A holding company can help investors and corporate groups. Organise ownership of subsidiaries, investments, intellectual property, real estate, and other assets through a dedicated corporate structure. The Abu Dhabi Global Market (ADGM) provides a specific framework for passive holding structures through Special Purpose Vehicles.
An SPV in ADGM can be established to hold shares, securities, investment interests, and intellectual property. In addition it holds other eligible assets while separating those assets and related liabilities from other parts of a corporate group.
Let’s explore how an SPV can work as a holding company, what it can hold, the legal structures available and how an ADGM company’s setup works.
What Is an ADGM SPV?
A Special Purpose Vehicle (SPV) is a separate legal entity created for a defined purpose. In a holding structure, its purpose may be to own shares, investments, property interests, intellectual property, or interests in subsidiaries and joint ventures.
The central concept is asset and liability ring-fencing. Instead of holding an investment directly through an individual or operating business. It can be placed within a dedicated corporate vehicle. This can create a clearer ownership structure and help separate the relevant assets and liabilities from other businesses, subject to applicable law.
- It cannot be used to conduct operational business.
- It cannot hire staff.
- It is different from an active trading or service company.
- ADGM provides a legal environment based on the direct application of English common law.
- The framework is supported by the ADGM Courts.
- This legal environment can be relevant to international investors and businesses seeking a familiar common-law jurisdiction.
How Can an SPV Work as a Holding Company?
A basic structure can look like this:
The SPV can sit between the ultimate owner and one or more subsidiaries or investments. For example, a corporate group may establish a holding company in ADGM and use it to own shares in operating companies in the UAE or other jurisdictions.
The operating companies remain responsible for their commercial activities, employees, customers, contracts, and day-to-day operations. The SPV instead functions as the passive ownership layer.
Common uses include:
- Holding shares in subsidiaries
- Holding interests in joint ventures
- Owning investment securities
- Holding eligible real estate interests
- Separating intellectual property from an operating business
- Holding patents and other intangible assets
- Structuring certain financing arrangements
- Creating dedicated vehicles for particular investments or projects
The distinction between passive ownership and active business is important. An SPV should not be used as a substitute for an operating company because ADGM expressly restricts SPVs from conducting operational business or hiring staff.
What are Advantages of ADGM SPV as a Holding Company?
Here are are multiple benefits you may explore:
Asset and liability ring-fencing
One of the main purposes of an SPV is to isolate particular assets and liabilities. A group with several investments may use separate structures to keep ownership and associated risks clearly identified.
Flexible ownership structures
An SPV can hold shares in subsidiaries, investment companies, securities, and joint ventures. The appropriate shareholding and constitutional structure can also be designed around the investors involved.
International investment structures
An ADGM holding structure may be useful for UAE, GCC, and cross-border investments. However, the tax and legal treatment of the underlying assets must be reviewed in the relevant jurisdictions.
Common-law legal framework
ADGM directly applies English common law within its legal framework. This can provide a familiar legal environment for international investors and companies involved in cross-border transactions.
Digital registration
The ADGM Registration Authority (RA) provides a digital incorporation process for SPVs and other non-operational entities. ADGM describes its SPV regime as flexible and designed for asset and investment holding.
What Can an ADGM company SPV Hold?
An SPV can be used for different asset-holding purposes, subject to applicable laws and any requirements attached to the particular asset.
| Asset or interest | Potential use |
|---|---|
| Shares | Holding subsidiaries and investments |
| Securities | Investment portfolios |
| Real estate | Property investment structures |
| Intellectual property | Separating IP ownership from operations |
| Patents | Centralised IP ownership |
| Cash | Holding investment or transaction funds |
| Commodities | Eligible investment holdings |
| Loans and receivables | Certain financing structures |
| Joint-venture interests | Dedicated investment ownership |
This flexibility can make an SPV useful for investors with multiple asset classes. For example, a technology group could separate ownership of valuable intellectual property from the company conducting its daily operations, while an investment group could use different vehicles for separate projects.
The structure should, however, be designed around the actual asset, transaction, ownership arrangement, and applicable regulatory requirements.
ADGM SPV Legal Structures
The appropriate legal form depends on the proposed ownership and purpose.The legal form, articles, share structure, shareholder rights, and governance arrangements should be selected according to the intended investment or holding structure.
A Private Company Limited by Shares (LTD) can be used for many corporate holding arrangements. It provides a conventional company structure with shareholders and directors.
A Restricted Scope Company (RSC) may be available to eligible applicants. ADGM states that RSCs are available to certain categories of clients and can provide limited disclosure on the public register.
ADGM Company Setup: Step-by-Step Process
The process should begin with defining what the SPV will own and how it will function.
1. Define the purpose and ownership structure
Identify the proposed shareholders, directors, assets, subsidiaries, investments, ownership percentages, and purpose of the vehicle.
2. Select the appropriate legal structure
Determine whether an LTD, RSC, or another permitted structure is appropriate for the proposed arrangement.
3. Determine CSP requirements
A key part of ADGM company setup is determining whether the proposed SPV is exempt or non-exempt under the Company Service Provider (CSP) framework.
