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For those interested in registering a company in the Emirates, this overview of the use of a Special purpose vehicle/entity (SPV or SPE) might come in handy. Use our tips on how you can practically use SPV to your advantage (for example, in Abu Dhabi).

SPV explained

A special purpose vehicle / entity is also called a "design" company. Typically, it is created specifically for a project. Basically, SPVs are created to carry out a specific transaction, where they act as a borrower, acquiring certain property rights or obligations from the project beneficiary.

They are most often used if the project contains a large number of participants that are regionally distant from each other and from the beneficiary of the transaction. To be more specific, it is often used for the securitization of shares, the sale and purchase of real estate, IP transactions and a number of other purposes. LLC registration in the UAE implies the use of such leverage.

Key objectives of SPV set up: the securitization of assets or loans; diversification of project risks; reducing the risk of bankruptcy of the beneficiary; marketing activities aimed at increasing the competitiveness of the parent company and ensuring the safety of trade secrets.

Let's analyze specific cases: registration of a building company in the UAE or the establishment of an IT startup in Abu Dhabi implies that an SPV can own shares in such companies, but cannot engage in their operational activities. Likewise, an SPV cannot hire full-time staff.

If you are planning to register an SPV in Abu Dhabi, please note that such a structure must use a registered address of a parent or subsidiary company, or a local corporate service provider's office. Among the special purpose entities there are various economic funds.

NOTE: SPVs are created on condition that partners have common

long-term goals, in the process of which the distribution of risks and benefits is vital. In the absence of these conditions, creating an SPV is impractical.

If you intend to register a Special purpose entity in Abu Dhabi, check out the main features of such structures:

  1. When buying real estate, the SPV can be used to hold the asset. Using an SPV in Abu Dhabi to store property is gaining popularity;
  2. When registering start-up projects in the UAE, SPVs can be well utilized for the purpose of owning IP rights of such structures;
  3. Setting up a family office in Abu Dhabi involves using SPVs to optimize their ownership at the family level.

Sharing risks

Another motivation for institutions to engage in transactions involving SPVs is to manage interest rate risk.

If you are planning to register an SPV in Abu Dhabi, please note that risk sharing must be sustainable and ensure a balanced solution,

financial control and efficiency tasks in project management (including crisis conditions). 

NOTE: Poor risk management and a misunderstanding of the risks of SPE usage can lead to failures and losses.

Flexible stake ownership

Before setting up an SPV in Abu Dhabi, please note that this jurisdiction has a flexible shareholding regime in which shareholders:

  1. no need to be a resident;
  2. one can have several classes of shares;
  3. one can use pre-emptive purchase rights.

Conclusion

The use of a Special purpose vehicle/entity implies the registration of a holding company in Abu Dhabi, which business families and companies can use with obvious benefits.

The IQ Decision UK team has extensive experience in providing assistance in the creation and management of SPVs across a wide range of sectors. In addition to initial consultation on SPV setting up in Abu Dhabi, we can provide a range of related services. Reach out to us by using the contacts listed on the website, or by filling out the feedback form below.