New ADGM Company Service Provider

The Abu Dhabi Global Market (ADGM) is an international financial centre located in the Emirate of Abu Dhabi, United Arab Emirates. The ADGM has developed a reputation as an innovative financial district, and has established many first's in it six-year history. The FinTech Abu Dhabi summit has become a must-attend event, and together with incubators such as HUB-71, ADGM has made it's mark as a leading fintech centre in the region.

Other such initiatives include the Special Purpose Vehicles (SPV) regime, and the ADGM Foundations regime.

The SPV regime is open to a wide variety of uses, from investor-friendly holding structures, to asset separation and transfer. Foundations provide a mechanism to consolidate holdings of various assets (shares, real property, intellectual property, royalties, etc.) into a single holding entity. This allows for clarity on the transfer of assets during a succession process.

Offering world-class structures was the first step. The ADGM has now taken another significant step in the right direction, with the introduction of the Company Service Provider Framework.

This framework aims to regulate existing corporate service providers, such as 10 Leaves, and addresses certain challenges of administering ADGM SPVs and Foundations, especially those that do not have a significant nexus to the UAE.

The ADGM Company Service Provider is now the point of contact between the ADGM Registration Authority and the SPV.

The ADGM Company Service Provider Regulations came into effect in April 2021, and have been imlemented since 12th July 2021.

What are it’s implications on service providers such as 10 Leaves?

Well, for one, the ADGM CSP framework now introduces more accountability and transparency. All company service providers will have to demonstrate that they are fit and proper and have the adequate resources and financial systems in order to provide world-class services. They will also have to take professional indemnity coverage.

Transparency will be a big win for prospective and existing clients. For instance, bundling of fees is now not allowed. Bundling is where some service providers furnish a consolidated fee, instead of separating ADGM and professional fees. This does not give the correct picture to prospective clients, and many of them are not even aware of how much the ADGM charges, which can lead to an over-representation of actuals.

10 Leaves has always made it a practice to separate professional and government fees, and hence welcomes this move.

Another significant step is the introduction of client money provisions. Client money is money belonging to clients and paid in advance to the company service provider. This can include ADGM fees, and other disbursements.

Having dealt with regulatory authorisations, we are aware of the impact of client monies, and potential misuses.

Company service providers in the ADGM will now be required to maintain additional safeguards to hold and control client money, and also reconcile and report these holdings on a regular basis. This will ensure adequate separation of client monies and better management of the fiscal responsibilities of CSPs.

What are the implications of the ADGM Company Service Provider regime on existing and new SPVs and Foundations?

All non-exempt ADGM Special Purpose Vehicles* and Foundations are now required to appoint a Company Service Provider to carry out company secretarial and registered agent services.

Exempt vehicles include subsidiaries of:

(a) persons exempt under the Commercial Licensing Regulations 2015 (Exemptions) Order 2020

A body corporate established pursuant to (i) any law or decree issued by His Highness the Ruler of the Emirate of Abu Dhabi (including the ADGM Founding Law), or (ii) any Federal Law (other than Federal Law No. 8 of 1984 concerning Commercial Companies, as the same may be amended or re-enacted from time to time).

A body corporate that is a subsidiary undertaking of a body corporate specified in paragraph above.

The International Bank for Reconstruction and Development and the International Development Association, commonly known as the “World Bank”.

(b) an authorised person within the meaning given to it in the Financial Services and Markets Regulations 2015,

A legal entity currently registered in ADGM holding a current Financial Services Permit issued by ADGM Financial Services Regulatory Authority

Legal entities holding a valid license or authorisation, as applicable, issued by UAE Central Bank. For the current list of the financial institutions currently licensed by the UAE Central Bank, please refer here: https://www.centralbank.ae/en/financial-institutions

(d) a company whose shares are admitted to trading on a regulated market in the United Arab Emirates, including in Abu Dhabi Global Market, or

Legal entities whose shares are admitted to the following regulated markets in the UAE:

https://www.adx.ae/English/Pages/default.aspx

https://www.dfm.ae/

https://www.nasdaqdubai.com/

Other UAE regulated markets

(e) a company that has demonstrated to the satisfaction of the Registrar to have adequate presence in the United Arab Emirates.

