Setting up a Special Purpose Vehicle (SPV) in ADGM
The Abu Dhabi Global Markets (ADGM) is an international financial free zone for local, regional and international institutions. In operation since October 2015, the ADGM provides a broad range of services, covering insurance, wealth management, banking, asset management and capital market activities.
ADGM’s jurisdiction extends across Al Maryah Island, Abu Dhabi with three independent governing authorities; the Registration Authority (RA), the Financial Services Regulatory Authority (FSRA) and the ADGM Courts.
Aligned with international standards and best practices of global financial centres, the ADGM is recognised as robust, progressive and responsive, making it one of the of the most trusted financial centres in the GCC.
As part of their services, the ADGM platform offers a flexible, simple and efficient Special Purpose Vehicle (SPV) regime which has been designed and benchmarked against international standards and alternatives. The regime caters to the requirements of a broad range of businesses and industries, with no restrictions on who can set up an ADGM SPV.
What is an SPV?
A Special Purpose Vehicle (SPV), also known as a Special Purpose Company (SPC) or a Special Purpose Entity (SPE), is an entity which is considered ‘bankruptcy- remote’. An SPV is usually a subsidiary which is protected in case the parent company goes bankrupt and considered isolated in case the same happens in reverse. An SPV can be used to finance as well as buy and sell assets which are often held on an off- balance sheet, aiming to limit liability and isolate financial risk. Setting up an SPV in the UAE can either be done through the Abu Dhabi Global Market (ADGM) or the Dubai International Financial Centre (DIFC).
What are the benefits of setting up an ADGM SPV?
ADGM’s SPV regime is regarded as a highly flexible and cost-effective solution for structuring asset holdings and investments. The regime offers business owners and asset holders greater freedom while allowing for separation of financial and legal risk. Under the direct application of English Common Law, SPVs follow companies’ regulations rather than separate regulations, which ensures consistency across all corporate vehicles.
Key features of the ADGM SPV include:
- Fast, efficient set-up process via PRO Partner Group
- Highly competitive fees and transparency of pricing
- No office required based on an agent being appointed
- Registered companies are permitted to apply for a tax residency certificate to benefit from the UAE double tax treaty network
- Variety of legal structures available
- No restrictions on the number of shareholders
- Common law jurisdiction
- Independent ADGM courts
- Independent regulatory framework
- No attestation required for corporate documents
- Shelf SPVs permitted
What are the typical uses of an ADGM SPV?
An ADGM SPV is most commonly used to hold shares in other companies in the UAE. It can effectively act as the 49% foreign shareholder in an onshore UAE LLC, whilst allowing the shareholders to have collective ownership of assets and IP within a robust local English Common Law jurisdiction. Below we list the key uses of an ADGM SPV corporate vehicle:
- Risk Sharing - allows an organisation to legally isolate legal and financial risk. SPVs are often used to form project companies for joint ventures, reflecting management responsibilities whilst isolating the partners’ risks associated with the joint venture.
- Financing - an SPV can be used to obtain financing without increasing the debt of the parent company or exposing the parent’s asses to cross-liabilities. It also enables investors to invest in specific projects as opposed to investing in the parent directly.
- Securitisation - SPVs are commonly used by organisations to securitise loans or other receivables. The SPV can purchase these assets by issuing securities to investors in the capital markets.
- Real estate investment - SPVs can be used to acquire properties. If the taxes on the property sale are higher than that of the capital gain, the SPV can be sold instead of the properties and tax is then paid on the capital gain as opposed to on the property sales tax.
- Asset Transfer - certain assets can be hard to transfer, therefore, a parent company may create an SPV to own these assets. When they wish to sell the asset, the SPV can be sold as a self-contained package.
- Raising Capital - an SPV may get favourable borrowing rates when raising capital. Since underlying assets are owned by the SPV, the credit rating may be preferable to the parent entity.
- Intellectual Property - an SPV can be used to hold the intellectual property of the parent company. Since this a non-operational entity, there would be less risk. Licence agreements can be put in place with the operating entities for them to have use of the IP.
How do I set up an ADGM SPV?
The ADGM SPV application and payment processes are fully digital and can be completed via the online registry solution through the ADGM portal.
To ease the process, ADGM does not normally require any personal visits or submittal of original hard copies of documentation during the setup process. In addition it does not require the full consularisation of foreign corporate documents as part of the formation process, only certification of documents is required, which saves time and money.
Please see below the outlined process steps for ADGM SPV application completion:
- Step 1 - Create a Profile
Create a profile and review and prepare the required documentation for the application process. A brief business plan including structure, shareholders and purpose will also be required for pre-approval and application. The documents required for application are listed below.
- Step 2 - Application Completion
Complete all required forms and submit the application along with the above listed documentation and required payment.
- Step 3 – Notification
Provided all information and required documentation is correctly submitted, the process can be completed within a few days. The status of your application will be available on your online dashboard and you will be updated via email should any changes be required for your application. Upon the Registrar’s final decision, you will receive a notification via email.
- Step 4 - Licence issuance
Based on a successful application, you will receive a soft copy of your licence. You will also be provided a link in the email enabling you to set up an appointment to collect all original documentation.
What documents are required to set up an ADGM SPV?
- Articles of Association (AoA)
Either model articles, model articles with amendments or a fully bespoke AoA can be drafted and used here.
- Registered office address
Copy of lease agreement or signed consent letter for provision of registered office address. ADGM allows the use of an ADGM company service provider to provide the registered office address.
- Resolution of Board of Directors or Shareholders Resolution
Only copy is required.
- Passport information and signature page for each authorised signatory, director, shareholder, and beneficial owner
Only copy is required.
- UAE visa page in passport for each authorised signatory (for UAE residents)
Only copy is required.
- Emirates ID for UAE national authorised signatory
Only copy is required.
- Certificate of Incorporation / Registration for each director and shareholder that is a body corporate
Certified copy (certified within the last three months)
Please note that any corporate services within ADGM will be delivered through a third party ADGM registered Corporate Service Provider (CSP). PRO Partner Group is not a CSP within ADGM.