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Beyond the Skyscrapers: Exploring Hidden Gems for Business Setup in Dubai

Advantages of Business Setup in Dubai
Dubai, the gleaming gem of the Middle East,

Dubai, the gleaming gem of the Middle East, has captured the world’s imagination with its awe-inspiring skyscrapers, luxurious lifestyle, and bustling metropolis. This thriving city has long been recognized as a global business hub, attracting entrepreneurs and investors from every corner of the globe. Its strategic location at the crossroads of Europe, Asia, and Africa, coupled with visionary leadership and business-friendly policies, has made it an unrivaled destination for ambitious ventures seeking growth and prosperity.

While the iconic skyline of Dubai is synonymous with progress and grandeur, there is a lesser-known facet of the city’s business landscape that holds tremendous potential and untapped opportunities for those in search of the perfect launchpad for their ventures. These hidden gems, tucked away amidst the bustling cityscape, come in the form of specialized economic zones known as “free zones.”

What are Free Zones?

Dubai is home to a diverse array of free zones, each catering to specific industries and offering an array of incentives designed to empower businesses to flourish. These zones represent a sanctuary for entrepreneurs, providing a haven where ideas can be nurtured, innovation can thrive, and growth can be accelerated.

Operating within the confines of a free zone grants businesses unique advantages that extend beyond the glittering exterior of Dubai’s skyline. It allows them to bypass certain bureaucratic hurdles and leverage tailor-made benefits tailored to their specific needs, all while benefiting from a nurturing environment that fosters creativity, collaboration, and expansion.

Advantages of Setting Up in Free Zones

At the heart of Dubai’s free zones lie a host of tantalizing benefits that draw businesses from far and wide:

  • 100% Foreign Ownership: Unlike the mainland, where local partnerships are often mandatory, free zones allow foreign entrepreneurs to retain full ownership and control of their ventures, fostering a sense of ownership and empowerment.
  • Tax Incentives: Within these economic oases, businesses are rewarded with enticing tax exemptions, ensuring that their hard-earned profits remain firmly in their hands, thus bolstering their ability to reinvest and grow.
  • Simplified Business Setup: The daunting complexities of setting up a business are considerably eased within free zones, where streamlined processes and reduced paperwork pave the way for swift and hassle-free establishment.
  • Repatriation of Profits: Businesses that thrive within the nurturing confines of a free zone can confidently repatriate 100% of their profits, thus reaping the rewards of their success without restrictions.
  • World-Class Infrastructure: Dubai’s free zones are a testament to the city’s unwavering commitment to providing world-class facilities, state-of-the-art infrastructure, and a technologically advanced ecosystem, all geared toward cultivating success.

Conclusion

As Dubai’s soaring skyscrapers capture the world’s attention, it is the city’s lesser-known free zones that hold the key to unlocking boundless opportunities for enterprising individuals and ambitious businesses. By venturing beyond the traditional landscapes of the city, entrepreneurs can discover hidden gems tailor-made to cater to their industry-specific needs and ambitions. These free zones offer not only a gateway to success but also a vibrant ecosystem that nurtures dreams, fosters innovation, and propels businesses toward unparalleled heights in Dubai’s dynamic and ever-evolving economy.

Discover Excellence with MS Group

For entrepreneurs seeking to establish their presence in the dynamic landscape of Dubai’s free zones, MS Group stands ready to provide the best services as a leading company service provider. With our profound expertise and dedication, we ensure a seamless and efficient journey from business setup to sustainable growth. Partner with us to unlock your business’s true potential in the vibrant heart of the Middle East.

Disclaimer: This article is provided for informational and reading purposes only. The content should not be construed as legal or financial advice. Readers are encouraged to seek professional advice and perform their own due diligence before making any business decisions.

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Navigating Business Set-Up in Dubai: A Comprehensive Guide to Incorporation

Navigating Business Set-Up in Dubai: A Comprehensive Guide to Incorporation
A Comprehensive Guide to Incorporation

Dubai is a global business hub renowned for its favorable business environment and strategic location. Setting up a business in Dubai offers immense opportunities and benefits, but the process can be complex and overwhelming for newcomers.

The 6 Steps to Consider While Settingc up a Business in Dubai:

1) Choosing the Right Business Structure in Dubai:

Dubai offers three primary business structures: Free Zone Companies, Mainland Companies, and Offshore Companies. Free Zone Companies provide 100% foreign ownership, tax exemptions, and simplified registration processes within designated free zones. Mainland Companies allow businesses to operate across the UAE market, requiring a local Emirati partner or sponsor. Offshore Companies are ideal for international business operations, offering tax optimization, asset protection, and global expansion opportunities. Each structure has its advantages and considerations, making it essential to choose the one that aligns with your business goals and requirements.

2) Dubai Free Zones: Exploring Business Opportunities:

Enjoy 100% foreign ownership, allowing complete control and autonomy over your business. Benefit from tax exemptions on corporate and personal income, customs duties, and capital gains. Experience simplified company registration processes, with streamlined procedures and efficient licensing. Access world-class infrastructure, state-of-the-art facilities, and proximity to international markets. Join a thriving business community, fostering networking opportunities and industry-specific support.

