Redomiciliation of a Cypriot company to the free zone Abu Dhabi Global Market (ADGM), UAE: procedure of change of jurisdiction. Service offer

The Emirate of Abu Dhabi is located in the Arabian Peninsula in the south of the Persian Gulf. Among seven emirates that are part of the UAE, it is the largest emirate. There are several free zones in the territory of Abu Dhabi.

The free zone Abu Dhabi Global Market (ADGM) is one of the two so-called “financial” free zones in the UAE. Its distinguishing feature is the direct use of rules of English law in the local legislation and local judges who know how to apply those rules. Companies incorporated in ADGM may conduct business both in (within ADGM) and outside the UAE. Such companies obtain a license (special permit from the Administration of the emirate) in accordance with the kind of activity they will engage in. Transfer of a company to the free zone implies the possibility to obtain resident visas for the company’s employees and their family members, which is an undoubted advantage.

• Stable banking system
• Possibility to work with US dollars
• Quick company incorporation
• Possibility to create substance in the country of incorporation
• Possibility to obtain resident visas for shareholders and/or employees of the company

1. Proposed kinds of activity of the company are on the approved list of activities of ADGM.
2. If the company has different classes of shares, differences between them must be stated in the articles of association or a special resolution passed by 2/3 of shareholders (law of ADGM allows different classes of shares in a company).
3. The authorized capital of the company must meet the license requirements. There are no requirements for private companies with non-financial licenses regarding the amount of the authorized capital, but in the free zone there are requirements regarding the authorized capital set for certain kinds of activity (for example, holding, trust management, brokerage) and forms of incorporation (PLC, PJSC)[1].
4. The memorandum and articles of association and internal regulations of the company must not contradict rules and regulations adopted in ADGM. In the case of contradictions, the rules of ADGM shall prevail, and the company will have to make necessary changes to its corporate documents to remove discrepancies.
5. The company is not in the process of liquidation, is not bankrupt, no official receiver has been appointed for its property, the company does not have open court proceedings with creditors, and no statement of claim (or other statement) has been filed against the company to declare it bankrupt or to start the liquidation procedure.

In ADGM, there are licenses for 3 categories of activities:

• Financial activities – a license is issued in respect of a specified list of activities that require approval of the financial authority of the free zone. Financial licenses, in turn, are classified into 7 subcategories depending on the specific activity.

Examples of financial activities: banking and its constituents, insurance, trust management, payment processing, investment.

• Non-financial activities – a license is issued in respect of a wide range of activities that do not require permit of the financial regulator. Only B2B[2] activities are allowed.

Examples of non-financial activities: trade, production, provision of services

• Retail activities – a license is issued in respect of a wide range of activities aimed at interaction with consumers (B2C[3] activities).

Examples of retail activities: trade, production, provision of services.

ADGM imposes the following company structure requirements:

An individual aged 18 or older or a legal entity may be a director. No requirements have been set regarding director’s residency. At least one director of a company must be an individual.

The minimum number of directors is 1 (for PLC, it is 2), the maximum number is not set.

Directors’ information is not available to the public.

A private company is not required to have a secretary. A PLC must have a secretary.

An individual aged 18 or older or a legal entity may be a secretary. No requirements have been set regarding secretary’s residency.

The number of secretaries is not limited.

Secretary’s information is not available to the public.

Individuals and legal entities are allowed, with no requirements regarding their residency. ADGM does not require a company to have a local shareholder.

Shareholders’ information is not available to the public.

A company must have an authorized signatory in ADGM. Only an individual who is a citizen of one of the countries of the Cooperation Council for the Arab States of the Gulf (GCC: Bahrain, Qatar, Kuwait, the UAE, Oman, and Saudi Arabia) or a resident of the UAE may act as an authorized signatory.

Appointing one authorized signatory is sufficient (when appointing more than one authorized signatory, at least one of them must be a citizen of a GCC country or a resident of the UAE).

The authorized signatory acts as the company’s representative before the ADGM authorities and has their name stated in the license.

The authorized capital must be denominated in US dollars (USD). Confirmation of payment of the authorized capital is not required.

