4 June, 2024

Special Purpose Vehicle (SPV) Company Set Up In ADGM

adgm spv company formation

Introduction to ADGM SPV Company Formation

Setting up an ADGM SPV (Special Purpose Vehicle) as your holding company is an excellent option for businesses and their investors. The Abu Dhabi Global Market (ADGM) offers a range of benefits, making it a premier choice for SPV company formation. Here’s a detailed look at why ADGM stands out:

Key Advantages of ADGM SPV Company Formation

Cost-Effective Incorporation: One of the primary advantages of ADGM SPV company formation is the cost-effectiveness. The fees for setting up and maintaining an SPV in ADGM are significantly lower compared to other jurisdictions, making it an economically viable choice for companies.

Fast and Simple Process: ADGM boasts a fully digitized incorporation process. This means businesses can complete the setup quickly and with minimal hassle. The streamlined procedures reduce the time and effort required, allowing companies to become operational in just a few days.

Investment Flexibility: ADGM provides a highly flexible regulatory environment that supports a wide array of investment activities. This flexibility is particularly appealing to investors, enabling them to diversify their investment portfolios and pursue various opportunities without restrictive regulations.

Strong Legal Protections: The regulatory framework within ADGM offers robust legal protections for both businesses and investors. This secure legal environment helps to safeguard investments, ensuring that both parties have confidence in the stability and integrity of their operations.

Global Reputation and Credibility: Establishing an SPV in ADGM enhances your company’s credibility on the international stage. ADGM is recognized globally for its stringent regulatory standards and business-friendly policies, making it an attractive destination for multinational corporations and investors alike.

Enhanced Business Opportunities: By forming an SPV in ADGM, companies can tap into a broad network of financial and commercial opportunities. ADGM’s strategic location in Abu Dhabi, coupled with its state-of-the-art infrastructure, provides businesses with access to regional and global markets.

Tax Efficiency: ADGM offers significant tax advantages, including no corporate or personal income taxes. This tax-efficient environment allows businesses to maximize their profitability and reinvest in growth and expansion initiatives.

SPV In ADGM

The Abu Dhabi Global Market (ADGM) is an international financial centre located in the Emirate of Abu Dhabi, United Arab Emirates. Known for its innovative approach and business-friendly environment, ADGM has rapidly established itself as a premier financial district since its inception. In just a few years, ADGM has become a hub for fintech innovation, hosting events like the prestigious FinTech Abu Dhabi summit and fostering growth through incubators such as HUB-71.

Benefits of ADGM SPV Company Formation and Setup

Ease of Incorporation and Administration

ADGM SPV company formation offers a streamlined, fully digital process for incorporation, renewal filings, and ongoing administration. All documents can be signed online, eliminating the need for physical paperwork. Additionally, there are minimal annual obligations, and there is no requirement to hold an annual shareholder meeting, making the administration of an ADGM SPV exceptionally convenient.

Flexible Ownership Structures

The ADGM SPV setup is highly flexible regarding ownership structures. There is no minimum share capital requirement, and there is no cap on the number of shares or shareholders. Importantly, there are no restrictions on the nationality of share ownership. The Articles of Association for an SPV can be tailored to include multiple classes of shares (voting, non-voting, preferred), allowing for varied voting, dividend, and distribution rights. This flexibility makes it easier to align the SPV’s structure with the strategic needs of the business.

Cost Savings

One of the significant advantages of setting up an ADGM SPV is the cost savings. There is no need to rent physical office space, and shareholder documents do not need to be attested and legalized. Furthermore, there is no requirement for any parties to be physically present in the UAE, which reduces travel and accommodation expenses.

Attractiveness for Investment

ADGM SPVs are particularly attractive to investors due to their ability to issue convertibles such as SAFEs (Simple Agreement for Future Equity) and convertible notes. ADGM recognizes and enforces critical investor and governance rights, providing a secure and reliable legal framework. This legal protection gives investors confidence, making ADGM SPVs a robust platform for attracting capital.

