Over the course of decades, Abu Dhabi has undergone a remarkable transformation, evolving from a desert expanse into a prominent financial center surrounded by flourishing residential areas. With a diverse pool of talented professionals and positioned at the forefront of global sustainability efforts, the city is dedicated to pioneering green initiatives and strategic planning for future generations.
Central to Abu Dhabi’s ascent as a premier financial hub is the Abu Dhabi Global Market (ADGM), which plays a pivotal role in establishing the city as a global benchmark for financial excellence. ADGM’s commitment to harmonization, transparency, and clarity fosters a climate of confidence and trust among stakeholders, enticing businesses to establish roots in Abu Dhabi. There are different financial, non-financial, and legal activities promoted by ADGM in Abu Dhabi. Among these structures, Special Purpose Vehicles (SPVs) and Holding Companies stand out as prominent options.
An ADGM Holding Company typically serves as a parent entity, operating as a Private Limited Company (Ltd) with the capacity to own subsidiaries, as well as various assets including real estate, intellectual property rights, stocks, and more, regardless of their location. SPVs, on the other hand, function as passive holding entities established to mitigate financial and legal risks by segregating specific assets and liabilities. ADGM’s SPV framework is crafted to deliver flexibility, resilience, simplicity, and efficiency, drawing inspiration from leading models worldwide.
Let’s have a deeper understanding about Holding companies.
Holding Companies– What and Why?
A holding company is a business entity primarily engaged in holding controlling stocks of other companies, known as subsidiaries, which conduct operational activities such as manufacturing and service provision. The role of the holding company’s management is to oversee the operations of these subsidiaries, rather than directly engage in production or service delivery.
Holding companies can take various legal forms, including LLCs, partnerships, trusts, or foundations, with LLCs being the most commonly preferred structure.
These entities are established for several reasons:
- Asset Protection and Liability Shielding: By maintaining a clear separation between the holding company and its subsidiaries, assets held by the former are shielded from liabilities incurred by the latter. In the event of a subsidiary’s financial distress or bankruptcy, the assets are safeguarded from creditors’ claims.
- Facilitating Growth, Development, and Innovation: Holding companies offer a platform for diversifying investment portfolios and entering and exiting ventures with greater flexibility. The holding-subsidiary model facilitates the establishment of global credit limits, enabling easier access to funding for smaller subsidiaries.
- Tax Optimization: Depending on the jurisdiction in which it is established, a holding company may benefit from tax advantages associated with its structure and relationship with subsidiaries. This can result in reduced tax burdens and enhanced profitability for the overall corporate group.
Why set up a Holding Company in ADGM?
ADGM, emerging as a prominent financial hub for business and fintech, offers several compelling advantages for such ventures. Here’s a breakdown:
Legal and regulatory framework
- The legal framework facilitates cross-border activities.
- Full foreign ownership is permitted.
- There are no restrictions on foreign talent or employees.
- Capital repatriation faces no restrictions.
Tax benefits
- Profits, capital, and assets enjoy zero tax for 50 years.
- Employee income is also tax-free.
Counterparty confidence
- ADGM is a respected, independent regulator.
- Its independent, English common law judicial system stands out.
- It operates separately from the UAE legal system, adopting a risk-based regulatory approach.
Diverse ecosystem
- It serves as a regional deal-making hub.
- A multitude of international firms, investment funds, banks, and financial institutions are concentrated here.
- Professional services like law and auditing firms are of world-class quality.
- The region sees a growing trend in fund domiciliation.
Geographic epicenter
- Management offices, holding companies, and family offices benefit from proximity to their assets.
- The Middle East, Africa, and South Asia (MEASA) are increasingly pivotal in the global economy.
- The UAE’s role in South-South trade, particularly between Asia and Africa, is significant.
- ADGM is strategically positioned to tap into emerging market potential.
Costs Of Setting Up a Holding Company In ADGM
The Registration Authority helps to set up the legal structure of the ADGM Holding Company. In most cases, this would be a Private Company Limited by Shares. Shareholders can be individual, or corporate. Establishing a Holding Company in ADGM involves various procedures and associated costs as outlined below:
Registration Process:
- Name Reservation Application: $200
- Incorporation Application for a Private Company Limited by Shares: $1,500
- Commercial License upon Incorporation: $4,000 (annual fee)
- Business Activity Fees: $4,000 (annual fee)
Data Protection:
- Registration: $300
- Annual Renewal: $100
Office Space:
- Business Centre: Starting from $19,000 for a one-desk office.
- Fitted Offices: Starting from $55 per square foot.
Visas:
- Establishment Card Application: $273
- E-channel: $1,100 (one-time)
- E-channel Deposit: $1,360
- Visa Fees (per visa): Starting from $1,500
Summary of Costs:
- Name Reservation: $200
- Incorporation Application: $1,500
- Commercial License: $4,000
- Business Activity Fee: $4,000
- Data Protection Registration: $300
- Office Spaces (Business Center): Starting from $19,000
- Fitted Offices: Starting from $40,000
- Establishment Card Application: $273
- E-channel: $1,100
- E-channel Deposit: $1,360
MS for Setting up a Holding Company in ADGM
MS provides all-inclusive advice for setting up a holding company within the ADGM. Ranging from consultancy to guiding through authorization processes and legal document preparation, our team assists clients in navigating the complexities of incorporation. We ensure that applications are thorough, compliant, and submitted with confidence, streamlining the establishment process for our clients in the ADGM.
Disclaimer
The content posted is for informational & knowledge-sharing purposes only and is not intended to be a substitute for professional advice related to tax, finance, legal, compliance, or accounting. No warranty whatsoever is made in this regard, and it is not intended to provide and should not be relied on for tax/finance/legal/compliance or accounting advice. The content posted is subject to future amendments/changes/clarifications in the regulation by the authorities. For any clarifications, you may contact our finance, compliance, and legal team.