Abu Dhabi Global Market - SPV’s

Abu Dhabi Global Market - SPV’s

- Jessica Ashford

A Special Purpose Vehicle (SPV), also known as a Special Purpose Company (SPC) or a Special Purpose Entity (SPE), is an entity which is considered ‘bankruptcy- remote’. An SPV is usually a subsidiary which is protected in case the parent company goes bankrupt and considered isolated in case the same happens in reverse. An SPV can be used to finance as well as buy and sell assets which are often held on an off- balance sheet aiming to isolate financial risk.

The typical uses for an SPV are as follows:

 

  • Risk Sharing- allows an organisation to legally isolate legal and financial risk. SPV’s are often used to form project companies for joint ventures, reflecting management responsibilities whilst isolating the partners’ risks associated with the joint venture.
  • Financing - an SPV can be used to obtain financing without increasing the debt of the parent company or exposing the parent’s asses to cross-liabilities. It also enables investors to invest in specific projects as opposed to investing in the parent directly.
  • Securitisation - SPV’s are commonly used by organisations to securitise loans or other receivables. The SPV can purchase these assets by issuing securities to investors in the capital markets.
  • Real estate investment - SPV’s can be used to acquire properties. If the taxes on the property sale are higher than that of the capital gain, the SPV can be sold instead of the properties and tax is then paid on the capital gain as opposed to on the property sales tax.
  • Asset Transfer - certain assets can be hard to transfer, therefore, a parent company may create an SPV to own these assets. When they wish to sell the asset, the SPV can be sold a s a self-contained package.
  • Raising Capital - an SPV may get favourable borrowing rates when raising capital. Since underlying assets are owned by the SPV, the credit rating may be preferable to the parent entity.
  • Intellectual Property - an SPV can be used to hold the intellectual property of the parent company. Since this a non-operational entity, there would be less risk. Licence agreements can be put in place with the operating entities for them to have use of the IP.

Setting up an SPV in the UAE can either be done through the Dubai International Financial Centre (DIFC) or the Abu Dhabi Global Market (ADGM). This article focuses on setting up an SPV in ADGM.

ADGM is a financial centre for local, regional and international institutions. It is a Free Zone occupying Al Maryah Island in Abu Dhabi. ADGM has been operational since October 2015 and is established in accordance with the Federal Law No (8) of 2004, Federal Decree No (15) of 2013, Cabinet Resolution No (4) of 2013, and Abu Dhabi Law No (4) of 2013. ADGM has three independent authorities, the Registration Authority, the Financial Services Regulatory Authority (FSRA) and ADGM Courts.

Setting up an SPV in ADGM is a quick and cost-efficient process. Key features of setting up in ADGM are as follows:

  • Access to broad UAE double tax treaty network
  • No office required if agent appointed
  • Variety of legal structures available
  • No restrictions on the number of shareholders
  • Common law jurisdiction
  • Independent ADGM courts
  • Independent regulatory framework
  • No attestation required for corporate documents
  • Shelf SPV’s permitted

There are two SPV types permitted by ADGM, private companies limited by shares and restricted scope companies (RSC). An RSC is a unique ADGM SPV which allows limited disclosure on the public register (full disclosure to the ADGM Registrar is still required). Once and SPV is set up, it will be provided with a commercial licence stating that it can undergo special purpose vehicle activities.

PRO Partner Group has assisted with the setup of numerous SPV’s and have recently noticed a growing demand for SPV setups in ADGM. We are able to provide swift and cost-efficient incorporation assistance. We are also able to source virtual registered office space so as to avoid the requirement for a physical office. Please get feel free to get in touch with me directly at jess@propartnergroup.com for additional information.


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