A Special Purpose Vehicle (SPV) is a legal entity that is established for a limited business purpose such as acquisition and holding of assets, carrying out a transaction or to use as a funding structure.  It allows companies to secure and isolate assets, create and invest in joint ventures, and perform specific transactions.  The main purpose for setting up a SPV is to carry out a business activity while isolating the parent company or the individual shareholder from legal and financial risks (such as bankruptcy and insolvency issues) by ring-fencing certain assets and liabilities.

Special Purpose Vehicles (SPVs) in Abu Dhabi Global Market (ADGM) are set up with investor friendly holding structures, where the owner’s assets and profits can be financially separated and at the same time not have to operate as a separate entity.  SPVs here can act as holding companies or can be used for the securitization of assets and liabilities. In ADGM, Restricted Scope Companies are also available for certain categories of clients which allow for limited disclosure on the public register.

Purposes:ADGM SPV regime is adopted by businesses, individuals, and the advisory community for a wide variety of purposes, including:

• To isolate a company’s assets or operations from the parent company
• To protect individual shareholders from being exposed to personal liability
• To carry out financial transactions, including joint ventures and asset purchases
• It protects funds and assets as it lowers parent company’s risks and gives more financial flexibility with lower capital requirements
• Protects against bankruptcy and creditors and so the parent company can make high risk financial transactions or investments without endangering the solvency of the entire company
• Can keep projects hidden from competitors and from company investors

SPVs cannot be used to conduct operational business or hire staff.

Key Advantages: There are many distinguished features and key advantages that ADGM SPV have that entities in other free zones and mainland do not. Some of these are described below:

• Tax residency in UAE. All ADGM registered entities are eligible to apply for a Tax Residency Certificate from the UAE Ministry of Finance (MoF) to benefit from the UAE’s Double Tax Treaty network. Entities will need to meet criteria set out by the MoF.
• Shelf SPVs permitted. ADGM allows the setup of shelf SPVs where a business, law firm or corporate services provider requires SPVs ready and waiting for a transaction, for itself, or its clients.
• Migration and continuance permitted. ADGM allows for the relocation and re-domicile of companies to ADGM from other jurisdictions.
• No office space needed. ADGM allows the use of an agent/ corporate service provider to manage the SPV and to provide the registered office address.
• Tax efficient. Access to broad UAE Double Tax Treaty network.
• No attestation required. No attestation required for corporate document and no requirement to file yearly audited financial accounts.

Flexibility:ADGM provides flexible and modern legal framework to setup and operate companies within ADGM.  For instance:

• Multiple classes of shares are allowed. This means that each class can have own voting rights, dividend options, share value, redemption options and more.
• The memorandum can be fully customized.
• No minimum share capital and no maximum number of shares
• Can be established as subsidiaries, project or joint venture vehicles
• No requirements to attest company documents
• No restrictions on nationality and ownership and no minimum share capital required
• Minimum requirement of just 1 shareholder and 1 director

Examples:Following scenarios are some of the examples where ADGM SPV can be used:

• Real estate investments can be made through the ADGM SPV
• ADGM SPV can hold intellectual property like trademarks, patents and copyrights
• Allows for financing without affecting the debt levels of the parent firm or exposing the parent’s assets to cross liabilities
• When creating joint ventures, SPVs can become the specific project-based company so that the venture partners are legally isolated from the venture risks
• Can have separate Intellectual Property which will have minimum liabilities and can enter into license agreements with third parties.

Any Questions? If you have any questions or need any assistance in setting up an SPV in Abu Dhabi Global Market, we’re here to help. Get in touch with us today to discuss your requirements with our experts.