For international investors, family offices and business groups, establishing a UAE holding structure has become more accessible.
Abu Dhabi Global Market or ADGM has removed the nexus requirement for applicants to demonstrate an existing connection, commonly called a “nexus,” to ADGM, the UAE or the wider GCC when establishing a Special Purpose Vehicle.
This change of ADGM Removes the Nexus Requirement for SPV’s potentially allows global investors and businesses to use an ADGM SPV for holding and structuring investments even when they do not already own assets, conduct business or maintain an established presence in the region.
What was the previous nexus requirement?
Previously, an applicant generally needed to demonstrate an appropriate connection between the proposed SPV and ADGM, the UAE or another GCC country.
That connection could arise through factors such as:
- Ownership by a UAE- or GCC-based individual or business
- Holding assets located in the UAE or GCC
- Conducting a transaction connected to the region
- Creating a demonstrable economic benefit within the UAE
Consequently, a foreign investor seeking to establish an ADGM SPV solely to hold assets located outside the GCC could face difficulty satisfying the eligibility requirements.
The removal of the nexus condition eliminates this initial barrier and broadens access to the ADGM SPV framework. A recent industry update confirms that the nexus prerequisite has been removed.
What is an ADGM SPV?
An ADGM Special Purpose Vehicle is a passive legal entity established for a defined purpose. Unlike an operating company, an SPV is generally not intended to sell products, provide services or employ an operational workforce.
It is commonly used to:
- Hold shares in subsidiaries or portfolio companies
- Consolidate ownership of global investments
- Hold intellectual property or other assets
- Structure joint ventures and co-investments
- Ring-fence specific assets and liabilities
- Facilitate financing or investment transactions
- Support family wealth and succession structures
By placing an asset or investment inside a separate legal entity, investors can create clearer ownership arrangements and isolate certain risks from the rest of a group.
What does the removal of the nexus requirement mean?
The change means that an applicant may no longer need an existing UAE or GCC investment, shareholder or business activity merely to qualify for an ADGM SPV.
For example, an international family may consider an ADGM SPV to consolidate overseas shareholdings even when the family does not currently own assets in the GCC. Similarly, an investor group may use the structure for a cross-border joint venture without first demonstrating that the underlying investment is located in the region.
This could make ADGM more relevant for:
- International families establishing global holding structures
- Founders consolidating ownership of businesses across countries
- Private investors holding multiple international assets
- Family offices undertaking succession and legacy planning
- Investment groups creating transaction-specific vehicles
- Businesses reorganising their cross-border shareholdings
The reform therefore strengthens ADGM’s position as an international structuring jurisdiction rather than one limited to investments with a regional connection.
What has not changed?
Removing the nexus requirement does not convert an SPV into a general operating company. Its purpose and ongoing compliance obligations remain important.
The SPV must remain a passive vehicle
An ADGM SPV is designed primarily to hold assets and investments or undertake a specific transaction. A business that intends to trade actively, invoice customers, provide services or maintain an operational team may require a different legal structure and licence.
At least one natural-person director is required
An ADGM SPV must have at least one director who is a natural person. The suitability and composition of the board should be considered as part of the wider governance structure.
An eligible authorised signatory is still required
At least one authorised signatory is generally required to be a UAE resident or GCC national. International applicants should plan for this requirement before beginning the incorporation process.
A Company Service Provider may be required
Unless an exemption applies, an SPV must appoint and retain an ADGM-licensed Company Service Provider. The provider typically assists with the registered office, incorporation, statutory filings and communication with the ADGM Registration Authority.
Regulatory and compliance checks continue
The applicant, shareholders, directors and beneficial owners remain subject to identification, due diligence and compliance requirements. The removal of the nexus condition should not be understood as the removal of regulatory scrutiny.
Is an ADGM SPV the same as a holding company?
An SPV can operate as a holding vehicle, but not every holding company should automatically be structured as an SPV.
The correct vehicle depends on what the entity is expected to do. If its purpose is limited to holding shares, assets or investments, an SPV may be appropriate. If the entity needs employees, commercial contracts, operating revenue or active management functions, a conventional holding or operating company may be more suitable.
The decision should therefore begin with the proposed activities—not simply the perceived convenience or cost of the structure.
Key matters to assess before establishing an ADGM SPV
The removal of the nexus requirement expands access, but it does not mean that an ADGM SPV is suitable for every investor. Before proceeding, applicants should consider:
- Purpose of the structure: What assets or investments will the SPV hold?
- Ownership and control: Who will be the shareholders, directors and ultimate beneficial owners?
- Jurisdictions involved: Where are the investors, underlying businesses and assets located?
- Tax implications: How will the SPV be treated under UAE Corporate Tax and the tax laws of other relevant countries?
- Economic substance and management: Where will strategic decisions be made and documented?
- Banking requirements: Will the SPV require a UAE or international bank account, and what documentation will the bank expect?
- Succession planning: How will ownership pass in the event of death, incapacity or a change in family control?
- Exit strategy: How will investments eventually be sold, transferred or distributed?
These considerations become especially important where the proposed structure includes overseas subsidiaries, intellectual property, financing arrangements or family-owned assets.
Corporate Tax must be reviewed separately
An ADGM entity falls within the scope of the UAE Corporate Tax framework. Incorporation in a financial free zone does not automatically provide a blanket exemption from Corporate Tax.
The treatment of income will depend on several factors, including the nature of the income, the activities of the entity, the availability of any participation exemption and whether the conditions applicable to a Qualifying Free Zone Person are satisfied.
International investors should also review tax residency, controlled foreign company rules, place-of-effective-management considerations, withholding taxes and reporting obligations in every relevant jurisdiction.
The legal structure and tax model should be designed together. Establishing the company first and reviewing the tax implications later can create avoidable compliance costs and restructuring challenges.
A wider opportunity for global investors
However, wider eligibility does not remove the need for proper planning. The commercial purpose, ownership model, governance, tax treatment, banking feasibility and ongoing compliance requirements must all be evaluated before incorporation.
The important question is no longer simply, “Can we establish an ADGM SPV?”
It is, “Does an ADGM SPV fit our assets, objectives and long-term strategy?”
How Tass & Hamjit can help
Tass & Hamjit assists international investors, family businesses and corporate groups in evaluating and implementing UAE holding structures.
A well-designed structure should do more than hold an investment. It should provide clarity, control and flexibility as the business or family portfolio grows.
To discuss whether an ADGM SPV is suitable for your proposed structure, contact us:
Email: uae@tasshamjit.com
Phone: +971 54 581 3655
Website: tasshamjit.com
Disclaimer: This article is intended for general informational purposes only and does not constitute legal, tax or investment advice. Regulatory requirements and their application may change or vary according to individual circumstances. Professional advice should be obtained before establishing or restructuring any entity.
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