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Abu Dhabi Global Market, or ADGM, has become a well-known financial centre offering solutions that cater to local, regional, and international firms. Over its years of operation, ADGM has set up regulations that mirror global best practices, including the adoption of common law through dedicated courts, an approach that simplifies business for overseas investors. One category of entities in the ADGM that has attracted attention is the Special Purpose Vehicle (SPV). These SPVs isolate legal and financial risk within a specific ring-fenced structure, ensuring only the assets or liabilities connected with that specific project or transaction remain exposed, and ADGM has corporate governance for them.
While SPVs typically focus on holding assets or shares, they still face obligations relating to governance and ongoing compliance. Even though these vehicles might appear minimalistic, the ADGM’s rules demand a level of rigour in management, record-keeping, and annual filings to keep the structure legitimate and transparent. This article explores how corporate governance for ADGM SPVs works in practice, looking at the roles of directors, the responsibilities for annual and event-driven filings, the appointment of local signatories, and how everything fits within broader frameworks such as economic substance regulations. By the end, you will have a full picture of how these SPVs remain both flexible and accountable, preserving investor confidence and meeting ADGM’s standards.
Understanding ADGM and its corporate governance for SPVs
ADGM was created in 2015 as an international financial centre in Abu Dhabi, the capital of the United Arab Emirates. Having three separate authorities, the Registration Authority, the Financial Services Regulatory Authority, and the ADGM Courts, ADGM enforces a legal framework rooted in common law, like its corporate governance for SPVs. This environment is advantageous for those seeking a straightforward way to handle cross-border investments or expansions in the Middle East.
Crucially, ADGM does not simply adopt broad ideas from the English legal tradition. Instead, it implements English common law directly, which is unique for the region. For organisations from Europe, North America, or Asia familiar with common law processes, this can simplify negotiations and reduce uncertainty.
Within this setting, ADGM introduced an SPV regime to ring-fence assets and liabilities, offering a stable platform for holding property, intellectual property, shares, or specific business undertakings. Unlike some free zones, ADGM does not restrict ownership or require local partners. One can incorporate an SPV in the ADGM with minimal share capital and minimal ongoing overhead, yet the centre still expects robust governance.
Defining an SPV
An SPV is a passive holding entity set up to hold and safeguard assets or to facilitate certain transactions in isolation from other parts of a corporate group. If you manage a real estate development, for instance, you might place each project under a separate SPV so that potential claims linked to that project cannot affect other undertakings. Similarly, startups might hold shares in an SPV as part of a flexible equity arrangement for early investors. In a typical scenario, an SPV is not engaged in daily trade or broad commercial transactions: it is mostly a tool for ownership, liability segregation, or specific financing deals.
Some distinguishing points about ADGM SPVs:
Point 1: No share capital threshold: A single share is enough; the law does not require any minimum capital.
Point 2: No residency requirement: Neither the shareholder nor the director has to reside in the UAE (apart from certain signatory requirements).
Point 3: Numerous share classes: ADGM allows multiple share classes, enabling fractional or tailored equity structures.
Point 4: No attestations: Certified copies of corporate documents usually suffice, bypassing the need for widespread notarisation or attestation from foreign authorities.
Setting up an SPV in ADGM
Forming an SPV and setting up in the ADGM often starts with deciding who the shareholder(s) and director(s) will be. The standard approach requires only one shareholder and one director, and they can be the same person. Once the essential parties are confirmed, the next steps generally follow:
Choose a registered address
The SPV must have an official local address in ADGM. Many opt to use a company service provider that can serve as the registered agent.
Submit incorporation documents
The founder files an incorporation form, along with copies of the required KYC for each shareholder and director. The ADGM Registrar reviews these.
Obtain commercial licence
Once the Registrar approves, the SPV gets its official licence, usually listing minimal or no active operations.
Data protection registration
ADGM has its own data protection obligations, separate from the rest of the UAE. The SPV must register and then renew annually.
After these steps, the SPV can start its intended function, such as holding shares in a specific portfolio company or real estate asset, subject to the ongoing governance rules.