3) Offshore Companies: Exploring International Business Opportunities:

Establishing an offshore company in Dubai offers numerous advantages, including tax optimization, as it allows businesses to benefit from favorable tax regimes. Additionally, offshore companies provide enhanced asset protection, shielding assets from potential liabilities and risks. Moreover, such companies can facilitate global expansion, providing access to international markets and opportunities. With its strategic location and business-friendly environment, Dubai serves as an ideal hub for offshore operations, enabling businesses to thrive and maximize their potential.

4) Understanding Dubai’s Tax Environment:

Dubai offers a compelling tax environment for businesses with several key benefits and exemptions. Companies operating in Dubai enjoy 100% tax exemption on personal income taxes. Value Added Tax (VAT) is currently set at a rate of 5% but does not apply to certain sectors like healthcare and education. Dubai also provides exemptions on customs duties, making it an attractive location for international trade and commerce. Additionally, businesses in Dubai benefit from a network of Double Taxation Avoidance Agreements (DTAA) with numerous countries, further enhancing their tax advantages.

5) Essential Steps for Business Incorporation in Dubai:

Company Registration: Begin by selecting the appropriate business structure (Free Zone, Mainland, or Offshore) and submit the required documents to the relevant authorities. Obtain necessary approvals and register your company with the appropriate government agency.

Trade Name Reservation: Choose a unique trade name for your business and apply for its reservation. Ensure that the name complies with the guidelines set by the Department of Economic Development (DED) or the respective Free Zone authority.

  • Visa Applications: Determine the visa requirements for your company’s shareholders, partners, and employees. Apply for visas through the appropriate channels, such as the General Directorate of Residency and Foreigners Affairs (GDRFA) or the Free Zone authority.
  • Opening Bank Accounts: Select a suitable bank in Dubai and gather the required documentation, including company registration papers, shareholder information, and identification documents. Submit the necessary paperwork to open corporate bank accounts for your business.
  • Licensing and Permits: Obtain the necessary licenses and permits specific to your business activity. This may include trade licenses, professional licenses, or specialized permits depending on the nature of your operations. Comply with the regulations set by the relevant authorities.

6) Leveraging Dubai’s Business Support Ecosystem:

Discover the boundless support for businesses in Dubai, a city teeming with accelerators, incubators, and networking platforms. Benefit from a dynamic ecosystem that nurtures innovation and growth, with programs tailored to every industry. Government initiatives further amplify opportunities, providing grants, mentorship, and access to a thriving community. Whether you’re a startup or an established enterprise, Dubai’s robust support services propel you toward success on a global stage. Unleash your business’s true potential in a city that fosters entrepreneurship like no other

How MS can help you.

At MS, we are dedicated to assisting you every step of the way, from pre-business setup services to establishing the best corporate structure and completing the registration process in the DMCC portal. Our expertise lies in designing unique plans and packages tailored specifically to your needs, ensuring that your business receives the personalized guidance it deserves. We take care of all the necessary documentation, including finalizing required documents from DMCC, facilitating amendments, renewals, and obtaining your company’s trade license. Additionally, we provide support for adding new activities, partners, or shareholders to existing licenses, and help you obtain your company’s establishment card. With a deep understanding of UAE regulations, our professional team is committed to providing comprehensive assistance, enabling your business to thrive and grow in the UAE market.

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Economic Substance Regulations for Holding Company Businesses in the UAE

Economic Substance Regulations for Holding Company Businesses in the UAE

Introduction:

The UAE applies Economic Substance Regulations (ESR) to Holding companies located in the country, including businesses in free zones and those engaged in any of the defined ‘relevant activities.’
Regulations hence require these holding companies to maintain and demonstrate an adequate “economic presence” in the UAE relative to the activities they undertake i.e., “Holding Company Business”.
In simple terms, if an entity wanted to declare its revenue in a country, they need to demonstrate sufficient “substance,” i.e. business actions that fit ESR’s relevant activities, taking place in the country. Entities can no longer book any revenue in any jurisdiction for tax benefits when there is no real activity taking place in that jurisdiction. The ESR law for holding companies, along with other licensed companies, was adopted in 2019 to ensure transparency and prevent financial manipulation. Holding companies in the UAE must adhere to these regulations and file the Economic Substance Return as per the law.

Definition of a Holding Company under ESR:

In the context of ESR, a holding company in the UAE is defined by meeting the following criteria:

  1. The company holds equity interests in other juridical persons.
  2. It earns income solely from dividends and capital gains derived from its equity investments.

A company that holds assets and has income from sources other than dividends and equity investments would not be considered a holding company under ESR.

Compliance Requirements for Holding Companies:

Holding companies must comply with the regulations set by the licensing authority, maintain an adequate number of employees and physical assets, and do not necessarily need to be directed and managed in the UAE.
Furthermore, they are not required to disclose adequate expenditures in the UAE. Holding companies can be mainland or free zone companies, such as Abu Dhabi Global Market (ADGM), Dubai Multi Commodities Centres (DMCC), MASDAR, 2454, etc. as long as they do not engage in any commercial activity within the UAE.

Core Income-Generating Activities (CIGA) for Holding Companies:

Section 3 of the Relevant Activities guide outlines that the CIGA of a holding company involves acquiring and holding equity interests in one or more companies. The income generated by the holding company primarily stems from its equity interests and dividends derived from those equity investments.

