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The Abu Dhabi Global Market, or ADGM, has spent less than a decade in operation yet already ranks among the most widely used common‑law finance hubs west of Singapore. One reason for that rapid ascent is the way its Special Purpose Vehicle regime dovetails with modern capital‑market techniques such as securitisation. An SPV incorporated in ADGM can be used as a securitisation vehicle, acquire an originator’s receivables, real‑estate rentals, project cash flows or even esoteric assets such as aircraft leases, then issue tradeable notes against the ring‑fenced income stream. Investors take comfort from English common law, a purpose‑built court and a regulator that recognises global best practice, while the originator harvests immediate liquidity and often achieves a credit rating higher than its own balance‑sheet standing.
This article sets out the building blocks of an ADGM securitisation, the advantages the structure confers, and the practical steps required to bring a deal from concept to closing. It then examines governance, tax, economic‑substance and ongoing reporting expectations, before closing with a summary of how professional advisers can lighten the administrative load for issuers who simply want to raise capital and move on with business.
ADGM SPVs as securitisation vehicles and the framework in brief
ADGM operates three separate authorities. The Registration Authority incorporates companies and records statutory changes; the Financial Services Regulatory Authority (FSRA) supervises any firm that offers financial services to third parties; and the ADGM Courts adjudicate disputes under directly applied English common law. That clear institutional split delivers legal certainty, a rare commodity across many emerging markets.
When a promoter wishes to create a securitisation vehicle it normally chooses the simplest available form: a Private Company Limited by Shares registered as an SPV. The SPV holds the asset pool, issues securities and performs contractual duties under the transaction documents. Because it is passive, its sole purpose is to acquire and manage ring‑fenced assets, it does not require an FSRA licence, provided it does not actively solicit investors or provide investment advice. The result is a fast, low‑cost incorporation that still benefits from ADGM’s court system, zero per‑cent corporate tax and extensive double‑tax‑treaty network.
Securitisation versus ordinary borrowing
Securitisation is the structured‑finance cousin of a vanilla bond. Rather than pledging a floating charge over the entire operating company, the originator sells or assigns specific receivables into the SPV. The SPV, remote from the originator’s insolvency risk, funds the purchase by issuing notes to capital‑market investors.
Why bother with the extra complexity? Three reasons surface again and again:
Liquidity from illiquid assets
A construction firm sitting on long‑dated government receivables can monetise them without waiting years for collection.
Credit arbitrage
Rating agencies look primarily at the asset pool, not the corporate seller. A BB‑rated retailer with prime‑quality card receivables might see its SPV notes achieve an A rating, slashing the coupon.
Balance‑sheet management
True‑sale securitisations remove assets and associated risk from the originator’s accounts, improving leverage ratios and freeing regulatory capital in the case of banks.
Assets most often securitised in the Gulf
- Trade receivables from blue‑chip or government counterparties.
- Auto and consumer loans originated by local finance houses.
- Residential mortgage portfolios amassed by home‑finance companies.
- Aircraft leases held by regional carriers.
- Infrastructure‑project cash flows, notably toll‑road or district‑cooling revenue.
- Future‑flow receivables such as ticket taxes, telecom licences or credit‑card interchange.
English common law recognises legal and equitable assignment of all such assets, which simplifies true‑sale opinions, vital for rating‑agency comfort.
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Mechanics of an ADGM securitisation
Originator identifies an asset pool
Eligibility criteria are drafted to ensure predictable cash flows and low dilution.
Legal‑transfer and perfection analysis
Counsel confirms the receivables can be sold, notices can be served and collections can be redirected to an offshore account in the SPV’s name.
Incorporation of the SPV
The promoter files a name‑reservation request, a short application form, certified passports and a customised memorandum and articles. A UAE‑resident authorised signatory is appointed, often supplied by the corporate‑service provider (CSP). The SPV elects to be treated as an exempt passive holding entity, meaning no office lease is needed.
Drafting of transaction documents
Sale agreement, servicing agreement, security deed, note or sukuk trust deed, offering memorandum and, where required, hedging contracts.