In determining adequate presence, the ADGM Registrar shall consider the following:

the company’s assets, turnover and employees in the United Arab Emirates*,
the company’s governance, policies and procedures**, and

any rules made by the Board or guidance issued by the Registrar in this regard.

*In order to demonstrate to the Registrar that the company has sufficient assets, turnover and employees, please see below non-exhaustive list of evidence acceptable to the Registrar (note: documents lodged with the Registrar must be recent and relevant, i.e. issued in the preceding three months prior to submission, and must be translated into English language).

Copies of the current valid commercial licenses (or similar document) issued by the local relevant regulatory authorities of operational legal entities currently operating in the UAE.

Copies of the latest audited accounts of the operational entities in the UAE or elsewhere.

List of the company’s assets– physical assets, buildings, machinery, factories.

Information on the number of employees employed by the company and annual turnover per company per financial year.

Copies of the current ‘establishment card’ (also known as ‘immigration card’) of each operating legal entity along with the list of the UAE residency visas issued for each legal entity/commercial license holder.

Organization structure for each operating legal entity clearly demonstrating governance structure and number of full time employees in each operating entity within the group chart.

Links to the company’s website where information on the board of directors and board committee can be found. Alternatively, please provide information indicating board of directors’ composition and board committees’ structure, including members of the committees, governance of the decisions and reporting lines within the structure.

Detailed description of the resources available in the compliance and/or in-house legal department or company secretarial division showing number of full time employees, along with their professional qualifications and roles held.

Other information which may demonstrate substantial assets.

**In order to demonstrate to the Registrar the company’s governance, policies and procedures, please see below non-exhaustive list of evidence acceptable to the Registrar

Business ethics policy;
Corporate Governance policy or statement/structure;
Compliance policy;
Bribery and corruption policy;
Economic substance policy;
Risk management policy; and
Anti Money Laundering Policy;

as well as evidence of monitoring and compliance with such policies and procedures.

Existing SPVs and Foundations will be given 12 months to comply with these new regulations.

Will this lead to increased costs?

Yes and no. While you may be having lower direct costs at present, there are a lot of indirect costs to consider – costs that may not be evident to you.

The first being the time spent in forming and maintaining such structures. We have seen many entrepreneurs and even experienced in-house administrators, struggling to complete the formation process. It takes time if one is not familiar with what needs to be done. Going through a company service provider will give you access to expertise, save time that you can spend in your core activities, and ensure a seamless process of formation.

When it comes to maintenance, the indirect costs are even more pronounced. Costs of non-compliance are steep, with fines running into thousands of dollars. Engaging with the company service provider will help you focus on your core business and transactions, with the CSP taking ownership and responsibility of all mandatory filings and maintenance of company records.

Secretarial services are often seen as additional costs, whereas the benefits outweigh them manifold.

This is especially significant when it comes to startups, which may be multi-class structures with many investors, founders and share-vested employees in the cap-table.

Additional compliances such as accounting submissions and Economic Substance filings are also made easier once you leave it to the experts.

The 10 Leaves team is working hard to bring to you consolidated digital solutions that will help you streamline the formation and maintenance of your SPVs and Foundations in the ADGM. Get in touch to know more.

10 Leaves is a Company Service Provider in the ADGM and offers the following services to ADGM SPVs and Foundations:

Incorporation Agent – assistance in setting up the SPV/Foundation.
Registered address – providing the registered office.
Provision of directors/Council Members.
Provision of company secretaries.
Provision of Authorised Signatories.
Provision of nominee shareholders.
Provision of accounting services.
Customisation of the Articles of Association.
ESR Filings and notifications.
Pledge Arrangements and registration.
Translations and attestations.
Assistance in bank account opening.

In addition to the above, we offer corporate and commercial services through 10 Leaves Legability. These include shareholding agreements, IP agreements, Share vesting plans and agreements and ESOPs.

For startups, we offer structuring solutions, including issuance of warrants, SAFE notes, convertibles and maintenance of cap tables.

We provide all our services through a proprietary digital frontend, with a secure digital backend, to ensure that you have a seamless experience, unmatched by competition. As a client, you also have access to our industry-leading media solution that incorporates engaging videos, detailed podcasts and informative publications to keep you updated and informed of the latest developments that affect your company on an ongoing basis.

Contact us to know more about ADGM Company Service Providers Regime