Foundations and Special Purpose Vehicles
Abu Dhabi Global Market (ADGM) is a financial center established in the emirate of Abu Dhabi for local and international institutions. It consists of the following three authorities which act independently:
- The Registration Authority;
- The Financial Services Regulatory Authority (FSRA); and
- The ADGM Courts.
ADGM offers both financial and non-financial activities, along with family businesses, corporate headquarters and various management functions. The free zone in particular provides for a beneficial environment to domicile holding companies, Special Purpose Vehicles (SPVs), Foundations and other structures to hold and protect assets.
Special Purpose Vehicles (SPV)
ADGM introduced the establishment of SPVs in the UAE. SPVs are similar to the concept of offshore companies and are corporate vehicles with a separate legal personality. Such SPVs can (if meeting the criteria set out by the UAE Ministry of Finance) apply for a Tax Residency Certificate from the UAE Ministry of Finance to benefit from the UAE’s Double Tax Treaty network.
The ADGM offers two types of SPVs
- Private Company Limited by Shares (Ltd.) – For the use as either standard private limited company or passive holding company; and
- Restricted Scope Company (RCS) – This unique ADGM SPV offers limited information disclosure on the public register but full disclosure to the ADGM Registrar. Such RSCs may be incorporated for the following purposes: a subsidiary of a group which publicly files consolidated accounts, a subsidiary of a company formed by Emiri decree or a Single Family Office.
The typical uses for such SPVs include the securitization of loans or other receivables, the acquisition of title to real property (in order to limit recourse of mortgage), financing (e.g. ring-fence investments), asset transfers, risk sharing (e.g. project companies for joint ventures, reflecting agreed management responsibility while legally isolating joint venture partners from risks associated with the ventures), raising capital or to separate valuable Intellectual Property into a standalone entity.
Abu Dhabi Global Market also launched the establishment of Foundations in the Middle East which provides a platform for financial planning and wealth management as an alternative to trusts. Foundations are incorporated as a legal entity and have a legal personality which in this case, makes them very similar to companies but without shareholders. Foundations are independent self-governing legal entities in the jurisdiction where they are set up. They are designed to hold an endowment provided by the founder for a specific purpose (as set out in the Foundation’s by-laws) for the benefit of the beneficiaries.