What are the typical uses of an ADGM SPV

What are the typical uses of an ADGM SPV?

What are the typical uses of an ADGM SPV?

An ADGM SPV is most commonly used to hold shares in other companies in the UAE - particularly it can effectively act as the 49% foreign shareholder in an onshore UAE LLC, whilst allowing the shareholders to have collective ownership of assets and IP within a robust local English Common Law jurisdiction. Below we list the key uses of an ADGM SPV corporate vehicle:

  • Risk Sharing - allows an organisation to legally isolate legal and financial risk. SPVs 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 - SPVs 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 - SPVs 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.

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