate.
An application for an SPV that has foreign non-resident shareholders and does not hold any assets in UAE or GCC will not meet the nexus requirements, and hence will not be qualify for registration.
More on ADGM SPVs:
Are you looking for a comprehensive guide on ADGM SPVs? Click here.
Do you want to hold intellectual property in the name of an ADGM SPV? Click here to know more.
Are you looking at registering an SPV in the ADGM? Get in touch with us today!