The Special Purpose Vehicles (SPV) company setup in ADGM is a market-leading initiative. The SPV regime can be used for a wide range of purposes, including asset separation and transfer, investor-friendly holding structures, and more.
Abu Dhabi Global Markets (ADGM) is the worldwide financial free zone for national, regional, and international organizations. Since it began operating in October 2015, the ADGM has offered a wide range of services, including those related to banking, asset management, insurance, wealth management, and capital market activities.
Refer to our Abu Dhabi company incorporation page to know more if you wish to form a company there.
Abu Dhabi is under the jurisdiction of three different governmental bodies: the Registration Authority (RA), the Financial Services Regulatory Authority (FSRA), and the ADGM Courts.
WHAT IS AN SPV?
A “bankruptcy-remote” entity is referred to as a Special Purpose Vehicle (SPV), Special Purpose Company (SPC), or Special Purpose Entity (SPE). An SPV is typically a subsidiary that is isolated in the event of a parent business bankruptcy and protected in the event of the opposite. In order to reduce responsibility and eliminate financial risk, an SPV can be used for financing as well as the purchase and sale of assets that are frequently held off-balance sheet. In order to create an SPV in the United Arab Emirates, either Abu Dhabi Global Market (ADGM) or Dubai International Financial Centre (DIFC) can be used.
FEATURES OF AN ADGM SPV
- For corporate documents, there are no attestations
- Shelf SPVs are acceptable
- There are no limitations on ownership’s nationality
- A minimum of one shareholder and one director is required
- No maximum limit on shares
- No minimum share capital
- Shelf SPVs are acceptable
USES OF AN SPV COMPANY
- ADGM SPV as Passive Holding Company – Investments in businesses located in Saudi Arabia, the United Arab Emirates, or any other nation can be held in an ADGM SPV. Shares in the underlying companies, convertible securities, warrants, and notes are some examples of these. These investments may generate dividend income for the SPV as well as capital gains when liquidated.
It should be noted that ADGM SPVs cannot function as operational holding companies. As a result, they are not permitted to hire staff, maintain offices other than those provided by the company service provider, such as Relin Consultants, or engage in any other actions that might be viewed as active management of the underlying investments.
- ADGM SPVs Holding Real Estate Investments – Depending on where the asset is located, it may be used to get real estate titles and restrict the mortgage lenders’ rights of recovery. When compared to transferring the asset, the sale of the SPV’s shares may incur fewer taxes and transaction costs in some countries.
- ADGM SPV as Securitisation Vehicle – When a party originates a loan and uses the SPV to securitize it, the SPV buys the assets by issuing debt that is secured by the underlying assets. Pledges may be registered with the Registration Authority in accordance with the ADGM, and they must be satisfied before any share transactions on the SPV can take place.
- ADGM SPV as Asset Transfer Vehicles – might be used to transfer assets along with important agreements. These transfers can also be included in legacy-planning solutions for long-term asset transfers. They can be activated on particular milestones.
- ADGM SPV in Financial Transactions – This can be used to protect specific investments, allowing financing without increasing the parent company’s current debt levels or exposing the parent’s assets (or the assets of the SPV) to cross-liabilities.
- ADGM SPV as Risk Sharing Vehicles – Joint ventures may be utilized to create specialized project-based businesses. This would demonstrate the shared management responsibilities and legally protect joint venture partners from the joint venture’s risks.
Again, in these situations, only passive management of the SPV is permitted, which implies that the SPV structured as a joint venture cannot have employees, maintain an office, or appear as managing the arrangement actively in any other way.
- ADGM SPV For Raising Capital – This can be used to raise money, with the parent company’s credit rating being replaced by the SPV’s collateral as a measure of creditworthiness.
- ADGM SPV For Intellectual Property Holding – Can be used to divide intellectual property into a different structure that has no risk, can be used to raise money, and can be used to enter into license agreements with other parties.
LEGAL STRUCTURE OF AN SPV COMPANY
There are two options available:
- Private Company Limited by Shares (LTD) – A typical private corporation with a share capital. This type of registration, which resembles a UK limited company, is the most common. The ADGM Companies Regulations are actually based on the UK Companies Regulations, enhancing familiarity.
- Restricted Scope Company (RSC) – This allows for the limited disclosure of information on the public register, but full disclosures must be made to the Registrar. RSCs may only be incorporated as a family office or as a subsidiary of a public company to take into account the possibility that this less demanding method could harm shareholders and creditors.
