In the developing landscape of corporate structures, Operational Holding Companies and Special Purpose Vehicles (SPVs) distinguish themselves as distinct entities, each governed by its own set of legal parameters, requirements, and operational boundaries. It is imperative for entrepreneurs, investors, and professionals to embark on an exploration of these structures. This comprehensive analysis aims to explore the complexities in depth through quantitative dimensions, and regulatory nuances surrounding Operational Holding Companies and SPVs, providing a detailed understanding essential for informed decision-making in the corporate world.
1. Operational Holding Company
Legal Definition: An Operational Holding Company, as per the Abu Dhabi Global Market (ADGM), is defined as a unit primarily engaged in holding the assets and controlling the equity of subsidiary corporations. The holding companies in this class do not provide any other service to the businesses in which the equity is held. It does not administer or manage other units within the group.
Legal Activities: Operational Holding Companies are permitted to conduct additional operational activities, such as trading or providing services, alongside their primary role as asset holders. However subject to ADGM’s approval, they can conduct head office and proprietary investment activities.
Visa Eligibility and Office Space: A minimum of a desk space is mandate ory requirement to incorporate an operational holding company and are eligible for a visa in proportion to their office space. For one dedicated desk they can have 2 visas.
Other Legal Considerations: There is no specific nexus requirement for establishing an Operational Holding Company in ADGM.
2. Special Purpose Vehicle (SPV):
Legal Definition: An SPV, according to ADGM regulations, is a separate legal entity formed for a specific purpose, often to hold assets, issue securities, or securitize assets. Its activities are limited to the purpose for which they were established.
Legal Activities: SPVs are strictly prohibited from engaging in operational and commercial activities and are primarily used for holding ownership of assets or securities, as stated in ADGM regulations.
Visa Eligibility and Nexus Requirement: ADGM regulations stipulate a nexus requirement for establishing SPVs. The nexus can be demonstrated through various criteria, including
ownership/control by UAE or GCC entities, holding assets in the region, or facilitating transactions with real or economic benefit to the UAE.
Office Space Requirement: SPV needs to take office space but can use the registered address of a Company service provider.
Regulatory and Administrative Requirements
Appointment of Corporate Service Provider: While Operational Holding Companies do not necessitate the appointment of a corporate service provider, ADGM mandates that SPVs must appoint a registered Company Service Provider (CSP).
Fees and Incorporation Process: Incorporation fees for Operational Holding Companies in ADGM amount to 10,000 USD whereas SPVs incur a fee of 1900 USD. The timeline for incorporation for both entities is 23 weeks, inclusive of initial onboarding processes, application preparation, and ADGM review and approval.
Shareholder, Director, and Authorized Signatory: Both Operational Holding Companies and SPVs require a minimum of one shareholder and director, who can be foreign individuals or corporate entities. An authorized signatory who is a UAE resident is also mandated for both entities.
The distinction between Operational Holding Companies and Special Purpose Vehicles (SPVs) is more than just legal jargon—it’s a path for strategic decision-making as both are considered excellent tools for structuring. Whether you’re navigating asset management or pursuing targeted objectives, understanding these entities’ unique roles and regulatory landscapes is your way to success in the Abu Dhabi Global Market (ADGM) and beyond