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Corporate governance essentials
Although an SPV is a passive structure, it must adhere to the ADGM’s rules on transparency and accountability. Two main categories of compliance exist:
Basic governance
This involves the internal rules set out in the SPV’s Memorandum and Articles of Association (or custom documents if used). The founding documents specify how directors are appointed, how shares are transferred, and how decisions get ratified.
Regulatory obligations
This is the external aspect, where the SPV must follow ADGM’s annual and event-driven filing requirements, keep up with beneficial ownership declarations, and confirm whether it must comply with the UAE’s economic substance regulations.
Roles in SPV management
Shareholder(s)
The ultimate owners of the SPV. One is enough, but it is also possible to have multiple, each potentially holding a different class of shares.
Directors
At least one is mandatory, responsible for overall management and daily decisions (to the extent they exist in a typical SPV). Directors sign official paperwork and oversee the entity’s compliance.
Resident authorised signatory
The ADGM requires that at least one signatory be a UAE resident, unless the shareholders are GCC nationals or entities. This signatory does not necessarily have to be a director, but often is.
Company service provider
The newly introduced CSP rules require non-exempt SPVs to appoint a local service provider. The CSP helps with routine compliance tasks, corporate secretarial duties, and communications with the ADGM Registrar.
Because SPVs rarely employ staff or conduct regular trade, the day-to-day governance is more about maintaining the official registers, lodging annual statements, and fulfilling any demands from external parties (like banks that host accounts).
"If an SPV plans to keep a bank account in the UAE, it must also supply the bank with updated licence documents on an annual basis."
Board and shareholder meetings
SPVs do not have to hold frequent board meetings. However, best practice suggests convening them periodically, perhaps once a quarter to review asset management, discuss any changes, or respond to compliance matters. Shareholder meetings are similarly minimal but recommended at least once a year, where you might review financial statements or authorise distributions.
In a small or single-shareholder structure, these “meetings” can often be resolved through written resolutions, which are then recorded in official registers. Because of the ring-fenced approach, it is crucial that any decisions about the underlying assets remain properly documented, so that claims or disputes cannot later allege informal or unauthorised transfers.
Annual filings
The ADGM imposes a number of yearly filings aligned with the date of incorporation:
Licence renewal
SPVs must renew their commercial licence each year, typically on their anniversary date. The renewal process includes confirming the registered address is active, verifying CSP arrangements, and paying the relevant fee.
Data protection renewal
During the same timeframe, the SPV’s data protection registration must be updated. The renewal costs around 100 US dollars, with non-compliance potentially incurring a much larger penalty.
Confirmation statement
Similar to an “annual return” in other common law jurisdictions, this statement affirms the SPV’s crucial information, officers, share capital, business activity, and registered office remain accurate. This is typically filed in tandem with the licence renewal.
The result is a structured approach that ensures the SPV’s public records remain correct and up to date. In addition, the ADGM uses these filings to track changes in beneficial ownership or directorship, allowing them to monitor potential risks or irregularities.
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Event-driven filings
Apart from annual updates, specific events require immediate notification and filings with the Registrar. Some common triggers:
Director changes
Appointing or removing a director, or altering their details.
Shareholder changes
Issuing new shares, transferring existing ones, or revising share classes.
Registered address changes
If the SPV shifts to a new local address or changes its CSP.
Alteration of articles
Any update to the SPV’s foundation documents.
Name changes
If the SPV decides to rebrand.
Creation of charges
If the SPV pledges its assets as security in a financing arrangement.
Completing filings within the required timeframe is crucial, as the ADGM can impose fines for lateness. The exact deadlines can vary, but typically the SPV must notify the Registrar within a short period after the relevant event.
Dealing with banks
An SPV might open a UAE bank account for convenience or to manage local currency transactions. In many cases, the bank will request the SPV’s updated licence each year, along with ultimate beneficial ownership disclosures. If the SPV does not supply these on time, the bank may freeze or suspend the account.
It is essential that the directors or the CSP remain aware of these obligations, especially where the SPV is used as part of a larger corporate arrangement and the bank account is needed for distributing dividends, receiving investment proceeds, or paying property-related expenses.
The role of CSP (company service provider)
In 2021, ADGM introduced rules requiring that certain SPVs appoint a company service provider unless they are exempt (for instance, some big multinationals with an existing ADGM presence or controlled by regulated financial institutions).
