Guide to ADGM Exempt Funds - 10 Leaves

  • 03-06-2020
The ADGM is an upcoming international financial centre in the MENA region for business and fintech. The quality of ADGM’s independent regulator, the prevailing common law framework, excellent infrastructure and tax efficiencies make it the perfect base to take advantage of the rapidly growing demand for financial and business services in Abu Dhabi and the greater MENA region.  

 

Why setup a financial services firm in the ADGM?

The ADGM is one of two international financial centres in the UAE. Established in 2015, it quickly rose through the rankings and is now counted as one of the top 25 financial centres in the world. ADGM’s innovative SPV regime, its initiatives in the fintech space and its issuance of the region’s first cryto-asset regulatory framework, have all contributed to its success. 

Clients who wish to cater primarily to the Abu Dhabi market, sovereign wealth funds and Abu Dhabi family offices may consider setting up in the ADGM.

Specific Advantages:

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

LEGAL AND REGULATORY FRAMEWORK:

  • Legal framework supports cross-border activities
  • 100% foreign ownership permitted
  • No restriction on foreign talent or employees
  • No restrictions on capital repatriation

TAX BENEFITS:

  • Zero tax for 50 years on profits, capital or assets from 2004
  • Zero tax on employee income

COUNTERPARTY CONFIDENCE:

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

DIVERSE ECOSYSTEM:

  • Central to regional deal making
  • High concentration of international firms, investment funds, wealth management firms, banks, and financial institutions
  • World-class regional and international law and auditing firms, and other 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 centre 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.

Exempt Funds in the ADGM:

Exempt Funds are subject to lower regulation in the ADGM, due to the fact that they are open to accredited clients only. An ADGM Exempt Fund has a minimum subscription of US$ 50,000 and is open to Professional Clients only.

Who is a Professional Client?

The ADGM has a detailed definition of Professional Client, which includes service-based, assessed and deemed professional clients. While specifics are best checked at the FSRA website (or you can contact us for more details), in general, assessed professional clients are subject to the net asset test of US$ 500,000.

Other features:

All units in an ADGM Exempt Fund would have to be offered to persons by way of private placement only.

The FSRA has a fast-track process for fund managers who wish to manage exempt funds from the ADGM. The base capital requirements are also lower – US$ 50,000 as opposed to US$ 250,000 in case of fund managers of public funds.

Since Exempt Funds are offered to professional clients only, the FRSA has relaxed many requirements that otherwise apply to public funds. ADGM Exempt Funds are permitted to add oversight arrangements, but this is not mandatory. Also, for most closed-ended funds, it is not mandatory to appoint a fund administrator. Read this article to know more about the other service providers that may be required for ADGM Funds.


ADGM Exempt Funds enjoy a fast-track application process where the FSRA aims to complete the process within a period of 10-12 days. Documents required to be submitted include the Private Placement Memorandum and the Fund Constitution, in case of a fund structured as an investment company. Learn more about the documents required for ADGM funds by clicking here..

Setting up a fund structure in the ADGM:

Setting up a fund in the ADGM requires either a) setting up a Domestic Fund Manager or b) licensing an existing fund manager in a recognized jurisdiction, to act as the External Fund Manager of the ADGM fund. Read this article to know more about the licensing process and associated costs.

Our services include assistance in:
1. Reviewing the fund structure and advice on the applicable regulatory framework;
2. Preparation of the Regulatory Business Plan and comprehensive financial projections;
3. Preparation of all policies, processes and manuals required;
4. Provision of Outsourced Compliance Officer and Outsourced Finance Officer services;
5. Finalising the legal structure, including holding company setup and customisation of Memorandums;
6. Preparation of complete fund documentation, including Private Placement Memorandums, Subscription Agreements and Fund Constitutions;
7. Assistance in finalisation of all service providers, including Fund Administrators, External and Internal Auditors; and
8. Finalisation of leased space, bank account opening and obtaining Financial Services Permissions.

 

Contact us to discuss your fund requirements today!

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