TAX RESIDENCY OF AN SPV COMPANY
In order to take advantage of the UAE’s network of double tax treaties, ADGM SPVs may be qualified to seek a Tax Residency Certificate from the Ministry of Finance. There may be other requirements that the SPV must meet.
KYC REQUIREMENTS FOR SPVS IN ADGM
The ADGM is a transparent, well-governed authority. The public can obtain information about shareholders, directors, authorized signatories, and secretaries because all SPVs are registered on a public registry. It is acceptable to use nominee arrangements, and 10 Leaves may serve as a nominee shareholder, director, or authorized signatory. Note that the ADGM Registrar will need to know who the Ultimate Beneficial Owners are.
DOCUMENTS REQUIRED TO SET UP AN ADGM SPV
- Articles of Association (AoA)
- Registered office address
- UAE visa page in the passport for each authorized signatory (for UAE residents)
- Board of Directors or Shareholders Resolution
- Emirates ID for authorized signatories who are UAE citizens
- For each director and shareholder who is a corporate body, a certificate of incorporation or registration is required.
PROCESS OF SPV COMPANY SETUP IN ADGM
- Creating a profile – The applicant must create a profile, review the relevant paperwork, and get it ready for the application procedure. For pre-approval and application, a brief business plan outlining the structure, shareholders, and purpose will also be necessary. The list of required documents for application is listed above.
- Completing the application – The applicant must fill out the relevant forms, then send the application, the supporting documentation listed above, and make the necessary payments.
- Notification – The procedure can be finished in a few days, provided that all the necessary data and paperwork are accurately supplied. The online dashboard will show the status of the application, and the applicant will receive updates through email if the application needs to be changed. The applicant will be notified via email after the Registrar has made a decision.
- License issuance – If the application is accepted, the applicant will get a digital copy of their license. The email will also contain a link that will allow them to schedule a time to pick up all original documentation.
ADVANTAGES OF AN SPV COMPANY IN ADGM
- ADGM abides by the common law of England and Wales. For civil and business problems, this offers a solid and predictable legal framework. Common law principles are advantageous to businesses because they are understandable and consistent, making it simpler to understand legal challenges and contractual obligations.
- Access to favorable tax treaties between the UAE and more than 50 countries is made available to businesses through ADGM’s network of double tax treaties. By preventing double taxation and easing cross-border corporate operations, these treaties make ADGM a desirable destination for international tax planning and investment.
- A fast and effective business formation procedure is provided by ADGM. Companies can swiftly form an SPV and begin operating their businesses thanks to the simple registration and incorporation processes.
- Unlike some jurisdictions that require a physical office presence, ADGM enables businesses to register and function without one. This can provide more management freedom and drastically lower operational costs for the SPV.
- Companies that are ADGM registered are allowed to repatriate their capital and profits without restrictions. This makes it easy for businesses to effectively manage their accounts and transfer money across borders as needed.
Reach out to us at Relin Consultants for further assistance with our services regarding SPV company setup in ADGM.
What is the cost of SPV company formation in ADGM?
The initial year’s payment to the Registrar is $2000, which includes $300 in data protection fees. In years to come, the recurring annual fee will be US$1,200.
What is an SPV and what purpose does it serve in the ADGM?
SPV is a legal entity established for a specified and limited purpose. For a variety of financial operations, asset management, and risk isolation in ADGM, SPVs are often used. Their goal is to ring-fence and segregate particular assets or projects from the parent firm in order to lower risk exposure.
Does ADGM have a minimum capital requirement for an SPV?
There is no minimum capital requirement for SPVs in ADGM. Companies can choose their capital structure based on their unique requirements and corporate goals.
What tax advantages do SPVs in ADGM have?
For businesses based in the region, ADGM offers a 0% tax rate on corporate income, capital gains, and withholding taxes. One of the key attractions for companies wanting to create SPVs in ADGM is the tax-free environment.
Is common law the foundation of ADGM’s legal system?
Yes, the common law—more particularly, the common law of England and Wales—is the foundation of the legal system in ADGM. This gives companies access to a well-known and widely respected judicial system for civil and business disputes.
Are there any limitations on the repatriation of capital or profits from ADGM?
No, there are no limitations on the repatriation of capital or profits from ADGM. Funds can be freely transferred by businesses into and out of the country, enabling effective financial management.