What Are the Advantages of SPV in ADGM?

A well-known international financial centre, ADGM provides businesses with a strong regulatory structure and a vibrant atmosphere encouraging innovation and growth. On Al Maryah Island, ADGM offers a well-recognized, internationally recognized platform for business expansion and development. The ADGM’s Special Purpose Vehicle (SPV) is an essential element that facilitates commercial activities. This blog delves into the concept of SPVs in ADGM, their benefits, and the steps involved in establishing one. If you’re considering an ADGM company setup, understanding SPVs is crucial.

What is ADGM?

The Abu Dhabi Global Market (ADGM) is a leading international financial centre on Al Maryah Island in Abu Dhabi. It provides a broad spectrum of financial services, including capital markets, asset management, banking, and insurance, making it an attractive destination for company formation in ADGM. ADGM’s independent legal and regulatory framework promotes an open, safe, and effective business environment. Because of this autonomy, businesses operating under its control can do so with confidence. Moreover, they can benefit from a shortened regulatory process, benefiting from vital governance requirements.

What is SPV in ADGM?

An SPV, or Special Purpose Vehicle, is a company established by its shareholders for a specific, predefined purpose. You can use an ADGM SPV to hold various assets, such as shares in private companies (like UAE mainland limited liability companies), publicly listed companies, real estate, and intellectual property rights (such as trademarks).

SPVs are restricted to “passive” activities and are not permitted to operate actively. For instance, while an SPV can hold shares in a construction or software development company, it cannot engage in construction or software development activities itself. Consequently, SPVs do not have employees and are not eligible for work or residency visas in the UAE.

An ADGM SPV cannot rent a physical office for registration purposes. Instead, it must use the registered office of a group company (such as a parent or subsidiary) based in ADGM or the office of a corporate service provider registered in ADGM.

As an English common law jurisdiction, ADGM applies certain common law and equity provisions, including equitable arrangements such as nominee and trust agreements. Foreign investors investing in UAE mainland LLCs can leverage a combination of an SPV and equitable contracts to protect their interests while adhering to UAE mainland local ownership requirements.

Why Use an SPV in ADGM?

The use of SPVs in ADGM offers numerous advantages that can significantly benefit businesses and investors:

• Risk Isolation

One of the primary advantages of using an SPV is the ability to isolate financial risk. A company can segregate specific assets or liabilities from the parent company by setting up an SPV. This structure protects the parent company from financial risk. Furthermore, it ensures that any liabilities associated with the assets or projects the SPV manages are contained. Moreover, it provides a clear separation of responsibilities and risk management.

• Tax Efficiency

SPVs in ADGM can take advantage of the tax benefits of the free zone. ADGM provides a tax-free environment for companies, meaning SPVs established within the ADGM-free zone can work without indulging corporate or personal income taxes. This can be a significant reason for businesses to save money.

• Regulatory Clarity

ADGM offers a clear and robust regulatory framework based on English common law. This gives companies high certainty and stability, which is essential for businesses involved in complex financial transactions. ADGM’s legal clarity and transparency make it an attractive location for an ADGM company setup.

• Access to Capital

Due to its status as an international financial centre, ADGM offers businesses access to various financial solutions and investment opportunities. Companies can tap into the global capital markets and attract investment from diverse sources, a significant advantage for those involved in ADGM business setup.

• Speed and Efficiency

Setting up an SPV in ADGM streamlines and optimizes the process for efficiency. Businesses can benefit from a quick setup process and minimal administrative burdens, allowing them to focus on their core activities.

Setting Up an SPV in ADGM

Setting up a business or SPV in ADGM follows a streamlined process designed to be as efficient and hassle-free as possible. Here are the steps you need to follow to set up ADGM:

Key Steps to Establish an SPV in ADGM:

• Determine the Purpose: Define the specific purpose for establishing the SPV. This can include asset holding, project financing, or other uses.
• Choose a Legal Structure: Decide on the legal structure of the SPV. In ADGM, businesses can set up SPVs as private companies limited by shares or as other structures that suit their business needs.
• Prepare Documentation: Gather the necessary documentation, including the company’s articles of association, business plan, and relevant identification documents for the shareholders and directors.
• Submit Application: Apply to the ADGM Registration Authority, along with the required documentation and fees.
• Obtain Approval: Once the Registration Authority reviews and approves the application, it officially establishes the SPV, and you receive the certificate of incorporation.
• Open Bank Accounts: Open the necessary bank accounts for the SPV to facilitate financial transactions.

Why Choose ADGM for SPV Formation

ADGM is an excellent jurisdiction for SPV for several reasons:

• International Financial Hub: ADGM is a key international financial centre attracting worldwide businesses and investors. It is the perfect hub for global economic activities due to its ideal location and welcoming corporate community, which makes it a perfect hub for company formation in ADGM.
• Regulatory Excellence: ADGM offers a robust regulatory framework based on English common law, providing businesses with legal clarity and protection.
• Economic Growth: ADGM contributes significantly to the economic growth of Abu Dhabi and the wider UAE by attracting investment and fostering business development, enhancing regional prosperity.

Can Foreign Investors Establish SPV in ADGM?

Yes, foreign investors can establish an SPV in ADGM. ADGM offers a favourable environment for foreign investors, with 100% foreign ownership allowed and no restrictions on the repatriation of profits. The ease of setting up and operating an SPV in ADGM makes it an attractive option for international businesses and investors.

The Process of Setting Up an SPV in ADGM

• Select the Purpose: First, define the SPV’s specific purpose, such as asset holding or project financing. Subsequently, this will guide its structure and operations.
• Choose the Structure: Decide on the appropriate legal structure for the SPV.
• Prepare Documents: Gather the necessary documentation, including identification and business plans.
• Submit Application: Apply to the ADGM Registration Authority with the required fees and documentation.
• Obtain Incorporation: Upon approval, you will receive the certificate of incorporation for your SPV.
• Open Accounts: Set up bank accounts to manage your financial transactions.

Why Choose Us for Your SPV Needs?

At NH Management, we specialise in ADGM SPV company setup and other ADGM business setup services. Our team of experts understands the regulatory requirements and processes involved in establishing an SPV in ADGM well. We provide comprehensive support to ensure a smooth and hassle-free setup process, allowing you to focus on your core business activities.

Ready to establish your SPV in ADGM? Contact us today to get started.  Our team at NH Management is here to guide you through every step of the process, ensuring a seamless and efficient setup. Allow NH Management to assist you in attaining commercial prosperity in ADGM.