ADGM SPV Regulations - 10 Leaves

  • 28-03-2020
 INTRODUCTION:

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.

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 holding ADGM SPV provides a viable option for a range of  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

Specific Advantages:

Here are some specific advantages of establishing in the Abu Dhabi Global Market.

FRAMEWORK:

  • The legal framework supports cross-border activities.
  • 100% foreign ownership permitted, no restrictions on capital repatriation.
  • No restriction on foreign employees.

TAX EFFICIENCIES:

  • Zero tax for 50 years on profits, capital or assets.
  • Zero tax on personal income.

CONFIDENCE:

  • Well regarded, independent regulator.
  • Independent, English-speaking, common law judicial system.
  • Distinct from the UAE civil courts.
  • Risk-based regulatory approach.

ECOSYSTEM:

  • 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. 
GEOGRAPHIC EPICENTRE:
  • 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.

ADGM SPV Rules and Regulations:

An SPV in the ADGM subject to regulation from the ADGM Registration Authority (RA). The RA accepts and reviews applications and issues licenses. The ADGM has a Monitoring Authority that monitors ongoing compliance with the relevant regulations.

Companies Regulations:

Modelled on the UK Companies Regulations, the ADGM Companies Regulations are comprehensive, and cover all aspects of company formation, constitution, operations and management. This is the primary regulation governing ADGM SPVs.

Commercial Regulations:

The ADGM Commercial Regulations make provision for the licensing and supervision of companies in the Abu Dhabi Global Market, for restrictions on the use of business names and for connected purposes.

Beneficial Ownership and Control Regulations:

These regulations were recently issued and make provision for beneficial ownership and control systems for legal entities registered in the Abu Dhabi Global Market.

Data Protection Regulations:

ADGM has a comprehensive regulation for data protection, that governs the processing of data of all ADGM SPVs. The SPV is required to appoint a data controller and ensure that it complies with the regulation for processing and storage of personal data and personal sensitive data, among others.

Insolvency Regulations:

While most ADGM SPVs may opt for a voluntary strike-off in case of insolvency, they would require to comply with the Insolvency Regulations.

Real Property Regulations:

ADGM SPVs can hold real estate in the UAE and elsewhere. In this case, the SPV will also have to comply with the Real Property Regulations.

Rules:

All ADGM SPVs are subject to the rules derivative of the corresponding regulations above, namely the Commercial Licensing Regulations Rules and Companies Regulations Rules.

ADGM Courts:

The ADGM Courts form an independent part of the ADGM, and Special Purpose Vehicles setup in the jurisdiction will be subject to the laws of the ADGM Courts, which are based on Common Law. 

Legal Structure:

Most ADGM SPVs are structured as “Private Company Limited by Shares”, which is a standard private company limited by shares, similar to UK Limited Companies. One shareholder & 1 Director companies are permitted. However, the SPV has to appoint at least one GCC-resident authorised signatory, as part of the Nexus requirements.

Restricted Scope Companies, (or RSC) are allowed as well, to certain clients. This offers limited information disclosure on the public register; however, full disclosures would have to be made to the Registrar. To account for the fact that this less stringent approach could prejudice shareholders and creditors, RSCs may only be incorporated as a subsidiary of a public company, or as a family office.

Bottomline:

The SPV regime in the ADGM is well structured, flexible and very cost-effective. Offering an international holding structure, based in a well-regarded jurisdiction, will provide comfort to regional investors, as well as others who wish to conduct business or hold investments in the greater MENA area.
 
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