Additional Benefits

The Abu Dhabi Global Market (ADGM) is known for its innovative approach and business-friendly environment. By choosing ADGM SPV company formation, businesses can leverage a host of additional benefits:

Regulatory Excellence: ADGM offers a strong legal and regulatory framework that enhances business confidence and investor security.

Tax Efficiency: ADGM provides a tax-efficient environment with no corporate or personal income taxes, boosting profitability.

Global Connectivity: Situated in Abu Dhabi, ADGM provides strategic access to regional and international markets, enabling businesses to expand their global footprint.

What can an ADGM SPV be used for?

 Typical Uses of an ADGM SPV Company Formation

(i) ADGM SPV as a Passive Holding Company

An ADGM SPV can be utilized to hold investments in companies located in the UAE, Saudi Arabia, and globally. These investments can include shares, convertibles, warrants, and notes in the underlying entities. The SPV can generate dividend income from these investments and realize capital gains upon divestment. It is important to note that ADGM SPVs are restricted from acting as operational holding companies; they cannot have employees, maintain office space (beyond what is provided by the Company Service Provider like 10 Leaves), or engage in activities that indicate active management of investments. For operational management, setting up an operational holding company in ADGM is recommended.

(ii) ADGM SPV as a Securitisation Vehicle

An ADGM SPV can be used by an originating party to securitize loans or other receivables. The SPV purchases these assets by issuing debt secured against them. The ADGM allows pledges to be registered with the Registration Authority, which must be cleared before any share transfers can occur. For detailed guidance on registering a pledge with the ADGM, please get in touch with an expert.

(iii) ADGM SPVs Holding Real Estate Investments

ADGM SPVs can acquire titles to real property, limiting recourse of mortgage lenders depending on the asset’s location. In some jurisdictions, transferring the SPV’s shares can result in lower taxes and transaction fees compared to transferring the asset itself. For more information on structuring real estate investments through an ADGM SPV, refer to this detailed article.

(iv) ADGM SPV in Financial Transactions

An ADGM SPV can be used to ring-fence certain investments, allowing for financing without increasing the parent firm’s debt levels or exposing the parent’s assets to cross-liabilities.

(v) ADGM SPV as Asset Transfer Vehicles

ADGM SPVs can facilitate asset transfers in conjunction with material agreements. These transfers can be triggered by specific milestones and incorporated into legacy-planning solutions for long-term asset transfers.

(vi) ADGM SPV as Risk Sharing Vehicles

In joint ventures, an ADGM SPV can form specific project-based companies, reflecting agreed management responsibilities while legally isolating joint venture partners from associated risks. Passive management of the SPV is required, meaning the SPV cannot have employees or office space and must not actively manage the joint venture.

(vii) ADGM SPV for Raising Capital

ADGM SPVs can be used to raise capital, with creditworthiness determined by the SPV’s collateral rather than the parent firm’s credit rating.

(viii) ADGM SPV for Intellectual Property Holding

ADGM SPVs can separate intellectual property (IP) into a distinct structure with minimal liabilities. This structure can raise funds and enter into licensing agreements with third parties. For more details on holding intellectual property using an ADGM SPV, refer to this informative article.

By leveraging the flexible and efficient structure of ADGM SPV company formation, businesses can optimize their asset management, enhance investment appeal, and achieve strategic financial goals. For more information on ADGM SPV setup and its benefits, consult with professional advisors or explore the ADGM’s official resources.

KYC requirements for ADGM SPVs

The Abu Dhabi Global Market (ADGM) stands out as a well-regulated, transparent jurisdiction ideal for Special Purpose Vehicle (SPV) company formation. The ADGM maintains a public register where details of shareholders, directors, authorized signatories, and secretaries are accessible to the general public. Nominee arrangements are permissible, with firms like 10 Leaves offering services as nominee shareholders, directors, or authorized signatories. It’s important to note that Ultimate Beneficial Owners (UBOs) must be declared to the ADGM Registrar.