External‑service contracts
A corporate‑trustee bank is engaged to act as note trustee, security agent and account bank; a back‑up servicer may also be appointed.
Rating‑agency process
Agencies review historic performance, stress scenarios, legal opinions and cash‑flow models before assigning preliminary ratings.
Offering and closing
Notes are sold to investors, often under Regulation S or Rule 144A, and the purchase price flows through a waterfall to the originator.
Post‑closing servicing
The originator (now “servicer”) continues to collect instalments and passes them through to the SPV’s account each month. A trust‑bank calculates distributions and pays investors.
Because the SPV itself has no employees, it relies on contractual covenants, performance triggers and periodic servicer reports to safeguard investors.
"Directors provided by the CSP carry fiduciary responsibility but delegate day‑to‑day management under the servicing agreement."
Why ADGM outshines alternative jurisdictions
Direct application of common law means precedents such as Household Mortgage or Re Global Lease can be cited without need to interpret free‑zone adaptations. That matters when rating agencies and investors, comfortable with English jurisprudence, scrutinise true‑sale and non‑petition clauses.
Cost efficiency follows from minimal authorised‑capital requirements, no audit obligation for small SPVs (unless demanded by investors) and low renewal fees. A typical SPV pays less than two thousand US dollars a year in Registration Authority charges.
Ownership flexibility allows multiple share classes and fractional shares. That enables issuance of profit‑participation or voting‑restricted shares to accommodate sophisticated sponsor economics.
Tax neutrality stems from zero corporate, withholding or value‑added tax on most SPV activities. Where a cross‑border treaty offers reduced or zero withholding on interest, the SPV may access that benefit after filing an economic‑substance notification and obtaining a Ministry of Finance residency certificate.
Robust enforcement environment is assured by the ADGM Courts, whose judges include former English High Court justices. Judgments can be enforced onshore in Abu Dhabi and, under reciprocal memoranda, in several GCC states.
Governance and ongoing obligations
Economic substance
While the SPV is not engaged in distribution, leasing or headquarters services, it does conduct a pure‑equity‑holding activity by owning shares in itself and, sometimes, in an orphan foundation that retains the voting shares for bankruptcy remoteness. Under UAE rules the SPV files an annual notification but is deemed to meet substance requirements so long as it has an ADGM registered office and third‑party CSP.
Beneficial‑ownership register
Because securitisation SPVs are typically orphaned, with shares held by a purpose‑built charitable foundation or trust, no natural person controls more than twenty‑five per cent. The register therefore records the foundation as shareholder and states that no registrable beneficial owner exists, a permissible conclusion under the regulations.
Books and auditing
If note‑holders demand audited accounts, the SPV engages an ADGM‑approved firm. Even when not strictly required, many issuers voluntarily audit because rating agencies assign lower surveillance fees to deals with audited data. Books must be retained for six years.
Event‑driven filings
Changes to directors, authorised signatory or registered address must be lodged within fourteen days. Refinancing, additional note issuance or asset‑substitution amendments are filed for transparency, though they do not always incur extra fees.
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Steps for first‑time issuers
Pre‑feasibility study
Model the cash‑flow waterfall, size over‑collateralisation and consider rating‑agency fee quotes.
Tax review
Confirm that underlying debtor jurisdictions will not withhold at source or, if they do, that treaty relief applies.
Legal opinions
Obtain true‑sale, security‑enforcement and non‑petition opinions from recognised firms.
CSP engagement
Select a provider with ADGM licence, experience acting as independent director and ability to furnish resident signatory.
Bank‑account arrangement
Open collection and reserve accounts with a trustee bank familiar with securitisations. ADGM SPVs are widely accepted because KYC is straightforward.
Servicer readiness
Ensure the originator’s systems can generate stratification tables, delinquency reports and pool‑balance statements that match rating‑agency templates.
Cost outline
Incorporation and first‑year licence
Approximately 1,600 USD.
CSP onboarding and annual secretarial retainer
3,000–5,000 USD depending on director numbers and complexity.
