A Short Overview of Special Purpose Vehicles (SPVs) and Holding Companies in the UAE
Special Purpose Vehicles (SPVs) and holding companies are commonly used corporate structures for ownership, investment, and risk management. While they appear similar at a high level, both are often used to hold assets or shares while their legal scope, regulatory requirements, and practical applications differ quite significantly.
An SPV is a distinct legal entity established for a specific and defined purpose which is typically to hold specific assets, ring-fence risks, or facilitate structured transactions. SPVs are frequently used in private equity, real estate, capital markets, and for cross-border structuring to separate liabilities and provide clarity to investors. SPVs are designed in a way to be passive in nature and are not intended to conduct active business.
A holding company on the other hand, is established to own and manage stakes in one or more operating subsidiaries. Holding companies are often established for group governance, oversight, financing, and operational management. They tend to be more flexible in terms of activities and are commonly used as the top line entity in corporate group structures.
The distinctions between an ADGM SPV and a holding company are particularly relevant in a UAE context.
ADGM SPV
An ADGM SPV is intended strictly for passive holding and structuring purposes. It cannot sponsor employment visas and must demonstrate a sufficient economic nexus within the GCC, reflecting regulatory substance expectations. Additionally, the authorised signatory of an ADGM SPV is required to be a UAE resident. These entities are well-suited for asset holding, investment structuring, and shareholder arrangements where operational activity is not required.
A holding company offers greater operational flexibility. It can sponsor visas, has no economic nexus requirements, and may undertake broader group management, ownership, and other functions. This makes it more appropriate for groups requiring centralised control.
In summary, SPVs are optimal for focused, passive ownership and risk isolation, whereas holding companies are better suited for active group management and long-term operational control. Choosing the appropriate structure depends on regulatory needs, substance requirements, and the intended role within the corporate group.
UAE SPV Comparison - DIFC, ADGM & RAK ICC
When establishing an SPV structure, clients commonly select one of three jurisdictions: the DIFC, ADGM, or RAK ICC, each offering their own regulatory frameworks, compliance requirements, and levels of transparency to suit different structuring objectives. Below Sovereign PPG have created an easy to read comparison chart summary for the key requirements.