Reduced Economic Substance Test:

To qualify as a holding company, an entity must pass the Reduced Economic Substance Test. This test is designed for companies engaged in pure equity holding activities.

Penalties for Non-Compliance:

Non-compliance with ESR can result in various penalties, including fines. These include AED 50,000 for failing to conduct tests and submit a report in the first year, AED 400,000 for non-submission of reports and tests repeatedly in the second year, AED 50,000 for providing inaccurate information, and AED 20,000 for failure to submit a notification.

Importance of a Professional Service Provider for ESR Filing:

Engaging professional team for ESR filing offers several benefits:

  1. Accurate tracking and monitoring of economic activities to ensure compliance with ESR regulations.
  2. Expert guidance in identifying and distinguishing relevant activities under the scope of ESR.
  3. Timely and accurate reporting and notification to regulatory authorities.
  4. Review actual business operations/activities undertaken by the licensee (substance over form approach)
  5. Provision of consultancy services to evaluate and structure operating models and corporate governance.
  6. Avoidance of conflicts of interest through the involvement of unbiased third-party professionals.
  7. Recommend remedial actions/measures to comply with Economic Substance Regulation

Conclusion:

Compliance with ESR is essential for holding companies operating in the UAE. By engaging ESR consultants or professional accounting services, companies can ensure accurate identification of relevant activities, timely filing of notifications, and avoidance of penalties. If you require further information or assistance in preventing penalties related to ESR notification failure, it is advisable to reach out to expert accounting firms or service providers in the UAE.

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Why SPVs and Foundations in ADGM? Unveiling the Dynamic Duo!

Why SPVs and Foundations in ADGM? Unveiling the Dynamic Duo!

Why SPVs and Foundations in ADGM?

An SPV (Special Purpose Vehicle) and a Foundation are two different legal structures that serve different purposes.

An SPV is a separate legal entity created to serve a specific purpose or project. It is often used to isolate risk and limit the potential liability of the parent company. SPVs are commonly used in structured finance transactions, mergers and acquisitions, real estate investments, and other business transactions. The assets and liabilities of the SPV are separate from those of the parent company, and the SPV can be dissolved once its purpose has been achieved.

On the other hand, an ADGM Foundation-like trust is used for many purposes such as wealth management and preservation, tax planning, family succession planning, corporate structuring, and asset protection. As compared to trust, the founder of the foundation can retain more control over the foundation. It is similar to a trust in common law jurisdictions, but unlike a trust, it has a legal personality and can enter into contracts and hold assets in its own name. Foundations are commonly used in civil law jurisdictions, such as in Liechtenstein and Panama, and can also be established in certain common law jurisdictions, such as in the UAE.

In summary, an SPV is a legal entity created for a specific business purpose, while a Foundation is a legal entity created to manage and protect assets for a specific purpose, such as charitable or philanthropic activities.


In ADGM, an SPV is commonly used in structured finance transactions, mergers and acquisitions, real estate investments, and other business transactions. The ADGM Companies Regulations 2015 provide for the incorporation of SPVs, which are typically used for ring-fencing assets and liabilities and limiting potential liabilities of the parent company. ADGM allows for the incorporation of different types of SPVs, including those for securitization transactions, project finance, and real estate investments.SPVs are commonly used for ring-fencing assets and liabilities and limiting the potential liabilities of the parent company.

ADGM also offers a legal structure for Foundations. The ADGM Foundations Regulations 2017 provide for the establishment of private and public Foundations in ADGM. A Foundation established in ADGM can be used for charitable or non-charitable purposes and can hold assets for the benefit of beneficiaries or for a specific purpose. A Foundation in ADGM has legal personality and can own assets, enter into contracts, and sue and be sued in its own name.

Uses of SPV

  • Risk sharing: A parent company can create an SPV to share the risks associated with high-risk projects. If the parent company faces bankruptcy during such projects, the SPV remains unaffected. Similarly, if the SPV faces bankruptcy, it does not impact the parent company since the SPV is created for a specific business purpose.
  • Asset transfer: SPVs facilitate the transfer of assets, making them unidentifiable. They can even enable the transfer of non-transferable assets like mines, power plants, and gas plants.
  • Financing: SPVs can ring-fence investments, increase debt owed to the parent company, or finance parental or SPV assets without subjecting them to cross-liabilities.
  • Real estate investment: SPVs can acquire title to real property, limiting the recourse of mortgage lenders based on the location of the asset.
  • Securitization: Companies can use SPVs to securitize loans, reducing funding costs. The SPV purchases assets by issuing debts, providing priority rights to asset-backed security holders for receiving payments.
  • Raising capital: SPVs can be used to raise capital at favorable rates, with creditworthiness determined by the SPV’s collateral rather than the parent company’s credit rating.
  • Intellectual property: SPVs protect a company’s intellectual property rights from pre-existing licensing deals. They can separate valuable intellectual property into a separate structure with minimal liabilities. SPVs can also raise funds and enter into license agreements with third parties independently of the parent company.

