Get Started with ADGM SPV: A Quick Overview

If you're a business owner or investor looking to establish a company in the UAE, you've likely heard of the Abu Dhabi Global Market (ADGM). ADGM is a rapidly growing financial center that offers a range of benefits to businesses and investors seeking to establish a presence in the Middle East. One of the most popular corporate structures in ADGM is the Special Purpose Vehicle (SPV), which is designed to help businesses achieve their strategic objectives while minimizing risk. 

In this blog article, we'll go through ADGM SPV in detail, including what it is, how it works, and its benefits. So, let’s dive in!

What is ADGM SPV?

An ADGM SPV is a legal entity that is set up for a specific purpose or activity. It is a popular corporate structure for businesses looking to undertake specific transactions, such as mergers and acquisitions, joint ventures, asset purchases, and securitizations. An SPV is a legal entity distinct from its parent company, which means that it has its own assets, liabilities, and legal status. It is also subject to its own set of regulations and laws, which can be more flexible than those imposed on other types of companies. 

What are the benefits of ADGM SPV?

ADGM SPVs offer several benefits to businesses and investors seeking to establish a presence in the UAE, including: 

1. Common Law Jurisdiction 

ADGM is a common law jurisdiction, which provides legal certainty and predictability for investors. 

2. No Physical Registered Address Requirement 

Unlike other jurisdictions, ADGM does not require an SPV to have a physical registered address within the free zone. 

3. Limited liability 

An ADGM SPV provides limited liability protection for investors, meaning that their personal assets are not at risk if the SPV becomes insolvent. 

4. Flexibility 

ADGM SPVs offer greater flexibility in terms of corporate governance, tax planning, and accounting than other types of companies. This makes them an attractive option for businesses looking to undertake complex transactions or operations. 

5. Regulatory environment 

ADGM is a rapidly growing financial center that is known for its transparent and efficient regulatory environment. This makes it an attractive destination for businesses and investors looking for a stable and predictable legal system. 

6. Taxation

ADGM SPVs benefit from the UAE's favorable tax regime, which includes no corporate tax, no personal income tax, and no withholding tax on dividends or interest payments. 

7. Can Obtain Tax Residency Certificates 

An ADGM SPV can obtain a tax residency certificate, which can be used to avail benefits under Double Taxation Avoidance Agreements (DTAA). 

8. Restricted Scope Company Available 

ADGM offers a Restricted Scope Company (RSC) structure, which allows for greater flexibility and reduced regulatory requirements for certain types of investment structures. 

Additional insights into the benefits of ADGM SPV here.

In addition to the general eligibility requirements for setting up an ADGM SPV, there are specific requirements and restrictions that should be considered before proceeding with the process. One important consideration is the nexus requirement, which relates to the connection between the applicant and ADGM, the UAE, or the GCC. There are two main ways to establish the necessary connection, either through the asset that the ADGM SPV will hold or through its ownership. 

Eligibility for an ADGM SPV

While an ADGM SPV can be an attractive option for certain investment structures, it is important to note that not all startups may be eligible to establish an SPV in ADGM. In addition to the general eligibility requirements discussed earlier, there are additional requirements and restrictions that must be considered: 

1. Nexus: In order to establish an ADGM SPV, an applicant must demonstrate an adequate connection or "nexus" to ADGM, the UAE, or the GCC. This connection can be established in one of two ways: 

• Asset: The SPV must hold an asset in the GCC region. For startups, this asset could be a subsidiary in any of the GCC jurisdictions that will carry out commercial activities of the startup. 
• Ownership: The SPV must have shareholders resident in the GCC region that collectively hold at least 25% of the shares of the SPV. It is important to note that demonstrating a nexus to ADGM, the UAE, or the GCC may require careful planning and structuring of the investment. 

2. ADGM authorized signatory: An ADGM SPV must have a GCC national or UAE resident appointed as the authorized signatory for the SPV. While nominee services can be used to assist with this requirement, it is important to ensure that the appointed authorized signatory meets the necessary qualifications and experience to fulfill this role. 

It is important to carefully consider these additional requirements and restrictions when determining whether an ADGM SPV is a suitable structure for your startup's investment needs. Seeking professional advice can help ensure that you are able to meet these requirements and establish an ADGM SPV that is compliant with ADGM's legal and regulatory framework. 

The Wrap

If you are considering setting up an ADGM SPV, it is important to work with a reputable and experienced corporate services provider. 

At KPI, we have a team of experts who can provide you with comprehensive support and guidance throughout the process of setting up your ADGM SPV. With years of experience in the UAE, our team has an in-depth understanding of the legal and regulatory framework in ADGM and can help you navigate the process of setting up your SPV with ease. 

We strive to deliver the highest level of services to our clients and ensure that their ADGM SPV is set up in compliance with all legal and regulatory requirements. 

Get in touch with our team us and learn about how we can help you establish your ADGM SPV and take advantage of the many benefits it has to offer.