By Ahmed Arif / Support Scale Up - Image Credit: ADGM
SOURCE: Support Scale Up - ADGM SPVS: WHAT YOU NEED TO KNOW
In addition to the more familiar forms of legal entities, ADGM also offers a category of corporate vehicle called a Special Purpose Vehicle (“SPV”). A range of business types, uses and industry sectors use SPVs in their group structure as the purpose of a SPV must fall outside the core financial services offering of ADGM.
This article is intended to highlight the features of a SPV and some of the factors you should consider when deciding whether to incorporate one in ADGM. Deciding where to incorporate your company depends on your situation and must be discussed with your lawyer.
What is an ADGM SPV?
SPVs are usually private companies which are established to ring-fence assets and liabilities: for example, an SPV may be established for a particular project or joint venture. Being incorporated in ADGM, a SPV is a free zone company but it cannot provide financial services to third parties. Rather, a SPV may only perform a limited range of “Exempt activities” including acquiring, holding or disposing of an asset; securitising assets; and issuing investments.
What forms of SPV does ADGM offer?
SPVs take one of two forms: private company limited by shares (“LTD”) or a restricted scope company (“RSC”). An LTD SPV is a standard private limited company and is used as a passive holding company. A RSC is unique to ADGM and offers limited information disclosure on the public register made available by the ADGM Registration Authority. As such, RSCs must be a:
• subsidiary of a group which files consolidated accounts which are publicly available;
• subsidiary of a company formed by Emiri decree; or
• Single Family Office (i.e. a private company which manages investments for a single family)
This article focuses on the LTD SPV structure, given its broader applicability.
What are the advantages of incorporating an ADGM SPV?
• Flexible ownership structure: The ADGM SPV regime requires no minimum share capital, no maximum number of shares or shareholders and multiple classes of shares are permitted. There is no requirement to hold annual shareholder meetings.
• No foreign ownership restrictions: There are no restrictions on the nationality of share ownership. In addition, if an ADGM SPV is wholly-owned by GCC nationals, it will be considered a GCC national for the purposes of onshore UAE foreign ownership restrictions (where minimum levels of UAE national ownership are prescribed at law). Companies incorporated in other traditional offshore jurisdictions (e.g. BVI or Cayman) are considered foreign nationals for the purposes of these foreign ownership restrictions.
• No requirement to take office space: ADGM SPVs only need a registered office address. This address may be that of an agent or corporate services provider, a holding company or a virtual office so set-up costs are reduced considerably.