In this article, we’re letting you know what an ADGM SPV is and the benefits of setting one up.
What is a Special Purpose Vehicle (SPV)?
Special Purpose Vehicles, commonly referred to as SPVs, are essentially holding companies that are established with the purpose of mitigating financial and legal risks by isolating specific assets and liabilities through a process known as ring-fencing.
The Special Purpose Vehicle (SPV) framework implemented at the Abu Dhabi Global Market (ADGM) has been thoughtfully designed to prioritize flexibility, resilience, simplicity, and efficiency, taking into account international best practices.
An SPV can be used to attract investors for the investment in the operational entity.
What are the features of an ADGM SPV?
- Migration & Continuance
ADGM allows for the relocation and re-domicile of companies to ADGM from other jurisdictions.
- Digital Incorporation Process
The incorporation application, renewal filings and ongoing administration of an ADGM SPV are entirely digital, and documents can be signed digitally. Shareholder documents do not require attestation.
- Registered Office Address Requirements
ADGM allows the use of a registered corporate service provider/agent to manage the SPV and to provide the registered office address.
What are the benefits of establishing an ADGM SPV?
- Asset Transfer
Certain types of assets can be hard to transfer. Thus, a company may create an SPV to own these assets. When they want to transfer the assets, they can simply sell the SPV as part of a merger and acquisition (M&A) process.
- Property Sale
An SPV may be created to hold or sell property. It can then sell the SPV instead of the properties and pay tax on the capital gain from the sale instead of having to pay the property sales tax.
- Isolate Financial Risk
A corporation’s project may entail significant risks. Creating an SPV enables the corporation to legally isolate or ringfence the risks of the project.
- Tax Residency
All ADGM registered entities are eligible to apply for a Tax Residency Certificate from the UAE Federal Tax Authority (FTA) to benefit from the UAE’s Double Tax Treaty network. Entities will need to meet the criteria set out by the FTA.
Setting up an SPV
Please note that pursuant to the new provisions of ADGM Companies Regulations, in order to incorporate a non-exempt SPV in ADGM on or after 12 July 2021, a Company Service Provider must be appointed. As a registered corporate service provider with the ADGM, CBD Formations assists with setting up SPVs in compliance with the ADGM. Read our article on SPVS for property investors and setting up a legal consultancy firm in the ADGM.
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