Advantages of Foundations

  • Asset management
  • Strong administrative features on which the Foundation Council operates on a par with a Board of Directors. The duties of council members are set out in the ADGM Foundation Regulation. The government follows international best practices and sets a regulatory standard for the Foundation Council. These criteria include legal obligations similar to those of directors in the company law.
  • Guaranteed by Guardian supervision. The Foundation Council is administered by the Guardian and makes sure that it complies with the charters and by-laws of the Foundation. The appointment of a Guardian after the death of the Founder is mandatory and optional during the Founder’s lifetime.
  • Legal personality as opposed to trust. Having a legal personality, as a company can, gives foundations the flexibility to enter directly into contracts and arrangements.
  • Separation of responsibilities while upholding control of properties. The Foundation is a separate legal establishment that permits the separation of responsibilities between the Foundation and the Founder.
  • Eternal existence after the life of the founder. A foundation is a permanent concept that consents to adjustments to continue and thus offers certainty after the death of the founder.
  • Wealth Protection Mechanisms

Personal Law vs ADGM Foundation Regime

In the UAE, Islamic law (Shariah law) governs inheritance, which can pose challenges for businesses that have Muslim shareholders who pass away, as the transfer of their shares to non-Muslims can be complicated. However, the use of an ADGM Foundation can provide a solution to this issue.

When a Muslim shareholder passes away, their shares in the company are subject to the rules of Shariah law regarding inheritance. In many cases, the shares will be passed down to the deceased shareholder’s heirs in accordance with Shariah law. However, if the heirs are non-Muslims, they may not be able to inherit the shares under Shariah law.

To avoid this issue, the ADGM Foundation can be used as a holding entity for the shares. The deceased shareholder’s shares in the company can be transferred to the Foundation, which can then hold the shares for the benefit of the deceased shareholder’s beneficiaries. The Foundation can be established in such a way that it is not subject to Shariah law and can provide a mechanism for the transfer of the shares to non-Muslim beneficiaries.

The Foundation can be established in accordance with the ADGM Foundations Regulations 2017, which provide for the creation of private and public Foundations. The Foundation can be set up to hold assets for the benefit of the deceased shareholder’s beneficiaries, who can be designated as beneficiaries of the Foundation. The Foundation can then distribute the shares to the designated beneficiaries according to the wishes of the deceased shareholder, which can be outlined in the Foundation’s charter or trust deed.

The use of an ADGM Foundation for the transmission of shares from a Muslim to a non-Muslim shareholder partner provides a flexible and customizable solution for businesses that may face inheritance issues due to Shariah law. The Foundation can be established to meet the specific needs and requirements of the business and can provide a clear mechanism for the transfer of shares to non-Muslim beneficiaries.

In the UAE, the transfer of shares between Muslim and non-Muslim partners can be complicated by the rules of Shariah law regarding inheritance. However, the use of an ADGM Foundation can provide a solution to this issue.

In summary, setting up an ADGM Foundation can provide a flexible and customizable solution for the transmission of shares of a Muslim partner to a non-Muslim partner in the event of death. The Foundation can be established to meet the specific needs and requirements of the partners and can provide a mechanism for the transfer of shares in a way that is not subject to the rules of Shariah law.

Consultation on Distributed ledger technology foundations:

The ADGM has recently released a Consultation Paper outlining a proposed legislative framework for foundations utilizing distributed ledger technology (DLT). This framework is designed to accommodate DLT projects that intend to utilize tokens for issuance and trading through various structures such as unincorporated decentralized autonomous organizations (DAOs), foundations, and companies limited by guarantee.

The primary objective of the paper is to develop a new regulatory regime tailored to the unique requirements and characteristics of foundations, aiming to attract DLT projects and developers. The goal is to introduce the Proposed Regulations for Distributed Ledger Technology Foundations in 2023.

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Cracking the Code: Your Ultimate Guide to Company Name Rules in the Abu Dhabi Global Market (ADGM)

Cracking the Code: Your Ultimate Guide to Company Name Rules in the Abu Dhabi Global Market (ADGM)

Company Name Rules in the Abu Dhabi Global Market (ADGM)

Introduction

When establishing or changing the name of a company in the Abu Dhabi Global Market (ADGM), it is important to adhere to certain regulations and requirements. These guidelines are in place to ensure that company names are unique, do not imply connections with government entities, and comply with the Business and Company Name Rules of 2016. We will provide an overview of the restrictions, controls, and requirements for the approval of company names in the ADGM.

  • Ensuring Name Uniqueness by name search and validation

To prevent confusion and avoid conflicts, the Registrar’s Company name search should be utilized to verify that the proposed company name is not already in use by another entity registered in the ADGM or any relevant jurisdiction. Additionally, it is advisable to check existing trademarks by contacting the Ministry of Economy or similar offices in other jurisdictions.

  • Restrictions on Name Similarity and Misleading Names

A company’s name should not be identical or too similar to an already registered company or partnership in the ADGM or any other relevant jurisdiction. This measure helps to prevent confusion among businesses and consumers. Furthermore, the name should not be misleading, implying relationships with the ADGM, ADGM Financial Services Regulations Authority, or any governmental authority in the ADGM, Abu Dhabi, or the United Arab Emirates (UAE) unless written consent has been obtained.

  • Sensitive Words and Expressions

Certain words or expressions are considered sensitive and require special permission or justification for their inclusion in a company name. Examples of such sensitive words include “Government” or “UAE.” If a company wishes to use these words, they must obtain written approval from the relevant authority and submit it to the Registrar during the name reservation or company registration process.

