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). The Abu Dhabi Global Market (ADGM) offers a robust framework for the establishment of Special Purpose Vehicles (SPVs).    Established in 2013, Abu Dhabi Global Market (ADGM) is an International Financial Free Zone in Abu Dhabi, with its own civil and commercial laws based on English common law. Consolidation, management, and asset protection are critical considerations for investors globally, especially in the GCC. ADGM offers an excellent corporate structure that effectively addresses these investor concerns. 

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 an SPV?

An SPV is a legal entity that is formed to protect against financial and legal risks by separating assets and liabilities. They can be set up as subsidiaries, project entity, or joint ventures to ensure that only the assets involved in a specific arrangement are at risk if something goes wrong. This means creditors of the SPV cannot go after the personal assets of its shareholders to settle debts.

What are the benefits of ADGM SPV?

An SPV in ADGM 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 Office Requirement 

SPVs do not need dedicated physical office spaces, but they would need to maintain a registered address within the free zone. ADGM registered CSPs will provide the registered office address for the SPVs.

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 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 are required to comply with the UAE Corporate Tax regulations. They could benefit from the 0% preferential rate of corporate tax subject to satisfying conditions specified by the Corporate Tax law.

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. 

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:  

• Shareholder holds a valid UAE residence Visa and resides in the UAE, or the Shareholder is a GCC national. 
• The SPV would invest in a business operating in the UAE or the GCC Region among other global businesses.  
• The SPV facilitates transactions connected, or provides real or economic benefit, to the UAE.

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 you meet these requirements and establish an ADGM SPV compliant with ADGM's legal and regulatory framework.

Steps to Set Up an SPV in ADGM

1. Determine the SPV Structure: Decide on the type of SPV and its specific purpose.
2. Choose a Registered Agent: Select a registered agent who will act as the intermediary with ADGM.
3. Submit Application: Complete and submit the application form through the ADGM online portal.
4. Provide Supporting Documents: Prepare and upload the necessary documents, including identification, proof of address, and business plans.
5. Pay Fees: Pay the applicable registration and licensing fees.
6. Review and Approval: ADGM will review the application and, if approved, issue the SPV license.

Document Requirements

The document requirements vary based on the type of shareholder.   

• If Shareholders of the proposed SPV are individuals: Passport copy for all Shareholders.
• If Shareholders of the proposed SPV are Legal Entities (Where Applicable): Copy of License, Certificate of Incorporation, The Memorandum and Articles of Association (MOA & AOA) with all amendments, Certificate of Incumbency (not more than one month old), Passport and Emirates ID for all Shareholders, Directors, Authorized Signatories, and Ultimate Beneficial Owners (UBOs).
• Passports copy for all Directors, as well as Passport and Emirates ID copy for all Authorized Signatories of the proposed SPV.
• Residential address proof of Directors and UBO’s of the proposed SPV. (Utility Bill not older than 60 Days)

Post-Registration Compliance  

SPVs in ADGM must comply with ongoing reporting and regulatory requirements. This includes annual financial statements, audits, and other compliance obligations. It's crucial to stay updated with any changes in compliance regulations to avoid penalties.

Fees and Costs

The cost of setting up an SPV in ADGM includes registration fees, licensing fees, and ongoing compliance costs. It's important to budget for these expenses to ensure smooth operation. Hidden costs such as additional administrative fees and the cost of professional services should also be considered.

Use Cases and Examples

SPVs are widely used in various industries for different purposes. For example:

• Real Estate: SPVs are used to manage specific property investments, ensuring that the financial risk is isolated from other assets.
• Finance: Financial institutions use SPVs to pool investments and manage financial instruments without exposing the parent company to direct risk.
• Infrastructure Projects: Large infrastructure projects often use SPVs to handle project-specific financing and operational responsibilities.

The Wrap

If you are considering setting up an SPV in ADGM, 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. It's essential to stay informed about ongoing compliance obligations and budget for all associated costs to ensure the successful operation of the SPV.

At KPI, we strive to deliver the highest level of services to our clients and ensure their ADGM SPV complies 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.