As the UAE’s role as a centre for international business and private wealth continues to grow, choosing the right legal structure is becoming an increasingly important part of corporate and wealth planning.
SPVs, holding companies and foundations are commonly considered as part of that process. While they can sometimes be used together, they serve different purposes, so the right choice depends on what is being structured and what the owner needs it to do.
Using an SPV to separate assets and asset protection
A Special Purpose Vehicle (SPV), is generally established around a specific asset, investment or transaction rather than to run an active trading business because they are passive holding entities.
An investor might use an SPV to own a property, for example, keeping that asset within its own legal entity, separate from other investments or business activities, and allowing for separate asset protection and risk isolation. The same approach can be used for intellectual property, a joint venture or a particular investment where there is a reason to keep ownership and liabilities separate.
That narrower purpose is one of the main differences between an SPV and a conventional holding company. An SPV will usually hold one asset or a limited group of related assets, while its shareholders or parent entity remain identifiable within the wider ownership structure.
In the UAE, ADGM SPVs and DIFC Prescribed Companies are among the vehicles used for this purpose. Which is appropriate will depend on the asset, its ownership and the wider structure around it.
Access a copy of our SPV, holding company and foundation comparison
Bringing businesses under a holding company
Once an entrepreneur owns several businesses or investments, keeping each one directly under individual ownership can become cumbersome. A holding company provides a central ownership layer, with the shares in the underlying businesses held beneath it.
An entrepreneur with operating companies in the UAE, Saudi Arabia and the UK could, for instance, place those companies beneath one holding company. Rather than changing the underlying businesses, this brings their ownership together at group level.
It can also provide a central point for tax planning purposes, receiving dividends and investing capital back into subsidiaries. Depending on its jurisdiction, licence and activities, a holding company may have employees or premises and can have greater operational substance than a passive SPV. Operational holding companies are most common in Abu Dhabi Global Market, under the activity ‘Operating Holding Company’. The typical purpose for setting up this type of structure is to expand the parent company’s international operations and facilitate the relocation of the Managing Director to Abu Dhabi to oversee and manage the regional business activities from within the UAE, typically for tax efficiency purposes.
Holding companies can be established in ADGM, DIFC and other UAE free zones. The appropriate location depends on what the group owns, how it operates and its tax and commercial position.
Where a foundation fits into family wealth interests
A foundation approaches ownership differently because it has no shareholders. It is an independent legal entity established by a founder and governed by a council under its constitutional documents.
That distinction becomes useful where the objective extends beyond organising a business group. A family may want its companies and investments to remain together after the founder’s lifetime, with an agreed framework governing how those assets are held for future generations.
The foundation does not need to replace the corporate structure beneath it. It can instead own the holding company, allowing the businesses to continue operating through their existing corporate structure while long-term ownership sits within the foundation.
For families with businesses and investments across several countries, this can connect succession planning with the way those assets are already owned. The UAE does not levy any federal inheritance tax, estate duty, or wealth tax on assets held personally or transferred through a foundation, although tax, inheritance and other rules in the countries concerned still need to be considered as part of the wider arrangement.
Is using the structures together a natural fit?
The choice is not always between an SPV, a holding company or a foundation. Each can perform a different role within the same structure depending on the personal and business interests of the investor.
A family foundation might sit at the top, with a holding company beneath it owning the family’s operating businesses. Separate SPVs could then hold a property or investment where keeping that asset apart serves a genuine purpose.
The result is a layered structure, but each layer has a specific job. The foundation deals with long-term ownership and succession. The holding company brings the corporate structuring interests together, while an SPV can separate an individual asset or investment from the rest.
That does not mean a more complicated structure is automatically better. Each additional entity brings administration, accounting and other ongoing obligations. An entrepreneur with one property may have little reason to establish a full holding structure, just as a business owner with companies across several countries may find a single SPV too limited for what they need.
The structure also has to work after it has been established. Creating an SPV or foundation without transferring the intended shares or assets into it leaves the ownership arrangement incomplete.
Key considerations for choosing the appropriate structure
The useful starting point is the assets themselves and what the owner needs the structure to achieve.
Where the requirement is to separate a particular investment or asset, an SPV may be sufficient. As several businesses come under common ownership, a holding company can provide a clearer group structure. Where the concern extends to how family wealth will be owned and passed on in the future, a foundation can provide the long-term framework above those corporate interests.
More complex families and business groups may have reasons to use all three, but complexity should follow the need rather than come before it. A structure works best when every entity has a clear purpose and the ownership arrangements reflect how the assets are intended to be managed over time.
How Sovereign can support UAE corporate structuring
Sovereign works with business owners, investors and international families on corporate and wealth structures across the UAE.
Our corporate structuring, tax and fiduciary teams can consider the assets involved and the owner’s longer-term plans before determining whether an SPV, holding company, foundation or combination of structures is appropriate. Where several entities are involved, we can also help coordinate how the different parts of the structure work together.
Sovereign can support the establishment and ongoing administration of SPVs, holding companies and foundations across jurisdictions including ADGM, DIFC and RAK ICC, together with the related corporate, annual accounts and tax requirements.
Access a copy of our SPV, holding company and foundation comparison
