A guide to setting up a Non-Profit Association in ADGM

02 Jun, 2023
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Bhavika Hotwani

Paralegal, Elnaggar & Partners

Introduction

Abu Dhabi Global Market (“ADGM”) is a financial free zone based in the capital of the UAE. It operates as an independent jurisdiction with its own legal framework which follows English common law principles, and an independent company registration authority and financial services regulatory authority. Federal Law No. 15 of 2013 established ADGM as a free zone on Al Maryah Island and is exempt from all Federal civil and commercial laws.

ADGM aims to provide a business-friendly environment for companies and institutions operating in the financial services sector, including banking, insurance, asset management, and capital markets. ADGM also serves as a hub for various professional services, such as legal, accounting, and consulting firms, supporting the growth of businesses within the region, and following international regulatory standards for financial-related activities. Its infrastructure enables investors to complete business registration, from its initial application, up to obtaining visas for investors and employees.

Al Maryah Island is home to ADGM a vibrant hub for business and has developed world-class infrastructure with sophisticated office spaces, high-end retail and dining outlets, and luxurious residences. It is a destination for global business, as it is home to local and regional institutions and international organizations.

In addition to ADGM’s extensive financial regulatory authority, it offers other unique licensing services such as the establishment of Special Purpose Vehicles (you can read more about them here), foundations, representative offices, family offices, and non-profit companies. This article focuses on the requirements and benefits of setting up a non-profit association in ADGM.

Overview

An association is intended to bring together groups of like-minded professionals to facilitate the exchange of knowledge, and further the interests of the industries that are present in and operating out of ADGM. This structure can support industrial professionals, and social causes, or even contribute to training opportunities. An association may even be used to advocate on behalf of members, and collectively promote policies that would be beneficial to the business, and the economy as a whole – since this is an incorporated entity that would aid in the credibility and visibility of its members.

 This legal structure gives associations a legal personality to enter agreements, own relevant assets, employ staff, and operate separately from its members. The purpose of establishing a foundation is scrutinized by the Registration Authority (“RA”) in ADGM. An association should bring a benefit to national and economic interests or it may be a local branch of an internationally renowned professional association.

The most common structure for an association is a Limited Liability Company (“LLC”), which is a Private Company Limited by Shares in ADGM. A share would represent each member’s ownership stake in the business and would limit the amount of assets that the shareholder would have to pay if the company were to liquidate, and if creditors required payment.

Associations are structured as a Company Limited by Guarantee (“CLG”), which does not have share capital or shareholders. Its funding involves a guarantee from each founding member (it may be as little as $10!) to contribute to the company’s creditors in the event of insolvency and winding up. CLGs are sustainable non-profit vehicle for associations, which protects the assets of the members to the amount that they have guaranteed. Not all members are required to contribute, and general membership can be structured in any way the founders see fit.

Application process

All operational companies in ADGM need to complete a pre-registration business application form prior to completing the form to incorporate the association. The business application form requests further information about the association, such as its proposed name, and identification information about the founding member. Further details about the founders are sought (such as their expertise and if they are a member of a professional body) and about the activities of the association (such as the competitive landscape and opportunities for the business, expected headcount, and sources of funding). The broad ADGM regulations about the naming of businesses and regulation of any financial activities apply to CLGs. A point to note is that the word ‘UAE’ is a sensitive word, and the application may be rejected for this reason.

Associations are priced very competitively, with a total cost of USD 2,500 for an operating license, and an initial payment of USD 300 for the pre-registration business application form. The registration of an association does not require engaging a Corporate Services Provider (CSP), as compared to the mandatory requirement of a CSP for the establishment of a company in ADGM. CSPs can, however, assist applicants by issuing a consent letter, to permit the association to use the CSPs office address.

The documents required depend on the entity that will be the founding member – either an individual or a corporate entity. Individuals require identification documents such as their passport, and visa/Emirates ID (if applicable), and corporate entities would require a valid license, Articles of Association, and a valid resolution authorizing the establishment of the association.

Summary

ADGM offers a supportive platform for professionals to network and share knowledge with similar industry experts by way of an association. Setting up in ADGM provides associations with the visibility of being an establishment within Al Maryah Island, and opportunities for funding and growth as an entity that furthers economic interests. While setting up the first association for lawyers based in the UAE (Emirates Legal Network), I noticed how accommodating and approachable the registration team was, which only contributed to the ease and convenience of establishing this structure – which now enables legal professionals to network, share ideas, and expand their knowledge through collaboration.

Members are protected from insolvency claims since associations are set up as CLG and would not have to sell personal assets if the situation arises. As a CLG does not require share capital, members can invest a nominal amount of money which limits their liability when the association is winding up. In addition to the inexpensive set-up fees, an association is an ideal instrument for networking, encouraging professional development, and increasing the credibility of an already existing association in the UAE.

 

Bhavika Hotwani

Legal Consultant
Elnaggar & Partners

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