The new ADGM framework harmonises the jurisdiction with other global standards.
The Abu Dhabi Global Market (ADGM) recently introduced the Company Service Provider framework ("CSP"), a piece of legislation that applies to Special Purpose Vehicles ('SPV') and foundations that are located and operating within the jurisdiction. This legislative framework implements a robust governance structure for SPVs and foundations, and help streamline their engagement with the ADGM Registrar. SPVs and foundations are used most commonly in the ADGM by corporates in the aviation and shipping sectors, as well as technology firms and developers of intellectual property as the structures allow them financial assets to be retained and dedicated to specific, regional projects.
The CSP framework is designed to address and mitigate the potential challenges and new risks, which may arise as the success and demand for SPVs and Foundation structures in ADGM grows, particularly where these entities do not have a direct connection to ADGM.
The legislation brings the ADGM in line with other global jurisdictions such as Jersey, Guernsey and Cayman Islands that already have well established and similar CSP frameworks. The market provided input at the planning stage via public consultation, and have welcomed the introduction of the framework - we believe it is a commercially supportive and proportionate initiative, which we expect to be implemented and administered efficiently by the ADGM Registration Authority.
Under the framework, all CSPs who are currently providing or intend to provide services to other companies have to maintain and demonstrate adherence to the above controls to keep their commercial licence. CSP responsibilities may include offering a registered office address; company secretarial services including acting as an incorporation agent; accounting; bookkeeping and many more.
The new CSP framework introduces additional regulatory requirements for CSPs, including specific licensing requirements to ensure they pass the fit and proper test, adhere to compliance arrangements, conduct business in a prudent manner and the obligation to have adequate resources to conduct deliver services to clients. Every CSP will have additional obligations under this new legislation including acting as a liaison between the entity and ADGM Registrar and helping to facilitate all obligatory filings on behalf of the entity. CSPs licensed under the current regime will either transition to the new framework and apply to conduct one or more CSP activities or limit their activities to being a 'registered office provider' only.
CSPs that hold or control client money must also comply with client money provisions and must be able to demonstrate their policies, systems and controls in respect of the handling and segregation of client money.
All existing non-exempt SPVs and foundations that have not engaged with a CSP either prior to or post-incorporation, are obliged to appoint a CSP within 12 months of the implementation date or by their next commercial licence renewal date, whichever the earlier. All newly established, non-exempt SPVs and foundations will need to appoint a CSP prior to incorporation from three months after the implementation date.
Therefore, if a fund or asset manager is not licensed as a CSP and has incorporated SPVs as part of the fund structure they will be affected. The responsible party of the fund will need to ensure that all non-exempt SPVs that have been incorporated appoint a licensed CSP within the given timeframe.
All SPVs and foundations will fall in scope, with exemptions for certain SPVs and foundations that can satisfy a large degree of 'economic substance' or presence in the UAE (significant assets, resources, experience) or are licensed and regulated by the Central Bank of UAE. The registrar is authorised to impose sanctions for non-compliance, including the power to strike CSPs off the register.
This new framework is a welcome introduction to the ADGM's regulatory regime and harmonises the jurisdiction with other global standards. The ADGM continues to enhance the business environment for funds, ensuring rules are not overly burdensome and are appropriate to attract and meet the needs of the international business community. We believe this is another commercially balanced and proportionate framework that will be administered effectively and efficiently by the ADGM Registration Authority.
The new CSP framework introduces additional regulatory requirements for CSPs, including specific licensing requirements to ensure they pass the fit and proper test, adhere to compliance arrangements, conduct business in a prudent manner and the obligation to have adequate resources to conduct deliver services to clients. Every CSP will have additional obligations under this new legislation including acting as a liaison between the entity and ADGM Registrar and helping to facilitate all obligatory filings on behalf of the entity.