This article has been researched and written by Thomas McNelliey and the team at Creation Business Consultants. AI has not been used in generating this article.
INTRODUCTION: SEIZING OPPORTUNITIES IN THE UAE
The UAE has developed a process for identifying itself to the world as a key global player in wealth management and business development, thus attracting individuals and corporations that want a stable base for their financial activities. The Wealth Management industry is projected to reach USD 269.80 billion by 2024, with financial advisory accounting for USD 250.90 billion.
Assets under management, however, are forecasted to grow at an Annual Growth Rate of 9.90% for the period 2024-2027, thereby creating a market volume of USD 358.10 billion by 2027. (Source: Statistica)
The article analyses the matters surrounding the choice of the right UAE jurisdiction to administer wealth either by way of trusts, foundations, or SPV companies. We intend to provide the readers with an understanding of the legal situation, regulatory environment, and pragmatic considerations attached to each option, to enable them to make an informed choice.
UNDERSTANDING TRUSTS, FOUNDATIONS, AND SPECIAL PURPOSE VEHICLE COMPANIES
Prior to drilling down into jurisdiction considerations, it is important to clarify the distinguishing features of trusts, foundations, and SPV companies:
A trust is a legal relationship in which one person, the settlor, gives property to a trustee for the benefit of one or more beneficiaries. Trusts are actively used for estate planning, asset protection, and wealth management.
Foundations can be formed to hold and manage assets for charitable, family or business purposes. Foundations are a hybrid of trusts and corporations, so they draw a mixture of characteristics which can become relevant to wealth management entities.
SPECIAL PURPOSE VEHICLE COMPANIES (SPVS):
SPVs are entities that are created for a particular, or temporary, purpose. In finance, SPVs are typically created for one-off transactions, securitisation, project financing or mergers and acquisition. They provide the legal formality so that risks remain legally isolated to individual transactions instead of broader corporate entities.
CHOOSING THE RIGHT JURISDICTION: ADGM, DIFC, RAKICC
The UAE is home to various jurisdictions, each offering distinct advantages. Prominent among these are the Abu Dhabi Global Market (ADGM), the Dubai International Financial Centre (DIFC), and the Ras Al Khaimah International Corporate Centre (RAKICC). Grasping the specific characteristics of each jurisdiction is pivotal for making well-informed decisions.
When you are looking at the relevant legal factors for wealth management companies between the Dubai International Financial Centre (DIFC), Abu Dhabi Global Market (ADGM) and Ras Al Khaimah International Corporate Centre (RAK ICC), you should consider the following key aspects:
PRACTICAL TIPS FOR DECISION-MAKING
Selecting a jurisdiction will not be stress-free, so make sure you build a strategy around the decision process. The following practical tips help anyone selecting a jurisdiction to establish trusts, foundations or SPV companies in the UAE.
Prepare for change in regulations and business plans by adding futureproofing to the decision-making process. Creation Business Consultants offers their clients quarterly General Manager training aimed at making our clients aware of any significant changes in the regulatory framework relevant to their business.
KEY FACTORS TO CONSIDER WHEN EVALUATING UAE JURISDICTION SUITABILITY
Please consider the regulatory framework and compliance obligations relevant to your organisation, with a special focus on any regulations for wealth management services, in order to ensure clarity from professionals at Creation Business Consultants.
LEGAL SYSTEM
- Consider the legal system of the particular location, either common law or civil law jurisdiction.
- Consider dispute resolution mechanisms and legal recourse available.
TAXATION POLICIES
- Consider laws on corporate taxation and how they would impact the financial services industry.
- Consider the implications of international tax laws, i.e., CRS.
INVESTOR PROTECTION
- Consider the level of investor protection and the disclosure requirements.
- Check the jurisdiction’s record for investor dispute cases.
FINANCIAL SERVICES LICENSES
- Consider the different types of licenses available for financial services.
- Consider the time frame for obtaining the relevant licenses and the ease of the process.
OPERATIONAL CONSIDERATIONS
- Consider infrastructure and service companies available to financial companies.
- Consider the availability of a skilled labour force and professional services.
MARKET ACCESS
- Assess how accessible the target market and customers are.
- Assess how easily the jurisdiction can connect and network with global financial markets and systems.
FUTURE-PROOFING CONSIDERATIONS
REGULATORY CHANGES
- Stay abreast of changes to the regulatory aspects concerning the financial sector.
- Get in early with the local regulators so that any updates and views on the latest developments can be obtained.
BUSINESS SCALABILITY
- Determine the degree to which business operations are scalable within a jurisdiction.
- Determine whether the jurisdiction can support the scaling and diversification of business.
TECHNOLOGICAL ADVANCEMENTS
- Assess the degree to which a jurisdiction is receptive to the advanced technology generally, and in finance.
- Assess the infrastructure to facilitate Digital Finance with Fintech.
ECONOMIC STABILITY
- The economic and political stability of the jurisdiction must be assessed.
- You need to assess any long-term economic policies and the subsequent impact on financial services.
TAKEAWAY: KEY CONSIDERATIONS AND SEEKING PROFESSIONAL ADVICE
In conclusion, the correct jurisdiction for trusts, foundations or SPVs in the UAE requires a review of the legal, regulatory and practical factors. Obtaining professional advice is important, and you are encouraged to contact Creation Business Consultants for such advice and to make a fully informed decision.
Connect with us today and embark on a journey to successful wealth management and business establishment in the UAE.
Email: [email protected] | UAE: +971 4 878 6240 | Saudi Arabia: +966 56 865 2329