  • Prohibited Words and Phrases

The ADGM maintains a list of prohibited words and expressions that cannot be used in company names. This list includes protected and restricted names or phrases, which may change over time due to new legislation. Examples of prohibited words include the names of public authorities, such as the Financial Regulator, Central Bank of the UAE, and ADGM itself, as well as words like “bank,” “insurance,” or “trust” that suggest financial services without proper consent from the ADGM Financial Services Regulatory Authority.

  • Name Endings

Different types of companies in the ADGM must use specific endings for their names. Public companies limited by shares should end with phrases such as “public limited company,” “plc,” or variations thereof. Private companies limited by shares must use endings like “limited,” “ltd,” or their variations. Restricted Scope Companies should include the word “restricted” or ‘’RSC’’ and Special Purpose Vehicles should use the word ‘’Holdings’’ in the name and use the same endings as private companies limited by shares.

  • Naming Considerations for Branches of Foreign Companies

If a foreign company wishes to register as a branch in the ADGM, it must use the name of its parent company.

  • Proposed Name in Arabic

Applicants are required to provide the proposed name of the company in Arabic during the name reservation or incorporation process. If left blank, the Registrar will exercise discretion in determining the Arabic spelling of the name.

Conclusion

Choosing a company name in the ADGM involves several restrictions, controls, and requirements to ensure uniqueness, avoid misleading information, and comply with the Business and Company Name Rules of 2016. By following these guidelines and seeking proper approvals, when necessary, businesses can select appropriate names that reflect their identity while adhering to the regulatory framework of the ADGM. It is important for entrepreneurs and companies to familiarize themselves with the rules and consult the relevant authorities to ensure compliance and a smooth registration process.

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Legal Structures in ADGM: Choosing the Right Entity for Your Business

Legal Structures in ADGM: Choosing the Right Entity for Your Business


Introduction:

Choosing the right legal entity is a crucial step when establishing a business. In Abu Dhabi Global Market (ADGM, there are various legal entity types available to entrepreneurs. Understanding the characteristics and requirements of each entity type is essential for making informed decisions. This article provides a comprehensive guide to the different legal entity types in ADGM, as defined by the ADGM Companies Regulations 2015 and subsequent amendments.

  1. Public Company Limited by Shares:

A Public Company Limited by Shares (PLC) is a company that has offered shares to the general public. It is the only type of company allowed to be listed on stock exchanges. It may offer shares or any securities of the company for sale to the general public.  It may be quoted on the stock exchange, but not all public companies are listed companies. The share capital and the liability of the shareholder is limited to the amount paid or unpaid (if any) on their shares. PLCs have a share capital, and the liability of shareholders is limited to the amount paid or unpaid on their shares. The minimum share capital requirement for a PLC is US$50,000.

  • Private Company Limited by Shares:

A Private Company Limited by Shares (LTD) is privately owned and cannot offer its shares for sale to the general public. While it can have a share capital, the liability of shareholders is limited to the amount paid or unpaid on their shares. LTDs are commonly used for various business ventures, both small and large.

  • Private Company Limited by Guarantee:

A Private Company Limited by Guarantee (LTG) is designed to protect members from liability. It does not have a share capital, and its members act as guarantors rather than shareholders. Members of LTGs agree to contribute a specific sum of money (a guarantee) if the company is wound up. This type of company is suitable for member associations, clubs, and professional membership organizations.

  • Restricted Scope Company:

A Restricted Scope Company is similar to a Private Company Limited by Shares, but it has fewer disclosure requirements and lighter compliance obligations. It is often used by professional investors, government entities, family offices, and specific institutions that require less regulation and greater confidentiality. A Restricted Scope Company can only be incorporated as a subsidiary of a group that publicly files consolidated accounts or as a subsidiary of a company formed by Emiri decree or by individuals from the same family.

  • Private Company Unlimited with Shares:

An Unlimited Company is a company without any limit on the liability of its members. Although it has a share capital, shareholders are personally liable for the company’s debts to an unlimited extent. This type of company cannot offer its shares for sale to the general public.

  • Private Company Unlimited without Shares:

Similar to the Private Company Unlimited with Shares, a Private Company Unlimited without Shares does not have a share capital. Shareholders are personally liable for the company’s debts without any limit. It also cannot offer its shares for sale to the general public.

  • Branch of Foreign Company:

A Branch of a Foreign Company allows a company incorporated or formed outside of ADGM to establish a presence within the free zone. The structure and requirements of the branch depend on the regulations of the foreign company. It is commonly used to establish a small presence or a representative office for referral of business transactions.

  • Limited Liability Partnership (LLP):

A Limited Liability Partnership (LLP) is commonly used by professionals such as accountants, auditors, and lawyers. In an LLP, each partner’s personal assets are protected, and partners are not personally liable for the debts or liabilities incurred by other partners.

  • General Partnership:

A General Partnership is an arrangement where partners conducting a business jointly have unlimited liability. Each partner is personally liable for the partnership’s obligations, and their personal assets may be used to settle debts.