KYC and Due Diligence Requirements

To set up an ADGM SPV, certain Know Your Customer (KYC) documents are required, including:

  • Passport copies
  • Emirates IDs/visas for authorized signatories
  • Proof of residence
  • Other standard due diligence documents

Enhanced due diligence may be necessary in some cases. All submitted documents must be certified true copies of the originals.

Office Space Requirements

ADGM SPVs are not required to have dedicated physical office spaces; however, they must maintain a registered address within the ADGM. The ADGM allows the use of offices provided by ADGM-based service providers for this purpose. At 10 Leaves, we offer registered agent services in the ADGM, along with company secretarial services. Contact us for a customized quote on our comprehensive services.

Costs Involved

  • First Year Fee: US$ 2,000, which includes Data Protection fees of US$ 300.
  • Recurring Annual Fee: US$ 1,200 from the second year onwards.

Why Choose ADGM SPV Company Formation?

  1. Regulatory Transparency: ADGM provides a highly transparent regulatory environment, with all SPVs listed on a public register.
  2. Nominee Arrangements: Flexible nominee arrangements are available, ensuring privacy while maintaining compliance.
  3. KYC Compliance: Robust KYC and due diligence processes safeguard against financial crimes.
  4. No Physical Office Requirement: SPVs can operate without a dedicated office, reducing overhead costs.
  5. Cost-Effective Setup: Competitive fees make ADGM an attractive option for SPV formation.

 

FAQ : ADGM SPV Company Formation : 

 

What is an SPV in ADGM?

A Special Purpose Vehicle (SPV) in the Abu Dhabi Global Market (ADGM) is a passive holding company created to isolate financial and legal risks by ring-fencing certain assets and liabilities. The ADGM SPV regime is designed to be flexible, robust, simple, and efficient, benchmarked against leading global standards.

How do you structure an SPV?

Family Structure:

  • You and your spouse are each named as SPV directors.
  • Each parent takes an equal share of the majority of shares, while a small non-director share is given to each child.
  • For example, in a family of five, the shares might be split with 35% going to each parent, and 10% to each child.

How to set up an SPV in UAE?

Setting up an SPV in ADGM involves four main steps:

  1. Create a Profile: The ADGM SPV application and payment process is fully digital and can be completed on the ADGM portal.
  2. Complete the Application: Fill out all required details and submit necessary documents.
  3. Notification: Await notification from ADGM regarding the status of your application.
  4. Issuing of License: Once approved, the license will be issued, allowing the SPV to commence operations.

How much does it cost to get an SPV in Dubai?

The cost of establishing an ADGM-approved SPV in the UAE varies. In the first year, the fees are as follows:

  • ADGM fee: USD 1,600
  • ADGM office address and service fee: USD 1,400 Total first-year cost: Approximately USD 3,000.

What is the difference between an SPV and a holding company?

  • SPV: Typically set up for a specific project or asset, often owning a single property or investment. It isolates risks associated with specific assets.
  • Holding Company: Owns shares in multiple subsidiary companies. Individual shareholders own shares in the holding company, which in turn is the 100% shareholder of all subsidiary companies. For buy-to-let investments, each subsidiary functions like an SPV, containing one property only.

What are the disadvantages of an SPV?

  • Ongoing Compliance Costs: Setting up an SPV can require ongoing legal and accounting assistance to ensure regulatory and legal compliance.
  • Reputational Risk: If the business or venture within the SPV is high-risk, it may impact the parent company’s reputation.

Can an SPV be a limited company?

Yes, an SPV can be set up as a private company limited by shares, but it is not restricted to this structure. An SPV can also be a public limited company, a limited liability partnership, or another type of business entity.

Enhance Your Understanding:

When considering ADGM SPV company formation, it is essential to understand the benefits and nuances of SPV structures. ADGM offers a streamlined, fully digital incorporation process, making it an attractive option for businesses looking to isolate risks and optimize their investment strategies. For detailed guidance on ADGM SPV setup, consult with experts who can navigate the complexities of legal and regulatory requirements, ensuring a smooth and compliant establishment of your SPV.