No standard minimum amount of the authorized capital of a private company has been set by the law in ADGM. The authorized capital of a private company must be divided into shares with no par value.

The minimum amount of the authorized capital of a public company is USD 50 000.

A company may issue shares of different classes. Issue of bearer shares is not allowed.

Before a company is incorporated, its founders must provide the free zone with a contract of lease of an office in ADGM. The address of the office will be deemed the company’s registered address.

In ADGM, there are several providers with whom an office lease contract can be entered into. However, a company’s address must be in the territory of ADGM. Providers offer different office options: from a coworking space to a full-fledged office. The necessary area of the leased office will be determined based on the proposed license of the company and proposed number of employees of the company in the UAE.

Before initiating the redomiciliation of a Cyprus company, it is first necessary to make sure that the company’s Articles of Association allow it to be redomiciled. It is also crucial that all issues with the company’s financial statements and taxes in Cyprus be resolved:

• preparation and submission of Annual Financial Statements for all ended years and obtaining of tax clearance certificates from the tax department (the average time for the Cyprus tax department to check a company file before closing it ranges from 3 to 6 months);
• preparation of Interim Financial Statements up to the date of the company’s migration from Cyprus (prior to the date of submission of the application to the Registrar).

The company will also need to publish notices of its redomiciliation in 2 daily newspapers of wide circulation in the Republic of Cyprus. The relevant confirmation will need to be sent to the Registrar after 3 months from the date of the last publication. Consequently, the creditors of the company may file with the Registrar an objection against the company’s redomiciliation within 3 months of the publication date.

1. The company makes a decision to redomicile to ADGM.

The following documents are prepared on this stage:

• Resolution of director stating that the company is solvent and there is no reasonable ground to believe that the company will cease to be solvent by the time of filing a redomiciliation application as well as that no application to liquidate or to dissolve the company, no bankruptcy petition of the company and no application for appointment of an official receiver for the company’s property has been filed with any public agency or court;
• Resolution of director or shareholders (depending on the articles of association of the company) to appoint:
  • a person authorized to sign documents on behalf of the company in connection with the establishment of a company in ADGM,
  • a person authorized to sign documents on all issues after the establishment of a company in ADGM;

a relevant power of attorney may also be issued by this resolution;

• Resolution of a special meeting of shareholders
  • to authorize continuation of activity in ADGM and
  • to approve the new articles of association of the company in accordance with ADGM law;
• If the company has more than one class of shares, a resolution of a special meeting of holders of each class of shares passed at a separate meeting of holders of each class of shares is also required. Notices of meetings of shareholders must be enclosed with a copy or resume of the proposed application for redomiciliation to ADGM and must also state that any shareholder of the company who is against redomiciliation may within 30 days apply to court for a ruling based on the fact that the proposed continuation of activity will unfairly infringe upon his/her interests;
• Letter of instruction from the company’s ultimate beneficial owner authorizing redomiciliation.

2. Preparation of a set of the company’s documents in Cyprus required to change jurisdiction:

• Providing the Registrar in Cyprus with the following documents:
  • Form ME2;
  • Confirmation by director(s) of the fact that the company does not have unfulfilled obligations (outstanding fees, charges, taxes, etc.) and also that the director(s) is (are) not aware of any circumstances that may adversely affect the company’s solvency in the next 3 years;
  • Resolution of shareholders’ meeting to redomicile the company to ADGM, UAE and to approve the Interim Financial Statements;
  • Annual and Interim Financial Statements / Annual Returns*;
  • Certificates confirming payment of taxes, including VAT (Income Tax and VAT clearance certificates)*;
  • Copies of publications in 2 Cyprus newspapers of notices of the company’s intention to redomicile from Cyprus.

*Not included in the total cost and paid separately.