  1. Limited Partnership:

A Limited Partnership (LP) exists when two or more partners jointly conduct a business, with at least one general partner and one limited partner. General partners have unlimited

  1. Protected Cell Company (PCC):

A Protected Cell Company (PCC) is a unique corporate structure where a single legal entity consists of a core and multiple cells. Each cell within the PCC has its own separate assets and liabilities, providing a high degree of segregation. The PCC operates as a hub and spoke structure, with the core organization connected to individual cells. While each cell is independent from one another and the core, they are all part of the same legal entity. PCCs are commonly used in the investment and insurance industries to create separate compartments for different assets or policies. A PCC can be formed as a Public Company Limited by Shares, Private Company Limited by Shares, or Private Company Unlimited with Shares.

  1. Incorporated Cell Company (ICC):

An Incorporated Cell Company (ICC) is similar to a Protected Cell Company (PCC) in that it comprises a core and individual cells. However, in an ICC, each cell is incorporated as a separate legal entity without any shareholder relationship with the ICC itself. This means that each cell within the ICC is treated as a distinct company under the law. The ICC structure offers a higher level of legal separation between cells, allowing for greater flexibility and autonomy. Similar to PCCs, ICCs can be established as a Public Company Limited by Shares, Private Company Limited by Shares, or Private Company Unlimited with Shares.

  1. Open-Ended Investment Company:

An Open-Ended Investment Company is a type of investment company that issues and redeems shares at the request of investors. Unlike closed-ended investment companies, open-ended investment companies do not have a fixed number of shares. Instead, they issue new shares as investors buy into the fund and redeem shares as investors sell their holdings. These companies are commonly used for collective investment in securities, providing investors with the opportunity to participate in a diversified investment portfolio. Open-Ended Investment Companies can be structured as Public Companies Limited by Shares or Private Companies Limited by Shares.

  1. Closed-Ended Investment Company:

A Closed-Ended Investment Company is an investment company that issues a fixed number of shares, which are then traded on a stock exchange or sold privately. Once the shares are issued, the company does not issue any additional shares or redeem existing ones. The value of the shares is determined by supply and demand in the market. Closed-Ended Investment Companies are suitable for long-term investments and often invest in a specific asset class or industry. They can be structured as Public Companies Limited by Shares or Private Companies Limited by Shares.

Require assistance in deciding the exact structure based for your business? Contact us!

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Special Purpose Vehicles: Unlocking Opportunities for Stakeholders

Special Purpose Vehicles: Unlocking Opportunities for Stakeholders

Introduction

Ever wondered how SPVs can be advantageous for various stakeholders such as business families, investors, entrepreneurs, property investors, and existing companies? Here is a good read on the same!

Understanding SPVs

ADGM SPV is a Body Corporate whose sole purpose, either generally or when acting in a particular capacity, is to carry out one or more of the following functions:

  • Issuing Investments
  • Redeeming or terminating or repurchasing, whether with a view to re
  • Issue or to cancellation, an issue, in whole or part, of Investments; or
  • Entering into transactions or terminating transactions involving
  • Investments in connection with the issue, redemption, termination or
  • Repurchase of Investments, and has been explicitly established for the purpose of:
  • Securitizing assets; or
  • Investing in Real Property

An ADGM SPV allows the holding of various assets, including shares of private and publicly listed companies, real estate properties, intellectual property rights (such as trademarks), and more. It is important to note that SPVs are limited to engaging in “passive” activities and cannot operate actively. Consequently, SPVs do not have employees and are not eligible for work or residency visas in the UAE.

  • Benefits of SPV

    The flexibility of Asset Ownership

SPVs offer flexibility in asset ownership, providing advantages to various parties, including:

Investors and businesspeople who can corporatize their share ownership in UAE limited liability companies (LLCs) by utilizing SPVs.

  • Real estate investors, both individuals and corporate entities, who can use SPVs to hold their property assets, whether it’s a single property or a portfolio. Large property portfolios can be allocated to different SPVs based on geography or property type.
  • Inventors, companies, start-ups, and founders can use SPVs to hold intellectual property rights, allowing for licensing agreements and pooling of royalties or licensing fees.
  • Business families with complex ownership structures can streamline their ownership at the family level by using SPVs to allocate different family companies to separate SPVs based on geographic or sector-specific divisions.
  • Companies entering into a joint venture (JV) agreements can establish a specific SPV for the JV or use their own SPV to enter into the partnership.

Segregation of Risk

  • As private companies are limited by shares, SPVs offer limited liability to shareholders. This means that shareholders’ liability is limited to their investments in the SPV, and their other assets are generally shielded from liability, except in cases where personal or corporate guarantees are provided. This segregation of risk allows for greater protection and separation of liabilities among different entities or individuals.
  • Third-Party Beneficiary Arrangements

ADGM recognizes the use of third-party beneficiary arrangements, such as nominee agreements and trust agreements. These arrangements allow for the protection of third-party rights and enable one shareholder to hold shares on behalf of another party. For example, while Individual A may be the legal shareholder of an SPV, Individual B can be the beneficial owner of the shares.