The CSP often acts as the registered agent, providing a local registered office as well as company secretarial duties, such as drafting board minutes and lodging filings. They also maintain statutory registers, including directors, shareholders, and beneficial owners.
For many smaller or overseas-based shareholders, a CSP is invaluable. They handle all communication with the authorities, track annual deadlines, and ensure the SPV does not miss crucial event-driven filings.
"Although a CSP imposes an extra service fee, it simplifies the administration, especially if the SPV’s owners or directors seldom visit the UAE."
Accounts and auditing
Every SPV is obliged to maintain proper accounting records. The level of detail can vary based on the company’s size and the monetary scale. The ADGM sets certain thresholds:
Small
Turnover not exceeding 13.5 million US dollars, with only a balance sheet signed by a director required, no external audit.
Medium
For those with a turnover above that figure, audited accounts become mandatory, including a director’s report.
The accounts must be prepared and finalised within nine months of the SPV’s financial reference date. For instance, if the SPV’s year ends on 31 December, it must submit accounts by the following 30 September. Even in a small SPV with minimal transactions, maintaining a consistent approach is key, especially if external investors or banks expect proof of the SPV’s financial standing.
Economic substance rules
The UAE enforced economic substance regulations (ESR) across all Emirates to align with international commitments. The rules require certain categories of entities conducting “relevant activities” to demonstrate real presence in the UAE. These relevant activities include holding companies, shipping, intellectual property, headquarters, distribution and service centres, among others.
SPVs that merely hold shares or passive real estate do not typically meet the criteria for ESR unless they generate relevant activity income. However, each ADGM SPV must evaluate whether it falls into a relevant category and then file a notification. Where the entity does meet the relevant activity threshold and earns income, it must complete the ESR report. Should the SPV not meet the conditions for ESR, the authorities might grant an exemption, but the entity must still file a notification or maintain records proving its exemption.
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SPVs must maintain proper accounting records, and depending on the turnover, may need to prepare and file audited accounts or simplified balance sheets within nine months of financial year-end.
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Banks expect updated compliance documentation, including licence renewals and beneficial ownership info, failure to provide may result in suspended accounts.
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Strong governance increases credibility, especially when the SPV is used for raising capital, safeguarding investor trust, and ensuring clarity in ownership or asset structures.
Advantages of solid governance
Investors and counterparties often favour structures with stable corporate governance. Even if an ADGM SPV is minimal, it can still produce documents showing prudent record-keeping, regular board or shareholder resolutions, and compliance with annual returns. This can be very helpful if the SPV is used for raising capital at the parent-company level.
For example, a tech startup might hold its shares in an ADGM SPV while it approaches external investors in later rounds. Potential supporters will scrutinise the SPV’s articles, confirm all shares are allocated properly, and appreciate that the entity meets ADGM’s standards. Good governance helps avoid conflicts, ensures clarity on ownership, and stands up well if a dispute escalates to the ADGM Courts.
How to handle expansions or new transactions
Over time, an SPV might evolve, acquiring new holdings or stepping into joint ventures. The directors must confirm that each step remains aligned with the SPV’s memorandum and articles. If the SPV wants to do something outside the original scope, it might need to file an update, or the owners might rewrite the articles.
Where multiple assets exist in the same SPV, it is vital to keep separate sub-ledgers or relevant records to avoid mixing liabilities. If a single property or shareholding triggers disputes, well-structured record-keeping can ensure that the rest of the SPV’s portfolio remains unaffected. This ring-fenced approach is precisely why SPVs were introduced to begin with, but it only works if the corporate governance framework is adhered to.
Aston VIP’s role in your licensing journey
Managing corporate governance for ADGM SPVs goes well beyond forming the entity. It requires careful adherence to annual obligations, timely event-based filings, maintaining up-to-date registers, and navigating ESR (when applicable). Aston VIP provides end-to-end support at each step, from drafting your SPV’s articles and ensuring good secretarial practices to liaising with ADGM authorities on your behalf.
If you are ready to set up an SPV or want to refine how you handle annual filings and compliance, contact Aston VIP for practical advice tailored to your organisation’s needs. Our experienced team helps you handle the details so that your structure remains robust, straightforward, and in line with what investors and lenders typically expect from a well-run ADGM vehicle.
