Special Purpose Vehicles’ (“SPVs”) are private corporate entities formed for special purposes, such as holding assets, entering into a new venture, segregating financial and legal risks by separating assets and liabilities. Usually an SPV can have any legal form and conduct any type of activity that the founder selects.
In Abu Dhabi Global Market (“ADGM”), the “SPV” is considered as a special type of vehicle, incorporated as a private company limited by shares and has a limited and specific activities that can be attributed to it.
Their popularity among founders and investors can be attributed primarily to ADGM’s flexible, secure and straightforward regulatory framework. Nonetheless, the regulatory framework alone does not solely dictate the success of ADGM’s SPV as three additional key considerations should be taken into account: (i) the SPV’s nature and activities, (ii) the simplicity of the establishment process, (iii) the minimal mandatory annual submissions that follow the incorporation and the associated costs.
We shall be discussing below all of these crucial factors below.
- The SPV’s nature and activities
An SPV is defined as a passive holding company, and whilst most SPV’s are structured under the form of a private company limited by shares (A company in which shareholders’ liability is confined to the capital amount they subscribed to.), they can also come under the structure of restricted scope company (“RSC”) (Which allows certain categories of applicants to benefit from limited disclosure on the public register). These entities are designed to isolate and manage specific assets and liability serving a multitude of purposes like investment holding, real estate management, project financing, consolidation, and risk mitigation… However, they are not permitted to engage in any commercial operations.
- The Regulatory Framework
Regarding their regulatory framework, ADGM SPVs are established in accordance with the ADGM Companies Regulation of 2020, which superseded the 2015 Companies Regulation. Pursuant to this regulation, SPV applicants will be categorized as either “Exempt” or “Non-exempt”. If an applicant does not meet any of the criteria for exemption specified by the law, it automatically defaults to the non-exempt category. If classified as Exempted, SPV applicants would not be required to appoint a Company Service Provider for the SPV application and management, whereas Non-exempt applicants must appoint and retain an ADGM approved Company Service Provider (“CSP”) for these purposes. Additionally, the entity must comply with other regulations and rules such as the Data Protection Rule of 2021 among others.
- The simplicity of the establishment process
The main prerequisite for any SPV involves satisfying a Nexus requirement: any SPV must demonstrate a suitable connection or ‘nexus’ to ADGM, the UAE, and/or the GCC Region. This connection can be established through various means, including providing documentary evidence that:
- The SPV is owned or controlled by a private company, family office, or individual based in the UAE or GCC.
- The SPV holds assets located in the UAE or the GCC Region.
- The SPV facilitates transactions linked to, or confers real or economic benefits to the UAE.
- The SPV’s purpose encompasses the issuance of Securities intended for admission to the Official List maintained by the Financial Service Regulatory Authority (FSRA) and/or trading on a Recognized Investment Exchange or other licensed platform established in ADGM.
Once such pre-requisite is met, then the incorporation can officially be processed. The process itself is straightforward, involving the collection of required documents and the submission of the application on the official ADGM portal.
After the submission of the application, ADGM will conduct a review and provide an answer within a few business days: It will either approve the application or return it for correction. Once the corrections are made and the application resubmitted, the Registrar authority will review it and grant final approval.
It is important to note that SPV fees are associated with various stages of the incorporation process, including $200 for Name reservation, $400 for the Incorporation application, $300 for Data Protection registration, and $1000 for commercial license issuance, bringing the total fees to $1900.
- Mandatory annual submission
Finally, it’s important to highlight that SPVs are obligated to fulfill the following annual mandatory submissions:
- Renewing the Commercial License;
- Renewing the Data Protection policy;
- Filing the Confirmation Statement;
- Filing the Annual Accounts of the SPV;
SPVs offer unparalleled benefits for founders and investors in ADGM. With their ability to segregate financial and legal risks, straightforward establishment processes, and flexible regulatory framework, SPVs stand out as the optimal choice for facilitating various business activities while ensuring compliance and operational efficiency.
Marlene Tayah
CSP associate
For personalized guidance regarding SPVs, please do not hesitate to contact our team by sending an email to: assiss@assiss.com.
DISCLAIMER: This blog post does not constitute professional advice. Additional facts or future developments may affect the content of this blog post. Before acting or relying upon any information within this document, please seek the advice of a member of our team.