• If the company’s creditors did not file their claims within 3 months of the date of publication of notices in the newspapers, and the Registrar has been provided with all required documents, the Registrar consents to the company’s redomiciliation (the company must later provide the Registrar with confirmation from the target jurisdiction – Certificate of Continuation/Continuance

• Ordering a Legal Opinion confirming that the company, according to its own law, may apply for redomiciliation[4].
• Ordering the following set of corporate documents of the company from the Registrar:
  • Certificate of Incorporation (a copy that will have to be legalized in the UAE consulate);
  • Memorandum and Articles of Association (a copy certified by the Registrar that will have to be legalized in the UAE consulate);
  • Certificate of Good Standing (original);
  • Certificate of Incumbency (original).

3. Lease of an office for the company in ADGM.

By the time the redomiciliation application is filed, the company must have at least a confirmed reservation of an office in the territory of ADGM.

4. Filing a form of reservation of the company’s name in ADGM and application for the company’s redomiciliation to ADGM.

The following documents shall be enclosed with the application:

• All the documents from steps 1 – 4;
• Filled out know-your-client (KYC) form for each shareholder / director / manager / secretary / legal representative / each authorized signatory;
• Copies of passport, UAE Visa / Emirates ID (if any), document proving residential address, and CV for each shareholder / director / manager / secretary / legal representative / each authorized signatory;
• Copies of all share certificates of the company;
• Business plan and general information on the company’s activity (history of creation of the business, management structure / managerial personnel, kinds of activity, offered goods and services, management’s location, development plan, reasons for redomiciliation to ADGM).

5. Payment of the redomiciliation fee (after the free zone’s approval).

6. Determination of suitable kinds of activity of the company in accordance with the ADGM classifier and issue of a commercial license to the company.

Upon the completion of redomiciliation ADGM issues a Certificate of Continuance.

7. ADGM sends the Registrar in Cyprus a written notice of continuation of the company’s activity in ADGM with a set of necessary documents.

8. In order to finalize the redomiciliation procedure (discontinuation), the company must file with the Cypriot Registrar either an original Certificate of Continuance or its certified copy (apostilled / legalized).

9. Obtaining a Certificate of Strike Off from the Cypriot Registrar.

IMPORTANT: companies registered in UAE free zones are exempt from capital gains tax, property tax and other taxes, except corporate tax and VAT.

From 1 June 2023, the UAE introduced a federal corporate tax. Free zone companies may be subject to both the standard rate of corporate tax (9%) and a zero rate. The application of a particular rate depends on a number of factors such as the company’s income, the types of its activities (whether they are excluded or qualifying, or not), counterparties, whether the company maintains adequate economic substance in the UAE, and other aspects.

On 1 January 2018, the UAE introduced value-added tax (VAT).

VAT, as a general consumption tax, applies to all transactions with goods and services unless such transaction is exempt from taxes or taxed at the rate of 0%.

The standard VAT rate in the UAE is 5%.

There is no obligation to register for VAT purposes while the turnover in the territory of the country is below the registration threshold, which in the UAE is AED 375 000 (~ USD 100 000).

Registering as a VAT payer is compulsory in the following cases:

• there is reason to believe that during the following 30 days taxable turnover will exceed the registration threshold (for example a contract is entered into);
• at the end of the month taxable turnover for the preceding 12 months actually exceeded the registration threshold;
• the company receives services that are subject to inclusion in accounts under the reverse charge and that are worth over the registration threshold.

Voluntary registration is also possible after the taxable transactions threshold of AED 187 500 (~ USD 50 000) has been exceeded.

Registration with the Federal Tax Authority of the UAE and obtaining a Tax Reference Number (TRN) for the company take at least 20 workdays.

After the registration with the Federal Tax Authority and obtaining a VAT payer number, the company must quarterly (and if its annual turnover exceeds AED 150 000 000 (~ USD 40 830 900), then monthly) prepare and file a VAT return, and pay arising VAT within 28 days after the end of the VAT period.

Every company incorporated in ADGM must keep accounting records sufficient to confirm its financial position and containing up-to-date information on the assets and liabilities of the company. It is also necessary to annually prepare the company’s financial statements and undergo audit.

Accounts of the following are exempt from audit:

• companies classified as small enterprises (a company is classified as small if its proceeds are under USD 13 500 000 and the average headcount of employees is under 35);
• subsidiaries if the parent company is established in accordance with the law of Abu Dhabi Global Market;
• dormant companies.

