A key concern for many foreign investors and business entering the GCC markets is usually how to amalgamate and manage underlying assets. Viable structures tend to be in demand that could meet the aim of consolidating assets and investments.
Defined as a gateway into the growing economies of the Middle East, North African and South Asian markets. The Abu Dhabi Global Market (ADGM) is an international financial centre found within the capital of the UAE.
The ADGM is a financial free zone with its own civil and commercial laws as well as its own financial services regulator, the Financial Services Regulatory Authority (FSRA).
Any corporate entity or an individual setting up a company in the ADGM can have 100% foreign ownership and would be subject to the civil, commercial, and regulatory environment like that established in the United Kingdom. The ADGM also includes the ADGM Courts, the infrastructure of which uses the common law in practice, which allows registered companies to draw on a well-established set of precedents. Ultimately, this type of set up provides peace of mind to foreign investors and businesses alike.
An ADGM SPV is created to isolate financial and legal risk by ring-fencing assets and liabilities. SPVs can be formed as subsidiaries, projects, or joint venture vehicles to ensure that only those assets related to a transaction are exposed to the liabilities associated with that transaction.
The SPV is a private company limited by shares and is incorporated under the laws of the ADGM. It designed to hold assets and for investment purposes. The SPV can only act as a passive holding company and cannot conduct operational business nor provide services or hire staff.
An ADGM Holding company is typically a parent corporation, existing as a private limited company (Ltd). An ADGM can own other companies (subsidiaries), property, patents, trademarks, stocks and other assets, wherever they may be.
Another significant benefit for investors using the ADGM free zone ecosystem, is the use of an ADGM vehicle to own Dubai properties. In the past, the Dubai Land Department (DLD) had restricted the types of companies which were permitted to own property in the designated areas.
Now companies incorporated in ADGM can own properties in designated areas of Dubai.
In creating the Special Purpose Vehicle model, ADGM has drawn on the best available structures internationally and offers several different vehicles to fulfil narrow, specific, or temporary corporate objectives. ADGM Special Purpose Vehicle Company offers a competitive cost regime with a committed focus on speed and ease of process.
An SPV can benefit from a receiving a flow of dividends and royalties from underlying investments and /or assets.
Below we have listed some of the key uses of an ADGM SPV such as:
Like other jurisdictions and free zones within the UAE, the ADGM have outlined the Economic Substance requirements for ADGM SPV’s. The authorized signatory of the said ADGM entity will have to be a GCC-resident and the entity must also hold assets with the UAE and/or GCC. Hence, the ADGM Registrar must be satisfied that the applicant/licensee has fulfilled the ‘Nexus Requirement’.
The ADGM SPV regime is well regulated, flexible and a very cost-effective vehicle. It provides a holding structure with many uses, resident in the UAE (subject to fulfilling the resident requirements), and simple reporting obligations within a respected jurisdiction.
Author, Seema Aziz, Strategy & Business Development Director, Creation Business Consultants