Flexible Shareholding

ADGM provides a flexible shareholding regime, offering the following advantages:

  • No residency requirements for shareholders.
  • No minimum capital requirement.
  • Multiple classes of shares can be issued, allowing for different rights such as voting rights, preferential, dividend, pre-emptive rights, etc.
  • Incorporation of pre-emption rights, such as rights of first offer, drag-along rights, and tag-along rights, into the SPV’s Articles of Association or a separate shareholder’s agreement.
  • Ease of share transfers.
  • The ADGM SPV Nexus Requirement

When registering an ADGM SPV, applicants must demonstrate an appropriate connection or “nexus” to ADGM, the UAE, or the GCC to satisfy the ADGM Registration Authority. This can be achieved by showing that an individual, family, or company based in the UAE or GCC will own or control the SPV, or the SPV holds assets in the UAE or GCC, or the SPV facilitates transactions benefiting the UAE. Non-UAE residents solely holding assets outside the UAE or GCC are unlikely to meet the nexus requirement.

  • ADGM SPVs and Tax Residency Certificates (TRCs)

Generally, ADGM SPVs are not eligible for Tax Residency Certificates (TRCs). However, if the SPV has a UAE parent company with operational assets in the UAE or owns an UAE subsidiary with operational assets in the UAE, it may be eligible for a TRC, subject to the discretion of the UAE Ministry of Finance.

  • ADGM SPVs and Economic Substance Regulations (ESR)

ADGM SPVs engaged in holding company business or owning intellectual property rights may be subject to the Economic Substance Regulations (ESR). These regulations require companies to demonstrate adequate economic substance in the UAE.

SPV and Asset Securitisation
Factoring and securitization structures are commonly used by businesses to convert illiquid assets into cash flow. Factoring involves selling assets, typically account receivables, to banks and financial institutions at a discounted price. In contrast, securitization structures aim to obtain funding from not just the banking sector but also the wider investment and capital markets.

An SPV plays a crucial role in achieving the twin objectives of transferring assets for the benefit of investors and creating capital market instruments in a securitization structure. SPVs are solely created to hold the assets to be transferred by the originator, ring-fencing them for the SPV’s beneficiaries. The SPV also issues financial instruments that provide exposure to the underlying assets. Investors indirectly acquire these assets through the securities issued by the SPV, depending on their risk appetite. While the SPV becomes the legal owner of the underlying assets, it acts as a conduit between the assets and the ultimate investors, making the security holders the ultimate beneficiaries.

Foreign investors often face challenges setting up onshore SPVs and implementing securitization transactions due to restrictions on foreign shareholding and filing requirements under UAE law. Additionally, UAE law does not recognize the concept of trust, which is a critical structuring tool in securitization. However, the legal frameworks of ADGM and DIFC are based on English and common law, allowing the use of trust structures in connection with the SPV regime.

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Stay Compliant and Streamline Your ADGM Annual Accounts Filing: A Guide to Smooth Financial Reporting in Abu Dhabi Global Market.

Stay Compliant and Streamline Your ADGM Annual Accounts Filing: A Guide to Smooth Financial Reporting in Abu Dhabi Global Market.

ADGM ANNUAL ACCOUNTS

Introduction:
Every ADGM (Abu Dhabi Global Market) Company and Limited Liability Partnership (LLP) is required to file annual accounts with the ADGM Registration Authority. These accounts reflect the financial performance of the company or LLP over the course of the financial year. However, certain types of entities, such as branches and Foundations, are exempt from the annual filing requirement. In this article, we will provide an overview of the types of accounts that need to be filed, formal requirements to be followed, deadlines for filing, and the process of submitting annual accounts through the ADGM online registry solution.

Types of Accounts to File:

The specific type of accounts you need to file depends on the type and size of your company or LLP, as well as the activities it conducts. Generally, the following must be filed:
• Audited annual accounts: These accounts must be audited by an ADGM Recognised Auditor. Along with the audited accounts, you must include the Auditor’s Report.
• Director’s Report: This report provides an overview of the company or LLP’s performance during the financial year. It should include relevant information about the financial position, results, and activities of the entity.
• Board resolution approving the accounts: A board resolution must be passed to approve the annual accounts before they are filed.
Simplified Accounts for Small Companies:


If your company or LLP qualifies as a “small” entity under the small company’s regime, you may file a simplified version of the accounts. This includes an unaudited balance sheet. To qualify as a small entity, your turnover should not exceed USD 13.5 million, and you should have no more than 35 employees. Public interest entities and financial services firms are not eligible for filing simplified accounts.

Formal Requirements:

When preparing annual accounts, several formal legal requirements must be followed, including:
• Denomination in U.S. Dollars (USD): All annual accounts must be expressed in U.S. Dollars.
• Signatures: Balance sheets must be signed by a director, and the name of the director must be stated. For audited accounts, the director’s report must be signed by a director or the company secretary, and the name of that person must be stated.
• Auditor’s Report: For audited accounts, the auditor’s report must state the name of the audit firm and the name of the person who signed it as the senior auditor.

Filing Deadlines:

The filing deadlines for annual accounts are calculated based on the company or LLP’s Accounting Reference Date (ARD). The ARD is set at the time of incorporation and can be viewed on the ADGM online registry system. The deadlines are as follows:
• First annual accounts: For new private companies or LLPs filing their first annual accounts, the deadline depends on whether they have a short or long first financial year. If the financial year is 12 months or less, the first set of annual accounts must be filed within nine (9) months of the ARD. If the financial year is more than 12 months, the accounts must be filed within nine months of the first anniversary of incorporation.
• Subsequent annual accounts: For existing private companies or LLPs filing their second or subsequent annual accounts, the accounts must be filed within nine (9) months of the ARD.

