What are the benefits of setting up an ADGM SPV?
ADGM’s SPV regime is regarded as a highly flexible and cost-effective solution for structuring asset holdings and investments. The regime offers business owners and asset holders greater freedom while allowing for separation of financial and legal risk. Under the direct application of English Common Law, SPVs follow companies’ regulations rather than separate regulations, which ensures consistency across all corporate vehicles.
Key features of the ADGM SPV include:
- Fast, efficient set-up process via PRO Partner Group
- Highly competitive fees and transparency of pricing
- No office required based on an agent being appointed such as PRO Partner Group
- Registered companies are permitted to apply for a tax residency certificate to benefit from the UAE double tax treaty network
- 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 SPVs permitted
- Nexus Requirement - An ADGM SPV must meet a nexus requirement and have connection to the UAE or GCC and evidence to support this. Example of this could be that the SPV is owned or controlled by a UAE or GCC based private company, family, family office or individual.
What are the steps required to set up an SPV in ADGM?
Setting up an SPV in ADGM is quick and easy process. The application is submitted online via ADGM Registration Authority (RA).
- Create an online profile via the ADGM portal
- Submit the application - fill in the required forms, collate all the required documentation and payment
- Review status of your application - you will be notified about any changes or further document requirements
- License issued -if you are successful, you will receive a soft copy of your license via email
What documents are required to set up an ADGM SPV?
- Articles of Association (AoA)
- Resolution of Board of Directors or Shareholders
- Nominee Arrangement Forms
- Economic Substance
- Documentation for Authorised Signatories and Directors
- Financial Services (Principal Approval)
- Source of Wealth for individual shareholders
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. It can effectively act as the 49%, 51% or even 100% 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 as 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.