Data‑protection fee
100 USD per annum.
Bank‑account opening
Banks charge an account‑opening fee (often waived) and minimum balance; trustee‑bank transaction fees apply per distribution.
Legal, rating, trustee and arranger fees
These dwarf incorporation cost and vary by asset class, note size and jurisdiction.
"Even after professional expenses, the blended cost of funds often undercuts unsecured corporate borrowing, making securitisation attractive for high‑quality but illiquid asset pools."
Illustrative transaction: SME loan portfolio
A regional finance company originates two‑to‑five‑year amortising loans to small businesses at an average coupon of ten per cent. Management wishes to recycle capital. It selects ADGM for the SPV because:
- the loans are governed by UAE law, so a domestic jurisdiction simplifies assignment;
- a zero‑tax treatment means the SPV can pay interest gross to note‑holders;
- the CSP can supply an experienced resident director familiar with collateral‑management covenants.
After carving out a 100‑million‑dollar static pool, the company sells it to Al Maryah Receivables SPV Ltd. The SPV issues three‑year notes at seven per cent, rated A‑ by a global agency. Net proceeds of ninety‑five million dollars return to the originator (after reserve‑fund and cost deductions), boosting internal rate of return.
Potential pitfalls and how to avoid them
Perfection gaps
Failure to serve assignment notices on debtors can render the transfer ineffective against receivers. Solution: close only after confirmatory acknowledgements.
Servicer disruption
If the originator suffers distress, collections may stall. Solution: include a back‑up servicer ready to step in within thirty days.
Trigger breaches
Rapid prepayment or arrears spikes may breach debt‑service coverage ratios. Solution: build early‑amortisation triggers that repay investors before deterioration escalates.
Tax‑residency challenges
Overseas tax authorities might view the SPV as lacking substance. Solution: keep an independent board, local account signatory and CSP minutes demonstrating decision‑making inside ADGM.
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ADGM’s advantages include common law certainty, low costs, flexible share structures, zero taxes, and access to the UAE’s double tax treaties, supported by its own courts and regulatory clarity.
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Ongoing compliance includes economic substance notification, UBO register (often orphaned), and event-driven filings, while auditing is optional unless required by investors or the rating process.
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Aston VIP offers full end-to-end support, from structuring and incorporation to governance, CSP services, bank accounts, and statutory filings throughout the life of the SPV.
Future developments
The FSRA is consulting on a specific securitisation regime that would set out disclosure templates, risk‑retention guidance and, potentially, fast‑track listing on the ADGM‑based International Securities Market. Meanwhile, the UAE’s incoming federal corporate‑income‑tax law preserves free‑zone zero‑rate treatment for income earned with adequate substance, although clarity around mainland‑sourced cash flows remains crucial. Originators should monitor both strands to ensure ongoing eligibility.
Aston VIP’s role in your licensing journey
Setting up an ADGM securitisation SPV involves far more than completing an online form. Share classes must match waterfall logic; articles of association must enshrine non‑petition language; independent directors must understand credit‑rating methodology; bank‑account mandates must align with trustee cash‑flow instructions; and economic‑substance notifications must reconcile with the Ministry of Finance treaty‑application portal.
Aston VIP delivers an end‑to‑end solution. Our structuring team analyses the asset pool, drafts bespoke constitutional documents, secures name reservations, files incorporation packs, supplies resident authorised signatories, opens trustee and reserve accounts, liaises with rating agencies during jurisdictional due‑diligence, and maintains statutory registers post‑closing. On an ongoing basis we prepare confirmation statements, data‑protection renewals, economic‑substance filings and any event‑driven share‑issue notices. For originators who prefer to focus on core lending or leasing activity, we also offer outsourced corporate‑administration and accounting for the life of the transaction.
Launch your ADGM securitisation vehicle with confidence by contacting us through the Aston VIP contact page. One of our specialist advisers will respond within a working day and set out a tailored roadmap, from asset‑pool selection to note closing, ensuring your deal benefits from the legal certainty, tax neutrality and investor appeal that Al Maryah Island affords.