Note: Public companies have a filing period of six (6) months instead of nine.

Changing the ARD:
If eligible, a company or LLP can request a change in the ARD by notifying the Registration Authority through the ADGM online registry solution. A directors’ resolution supporting the change must be submitted.
Account Filing Extension:
In exceptional cases, the Registrar may approve an application to extend the deadline for filing accounts. Applications must be submitted prior to the filing due date.
How to File Annual Accounts:
All annual accounts must be filed via the ADGM online registry solution. Follow these steps:
• Access your firm’s account on the ADGM online registry solution.
• Click on the “Maintain Company” button from the top menu bar.
• From the drop-down menu, select “Lodge Annual Accounts.”
• Follow the instructions provided and upload a copy of the annual accounts and any supporting documents.
• Once submitted, you will receive an automatic acknowledgment via email.
• The Registration Authority may review your annual accounts before acceptance. If revisions are required, they will be returned to you for amendment.
• Upon acceptance, you will be notified immediately through the online registry solution.

Conclusion:

Filing annual accounts is a crucial requirement for ADGM companies and LLPs. By understanding the specific types of accounts to file, meeting formal requirements, adhering to filing deadlines, and using the ADGM online registry solution, entities can ensure compliance with the ADGM Registration Authority’s regulations. Be sure to consult the official ADGM guidelines and seek professional assistance when necessary to facilitate a smooth and accurate filing process.

How MS can help you:

We have a solid team who is well-experienced in assisting with Annual accounts Filing. Want to stay compliant and avoid regulatory fines? We are here to help you!

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Understanding the UAE’s New Tax Service Fees: A Private Clarification

Overview of the New Tax Service Fees:

Overview of the New Tax Service Fees:

Staying updated with the latest regulatory changes is crucial for businesses in the evolving landscape. In the United Arab Emirates (UAE), the government has recently announced new tax service fees, effective from June 1st. These fees aim to streamline tax administration processes and ensure efficient service provision. In this blog post, we will delve into the key details of the announcement and its potential implications for businesses operating in the UAE.
The UAE’s Federal Tax Authority (FTA) has introduced new tax service fees that businesses should be aware of. These fees cover various tax-related services provided by the FTA. It is important to consult the FTA’s official guidelines for the most up-to-date and accurate information on these fees.

Conclusion:

The UAE’s new tax service fees, implemented on June 1st, aim to improve tax administration and provide high-quality services to taxpayers. By staying informed and proactive, companies can navigate these changes smoothly, contributing to their long-term growth and success in the UAE’s dynamic business environment.

How MS Can Help You?

At MS, we understand the complexities of accounting and taxation in the UAE and are well-equipped to assist businesses in navigating these changes smoothly.
As an experienced accounting and taxation consultant, our team at MS can provide guidance and support in understanding and complying with the new tax service fees. We can help businesses assess the specific fees applicable to their operations by keeping up to date with the FTA’s official guidelines. Our experts can also assist in reviewing internal processes to ensure efficiency and accuracy in tax-related matters, minimizing the risk of penalties or additional fees.
We are committed to helping businesses adapt to the changing tax landscape in the UAE, providing expert guidance and support tailored to their specific needs.

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What does it mean to be subject to the Regulations?

Economic Substance Regulation: UAE Adopts Global Tax Standards for Enhanced Transparency

Understanding the Economic Substance Regulations: Who Needs to Comply?

Being subject to the Economic Substance Regulations means that a business falls within the scope of the regulations and is required to comply with their provisions. The ESR applies to entities that engage in specific activities known as “Relevant Activities” within the UAE.

The Relevant Activities include:

  1. Banking Business
  2. Insurance Business
  3. Investment Fund Management Business
  4. Lease-Finance Business
  5. Headquarters Business
  6. Shipping Business
  7. Holding Company Business
  8. Intellectual Property Business
  9. Distribution and Service Centre Business

If a business carries out any of these relevant activities, it is considered subject to the ESR. As a result, the business must meet the economic substance requirements and fulfill reporting obligations as outlined by the regulations.

The economic substance requirements generally include the following:

  1. Conducting Core Income-Generating Activities (CIGAs): The business must ensure that the CIGAs relevant to its activities are conducted within the UAE.
  2. Adequate and Appropriate Operating Expenditure: The business should have sufficient operating expenditure, premises, and employees in the UAE to carry out its activities effectively.
  3. Directed and Managed in the UAE: The business’s board of directors or equivalent should make strategic decisions within the UAE.

Failure to meet these requirements can result in penalties, including financial sanctions and potential reputational damage. It is important for businesses subject to the regulations to actively assess their compliance and take appropriate measures to fulfill their obligations.

Conclusion:

Being subject to the Economic Substance Regulations in the UAE means that a business engages in one or more of the relevant activities listed in the regulations. This entails complying with the economic substance requirements, conducting CIGAs in the UAE, maintaining adequate operating expenditure, and ensuring that strategic decisions are made within the UAE. Businesses subject to the ESR must stay informed about their obligations, carry out internal assessments, and take proactive steps to meet the requirements. Compliance with the regulations is crucial to avoid penalties and ensure adherence to the UAE’s regulatory framework.

Disclaimer: The information provided in this article is for general informational purposes only and should not be considered legal or professional advice.