Growing Popularity of ADGM: Why Businesses are Flocking to this Financial Freezone

Abu Dhabi, the capital and largest of the seven emirates within the UAE, plays a pivotal role in the nation's economy. It contributes approximately two-thirds of the UAE's substantial USD 400 billion economy, underscoring its significant influence and economic might in the region.

Home to some of the world's largest sovereign wealth funds, Abu Dhabi offers unparalleled access to capital, supported by significant private wealth and numerous catalyst partners. The region's tax-friendly policies and strategic location bridging the East and West further enhance its appeal. In 2024, Abu Dhabi was also celebrated as the world’s safest city, a testament to its exemplary security standards and commitment to enhancing life for all who live, work, and visit here.

?

What is ADGM?

?ADGM, or Abu Dhabi Global Market, is one of the two internationally acclaimed financial centres in the United Arab Emirates. Inspired by the success of Dubai's Dubai International Financial Centre (DIFC), the Abu Dhabi government recognized the global demand for businesses in Abu Dhabi to operate within a specialized free zone. In response, in 2015, Abu Dhabi launched its inaugural financial free zone, ADGM, to enhance the UAE's offerings and further diversify its economy. Over the years, ADGM has ascended rapidly in global stature and is now recognized among the top 25 financial centres worldwide.

What are the Authorities governing ADGM?

?ADGM operates as an independent free zone jurisdiction, boasting its own comprehensive set of rules and regulations. It is designed to foster a business environment where companies can operate both confidently and efficiently. Governance in ADGM is maintained by three autonomous authorities:

1.?????? The Registration Authority (Registrar)

The Registration Authority is responsible for managing the incorporation, registration, and licensing of legal entities within ADGM. Additionally, it offers a range of government-related services to entities and professionals operating on Al Maryah Island. The team assists by offering guidance, reviewing, and processing applications from those looking to establish a legal entity in ADGM.

2.?????? The Financial Services Regulatory Authority (FSRA)

The Financial Services Regulatory Authority (FSRA) is committed to fostering a stable, well-regulated financial market in ADGM that aligns with the international benchmarks set by leading financial centers like London, Hong Kong, and Singapore. Positioned strategically among the burgeoning economies of the Middle East, Africa, and Asia, ADGM serves as an international financial hub offering a comprehensive range of services. These include banking, insurance, wealth management, asset management, and capital market activities, making it an open platform for global financial integration.

3.?????? ADGM Courts

ADGM Courts and their judiciary are modeled closely after the English judicial system, establishing a legal framework and judicial system that is coherent, recognized, and widely accepted. The direct adoption of English common law positions ADGM as the first jurisdiction in the Middle East to follow a legal approach similar to those of Singapore and Hong Kong, enhancing its credibility and reliability in international business and legal circles.

These bodies ensure that the framework of ADGM not only supports business operations but also upholds the highest standards of legal and regulatory oversight.

REASONS FOR THE GROWING POPULARITY OF ADGM

1.????? Seamless Incorporation Process

ADGM is renowned for its seamless incorporation process, which can be completed entirely online through their user-friendly portal. This digital approach simplifies the procedure, making it efficient and accessible for businesses looking to establish themselves in the jurisdiction.

2.????? English Common Law based system

ADGM's legal system, based on English law, make it particularly appealing to foreign investors interested in the Middle East. Unlike the other jurisdictions in the UAE which follows Shariah Law (Civil Law), ADGM provides the comfort to the investors of conducting business with the assurance that they can enforce contracts and resolve disputes in English, utilizing a familiar precedent-based court system.

3.????? Wide range of activities

ADGM offers a wide array of solutions for investors looking to establish a presence in the UAE's financial sector, including roles in banking, insurance, brokerage, dealing, asset management, corporate finance, and wealth management. Additionally, ADGM caters to a broad spectrum of non-financial business needs by providing licenses for professional services, commercial enterprises, family businesses, corporate headquarters, and various management functions. This versatility makes ADGM an attractive destination for diverse business activities within the UAE.

To provide a concise overview, ADGM offers the following three categories of licenses to businesses:

4.????? 100% Foreign Ownership

In ADGM, there are no restrictions on foreign ownership, allowing foreign investors to establish operations without the need for a UAE national (or a company wholly owned by UAE nationals) to hold 51 percent of the shares. This policy provides greater flexibility and control for foreign entities looking to operate within the UAE.

5.????? Tax Benefits and Repatriation

ADGM also offers significant financial advantages, including zero tax rates on income and profits, coupled with the ability to fully repatriate profits and capital. This makes it an especially attractive location for businesses aiming to maximize their financial efficiency and investment returns.

6.????? Ideal Choice for Financial Firms

Firms seeking to engage in financial services will find ADGM an attractive jurisdiction due to its credibility and certainty. The laws and FSRA regulations are comprehensive, robust, and clearly defined, providing a secure legal environment. Additionally, financial firms operating globally can strategically utilize their ADGM setup to bridge the time gap between key markets in the West and significant financial centers in the East.

7.????? Asset Protection through Special Purpose Vehicles (SPVs)

ADGM has implemented a comprehensive, cost-effective, and flexible Special Purpose Vehicle (SPV) regime designed to isolate financial and legal risks by ring-fencing assets and liabilities. SPVs can be set up as subsidiaries, project vehicles, or joint venture entities, ensuring that only the assets directly associated with a specific transaction are exposed to the corresponding liabilities.

Conclusion

In conclusion, the growing popularity of Abu Dhabi Global Market (ADGM) is a testament to its robust legal framework, strategic global positioning, and comprehensive financial services. With its no restrictions on foreign ownership, zero tax rates, and the ability to repatriate profits and capital, ADGM offers a highly attractive environment for businesses looking to establish or expand their operations in the Middle East. This free zone’s modern infrastructure, ease of doing business, and protective legal measures ensure that it remains a top choice for global enterprises.

At Water and Shark, we possess extensive experience in providing tailored assistance for businesses looking to navigate the complexities of ADGM. Whether you are considering establishing a presence or expanding your existing operations in the UAE, our team is ready to guide you every step of the way. For any assistance, please reach out to our UAE office. We are here to help you harness the full potential of your business endeavors in ADGM.