A non-exempt SPV must appoint an ADGM-licensed Company Service Provider. The CSP manages the incorporation process, provides the registered office address, and handles ongoing statutory filings on the company’s behalf.
Certain qualifying SPVs can be exempt from the CSP requirement if they satisfy the applicable criteria and the Registrar accepts their exemption.
4. Prepare KYC and corporate documents
The application may require information about shareholders, directors, authorised signatories, beneficial owners, identification documents, and the proposed corporate structure.
Know Your Customer (KYC) checks and Ultimate Beneficial Owner (UBO) information are important parts of the incorporation and compliance process.
5. Submit the application
Applications are processed through the ADGM Registration Authority, which is responsible for registering and licensing ADGM entities.
6. Maintain the company
After incorporation, the company must maintain its registered office arrangements, corporate records, ownership information, statutory filings, and other applicable compliance obligations.
Registered Office, CSP and Ongoing Compliance
The ADGM company setup process should account for ongoing obligations from the beginning.
For a non-exempt SPV, the licensed CSP acts as an important administrative connection between the company and the Registration Authority. Its role can include incorporation submissions, registered-office services, and ongoing company filings.
Companies should also keep their shareholder, director, authorised-signatory, and UBO information accurate and up to date. Recent ADGM Registration Authority communications also highlight continuing attention to beneficial ownership compliance, making accurate ownership records particularly important.
How Much Does ADGM Company Setup Cost?
ADGM publishes SPV registration fees in US dollars. Its current SPV information lists:
- Name reservation: US$200
- Company registration: US$700-US$800
- Commercial licence: US$1,000
- Published total: US$2000
ADGM notes that the US$700 registration fee includes the stated US$300 Data Protection registration fee.
These are registration-related charges and do not represent the total cost of maintaining an SPV. Additional expenses can include CSP services, registered-office arrangements, legal advice, accounting, tax services, banking, and other professional support.
Tax and Compliance Considerations
An ADGM holding structure should not be established on the assumption that incorporation automatically results in a particular tax rate.
- The UAE Corporate Tax position depends on the entity’s activities, income, status, and applicable legislation. The treatment of dividends, capital gains, financing income, intellectual property, real estate, and cross-border transactions should therefore be assessed based on the actual structure.
- Tax residency and access to the UAE’s Double Tax Treaty network may also depend on satisfying relevant conditions. Where appropriate, a company may consider whether it can obtain a Tax Residency Certificate and whether the underlying transaction qualifies for treaty treatment.
- Businesses should also avoid relying on outdated information about the UAE’s Economic Substance Regulations. ADGM states that the current economic substance requirements ceased to apply to financial years ending after 31 December 2022 following Cabinet Decision 98 of 2024. Historical filing obligations for earlier periods can still apply.
Tax and cross-border structuring should therefore be reviewed with qualified professional advisers.
SPV in the ADGM vs. Traditional Operating Holding Company
An SPV and an active holding or operating company serve different purposes.
| Feature | SPV | Operating holding company |
|---|---|---|
| Main purpose | Passive asset or investment holding | Active corporate management |
| Operational business | Not permitted | May be permitted |
| Employees | Cannot hire staff as an SPV | Can employ staff |
| Subsidiary ownership | Yes | Yes |
| Investment holding | Yes | Yes |
| Asset ring-fencing | Common use | May also be possible |
| Day-to-day operations | Not the intended purpose | Can be performed |
| Suitable for | Passive ownership structures | Active businesses and group operations |
If the proposed entity needs employees, customers, active trading, service delivery, or day-to-day management, an operating company may be more appropriate than an SPV.
When Is an SPV Suitable for a Holding Structure?
An SPV may be appropriate when the primary objective is passive ownership of specific assets or investments.
Typical situations include:
- Holding shares in subsidiaries
- Structuring investment holdings
- Separating valuable intellectual property
- Holding eligible real estate interests
- Creating a dedicated joint-venture vehicle
- Structuring certain financing transactions
- Ring-fencing a particular investment or project
- Organising ownership of multiple investment assets
Consideration
It may not be appropriate where the entity needs to actively trade, employ staff, provide services, issue customer invoices, or operate a conventional business. The right structure ultimately depends on the assets, ownership, transaction, tax position, and regulatory requirements involved.
FAQs
Can an SPV own shares in another company?
Yes. Ownership of shares in subsidiaries and other companies is a common use of an SPV holding structure.
Can an SPV have employees?
No. ADGM states that SPVs cannot conduct operational business or hire staff.
Does every SPV need a Company Service Provider?
Non-exempt SPVs must appoint an ADGM-licensed CSP. Certain SPVs that meet the exemption criteria may not need to appoint one.
Can an SPV hold intellectual property?
Yes, intellectual property can form part of an SPV holding structure, subject to the applicable legal, tax, and ownership requirements.
Is ADGM suitable for a holding company?
ADGM provides a dedicated framework for passive asset and investment holding through SPVs. Whether it is suitable depends on the proposed assets, ownership structure, activities, tax position, and compliance requirements.