The first reporting period of a company starts at its incorporation and lasts 6 to 18 months. Each subsequent reporting period lasts exactly 12 months from the date of the end of the previous reporting period.

For each reporting date, directors of the company must prepare financial statements of the company, including an auditor’s opinion (exceptions are stated above), and present them at an annual general meeting within three months of the end of the financial year.

Before starting the incorporation of a company, we recommend receiving consultation from a specialist of the non-resident audit department and tax specialist to determine tax burden of the company and discuss issues of further administration of the company.

PLCs allowed to be listed are imposed with additional requirements regarding audit and disclosure of financially important information. When planning to list shares of an ADGM company on exchanges of the UAE (ADX, DFM, NASDAQ-Dubai) or foreign exchanges, we recommend receiving consultation from a relevant specialist of GSL and a specialist of the non-resident audit department.

A company must annually renew its license (by paying the relevant fee) and lease contract.

The company’s renewal date is the date of issue of the license. In order to avoid penalties, the payment should be made 2 weeks before the renewal date. In the case of late payment, the Administration of the free zone reserves the right to impose penalties and suspend the license.

The cost of renewal of a company includes renewal of the office lease contract and renewal of the license. Upon renewal a renewed license is issued.

In the UAE, there is no such thing as residence permit. The migration rules of the UAE imply issue of resident visas, which are practically an analogue to a residence permit.

A resident visa may be obtained with regard to an ADGM company on the basis of entering into an employment contract with the company (work visa).

The number of resident visas depends on the business package chosen at the incorporation / redomiciliation of the company.

The procedure of obtaining resident visas is as follows (one may start obtaining a visa only after the company has been incorporated / the company’s redomiciliation has been finalized):

1. Obtaining an Establishment Card (opening the migration file of the company) – 3 to 5 days.

This document is necessary to enable the company to apply for resident visas in the future.

2. Submission of documents for a resident visa and obtaining an Entry Permit – 5 to 7 days.

To obtain a resident visa it is necessary to enter the UAE on an Entry Permit. If at the time of issue of an Entry Permit the applicant is already in the UAE, then in order to complete the procedure of obtaining a resident visa without leaving and reentering the country, the status of the visa must be changed. The service of changing the status of a visa is provided on request and paid separately.

3. Visiting the UAE to obtain a resident visa – in most cases a visa may be obtained within 5 workdays.

The applicant must:

• undergo medical examinations (blood test and fluorography);
• give biometric data (retina scan and fingerprints).

Once the passport with a resident visa in it is received, the country may be left.

4. Obtaining a resident’s Emirates ID.

The card is issued a few days after the issue of the visa. Personal presence is not required to receive it.

Moreover, medical insurance is required to obtain a resident visa (the average cost of a non-nominal medical insurance policy starts at AED 6 000 per year).

The cost of obtaining a resident visa in ADGM is USD 4 200. For further information on the procedure of obtaining it, contact your consultant at GSL.

[1] PLC – Public Limited Company, PJSC – Public Joint Stock Company.

[2] B2B – Business to Business.

[3] B2C – Business to Consumer.

[4] Preparation of a Legal Opinion is charged for separately depending on the details of a specific company. The approximate cost starts at USD 1 000.

[5] Mainland is the part of the UAE beyond the borders of free zones.

[6] The fees are valid as at May 2023.

[7] A 5% VAT may be added to the cost of services provided in the UAE.

[8] The basic cost of services is stated. The final assessment of the cost of services in the redomiciliation of a company to ADGM and preparation of the necessary set of documents depends on the policy and requirements of the service provider that serves the Cypriot company.

The cost does not include preparation of Annual and Interim Financial Statements / Annual Returns, and order of Income Tax and VAT clearance certificates; they are paid for separately.

[9] Cyprus VAT will be included in the invoice – 19% of the cost of provided services.

[10] The cost of preparation of financial statements and audit of the company’s business is determined based on time spent on work at the rate of USD 100 to USD 400 per hour (depending on the type of work and qualifications of the specialist involved); it is at least USD 1 900 – the cost of audit of statements with the minimum number of transactions.