The Abu Dhabi Global Markets (ADGM) financial free zone has created a flexible, robust, simple and efficient Special Purpose Vehicle (SPV) regime that caters to a broad range of business types, uses and industry sectors including but not limited to aviation financing and leasing, corporates, sovereign wealth funds, single family offices, trustees and individual investors.
SPVs are corporate vehicles, typically private companies, established for the purpose of isolating financial and legal risk by ring-fencing assets and liabilities. SPVs can be established as subsidiaries, project or joint venture vehicles to ensure that only those assets related to a transaction are exposed to the liabilities associated with that transaction. The key feature of an SPV is its separate legal personality, which means that claims by an SPV’s creditors cannot attach to the assets of the SPV’s shareholders or any of its sister companies.
ADGM offers a platform from which to fulfill narrow, specific or temporary corporate objectives. There are no restrictions on who can set up an ADGM SPV. It can be an individual or a corporate entity but a minimum of one shareholder is required.
The ADGM follows the English model such that SPVs follow the Companies Regulations rather than separate regulations, which provides consistency across all corporate vehicles. SPVs will be provided with a commercial licence specifying that the company is undertaking SPV activities.
ADGM also provides the option, to applicants meeting certain criteria, for an SPV to be formed as a ‘Restricted Scope Company’ (RSC). RSCs may be incorporated as a subsidiary of either a group that files public consolidated accounts or a company formed by Emiri decree, or as a Single Family Office. RSCs are required to make only limited information disclosure on the public register although full disclosure to the ADGM Registrar is mandatory.
The ADGM SPV regime is underpinned by ADGM’s robust regulatory platform, its common law legal system and independent courts, as well as its highly favourable tax environment. All ADGM-registered companies are eligible to apply for a Tax Residency Certificate from the UAE Ministry of Finance to benefit from the UAE’s extensive double tax treaty network.
As an ADGM-registered agent, Sovereign Corporate Services is permitted to manage an SPV and to provide the registered office address, thereby eliminating the requirement for the client to have a physical office space in the ADGM.
Benefits of the ADGM SPV regime:
Key features of an ADGM SPV include:
- Fast efficient set-up process via Sovereign
- Highly competitive fees
- All ADGM-registered companies are eligible to apply for a Tax Residency Certificate
- Access to ADGM’s independent civil and commercial legal regime
- Access to ADGM’s independent English Common Law courts
- No requirement to have corporate documents attested and legalised (in most cases)
- No physical office space required in ADGM. As a registered agent, Sovereign will provides the registered address for the SPV
- No restrictions on nationality of share ownership
- No minimum share capital, no maximum number of shares or shareholders, and different classes of shares are permitted
- Migration or continuance of existing corporate entities permitted
- Simple ongoing reporting requirements
- No liquidator required for wind-down process
Typical uses for SPVs:
- Securitisation – An SPV can be used by an originating party to securitise loans (or other receivables) by creating an SPV that purchases these assets by issuing debt, which is secured on these underlying assets. This ensures that the holders of the asset-backed securities have first priority right to receive payments on the debt while limiting recourse to the originator of the assets.
- Real Estate Investment – An SPV can be used to acquire title to real property and limit recourse of mortgage lenders depending on the location of the asset. In some countries, the sale of an SPVs shares can result in lower taxes and transaction fees than transferring the asset itself.
- Financing – Can be used to ring-fence investments, permitting financing without increasing debt levels for the parent company or exposing the parent’s assets (or SPV’s assets) to cross-liabilities.
- Asset transfer – An SPV can be used to transfer assets along with associated material agreements that may permit the transfer of all or part of ownership of the enterprise, while keeping intact material agreements that may be necessary to maintain the value of the asset.
- Risk sharing – An SPV can be used to form project companies for joint ventures, reflecting agreed management responsibility while legally isolating joint venture partners from risks associated with the venture.
- Raising capital – An SPV can be used to raise capital at favourable rates in certain situations, with credit worthiness determined by the available collateral of the SPV rather than the credit rating of the parent company.
Intellectual Property (IP) – An SPV can be used to separate valuable IP into a standalone SPV that has minimal liabilities and can be used to raise funds and enter into licence agreements with third parties. It can also assist in managing products with a variety of IP components.