Establishing an SPV in the ADGM | Flyingcolour

SPV as a passive holding company

You are allowed to utilize SPV in the ADGM to hold investments in the United Arab Emirates (UAE). Investment can be in the type of shares in these underlying entities, warrants, convertibles, and notes. As an SPV owner, you can derive dividend income from these investments. In addition, you can derive capital gain when divested.

You should remember that SPV in the ADGM cannot be an operational holding company. It means that you cannot hire staff, own office space, or conduct any activities that can be construed as the active management of the underlying investment. If you want to access these benefits, you should set up an operational holding company in the ADGM, instead of SPV.

SPV as a securitization vehicle

You can use the SPV to securitize loans, in which you purchase these assets by issuing debt secured on these underlying assets. The ADGM lets you register pledges with the registration authority. These pledges must be cleared before any share transfer can be affected on the Special Purpose Vehicle in ADGM.

SPV as a holding real estate investment

You can also use the SPV to get title to real property and restrict the recourse of the mortgage lender depending on the location of your location. The sales of the SPV’s shares can lower taxes and transaction fees, as compared to transferring assets.

SPV in a Financial transaction

You can use SPV to ringfence specific investments as it permits finances without leading to an enhancement in the existing debt level for the parent company or exposing the assets of the parent company to cross liabilities.

SPV as Asset Transfer Vehicle

You can use the SPV in the ADGM to transfer assets together with the material agreement. However, you can trigger these transfers on certain milestones. In addition, these transfers can be incorporated into legacy-planning solutions for long-term asset transfer.

SPV for raising capital

You can use SPV in the ADGM to raise capital with creditworthiness by the collateral of the SPV, rather than credit rating of the parent company.

SPV for intellectual property holding

You can also use SPV in the ADGM to separate intellectual property into separate structures, which have the least liabilities. In addition, you can use the same to raise and enter into the license agreement with the third party.

SPV as a risk-sharing vehicle

If a joint venture, you can use SPV to create the specific project-based company. It would reflect agreed management responsibility while isolating joint venture partners like you associated with the joint venture.

Like SPV as a passive holding company, you cannot hire employees, have office space, or be seen as actively managing the arrangement. However, you are only allowed to conduct passive management of the SPV in this case.