This Article is part of our article on the Expansion of Al Reem Island of ADGM. This Article focuses more on the regulatory frameworks and legal arenas during and post the transition from Abu Dhabi Mainland to Al Reem Island. The major shift that the business will face during or post the transition is the change in its legal and regulatory frameworks.  

Key Benefits for Businesses 

With the transition of Al Reem Island under the jurisdiction of the Abu Dhabi Global Market (ADGM), businesses are now operating within a robust common law framework. This regulatory shift offers several advantages: 

• The business will automatically adopt English common law which not only ensures a stable and transparent legal system but also fosters international business confidence and helps in international collaborations. 

• The ADGM Courts provide an independent judiciary, facilitating fast and fair resolution of disputes, which follows the international dispute resolution and arbitration standards. 

• The incorporation of a company and operation of businesses within the ADGM is much simplified with easier and faster registration process, flexible corporate structures, and applicable tax exemptions as per the applicable laws.  

• The internationally aligned legal system of ADGM enhances its attractiveness to global investors, promoting cross-border transactions and partnerships. 

This blog is a part of our Expansion of Al Reem Island of ADGM Series.

Comparing Pre- and Post-Transition Regulatory Environments on Al Reem Island 

The transition from the Abu Dhabi Department of Economic Development (ADDED) to ADGM represents a shift in regulatory paradigms. Key distinctions include: 

• Companies registered with ADDED follow a civil law system that adheres to the federal regulations of the UAE. Whereas ADGM follows a common law system that caters to international business standards. 

• Companies registered with ADDED are more focused on local trade and traditional business sectors. However, ADGM is one of the financial-free zones that is designated to provide financial services, fintech services, SPVs, and holding companies along with international companies and other non-regulatory activities. 

• Although 100% foreign ownership is permissible in ADDED, there are a few companies and business activities that often require local sponsorship or ownership, to acquire relevant regulatory approvals. However, ADGM does not require local sponsorship. Regulatory approvals in ADGM depend on the activity chosen. 

• Companies in the mainland and free zones are subject to federal tax laws and VAT in the UAE. However, free zone tax regimes are given some exemptions on a case-by-case basis. 

Key Insight: The transition enhances Al Reem Island’s appeal to international businesses while maintaining access to Abu Dhabi’s broader economic landscape. 

Steps for Businesses Adapting to ADGM’s Legal Framework on Al Reem Island 

1. Businesses must consult with the registration team of ADGM or the legal advisors who have practice in Abu Dhabi and ADGM to evaluate compliance requirements. 
2. The company should have a proper business activity that aligns with the permitted sectors of ADGM. There are mainly 3 categories of activities in ADGM – Financial, Non-Financial, and Retail. Depending on the nature of the business, the company can choose appropriate activities.  
3. The next step is to determine whether it is a new registration or a continuation of an existing registration. Please note that branches do not have the option to select continuation; they must either register as a new branch or as a new entity, depending on the applicant’s preference. The primary distinction between continuation and new registration lies in the company’s prior existence. Continuation applies when a company already exists in another jurisdiction before applying for a license with the ADGM Registration Authority (RA) and chooses to migrate to ADGM. Conversely, new registration occurs when a company does not currently exist within ADGM’s jurisdiction and is incorporated as a new entity. This option is available to applicants voluntarily. However, if the applicant holds a branch license issued by ADDED, they must register as a new branch within ADGM. 
4. The current ADDED licenses operating on Al Reem Island choosing to apply using the ‘Continuance to ADGM’ process, would be required to obtain a no objection certificate (NOC) from the ADDED, confirming eligibility to apply for continuation. Without the NOC, the application will not be accepted by ADGM RA. 
5. The company will undergo document revision such as revising the MOA and other corporate documents to meet ADGM standards. 
6. Submit updated documentation via the online portal of ADGM. 
7. Licensed businesses are required to always maintain a registered office address in ADGM. When applying for incorporation of a legal entity, please upload the lease agreement for the proposed office space in ADGM. The office spaces are available on Al Reem Island and Al Maryah Island through Office Spaces in ADGM Jurisdiction. If the lease is already registered with Abu Dhabi Municipality (DMT), a copy of the same or a contract copy with the landlord should be submitted to ADGM.  
8. Proactive planning is essential for businesses to smoothly integrate into the regulatory framework of ADGM. 

Compliance Checklist for Operating Under ADGM’s Framework 

The following documents and information will be required for New Registration or Continuation of the business. Please ensure they are all prepared beforehand to ensure an orderly and quick application review process: 

• Company / Trade Name 

• Selected Business Activities 

• Details of Registered Office Address 

• Lease Agreement 

• Mailing Address details 

• Amount of Issued Capital 

• Shareholding Structure Chart and Shareholder Details 

• Ownership Structure 

• Director(s) details 

• Authorized Signatory(ies) details 

• Money Laundering Reporting Officer (MLRO) details (applies only to DNFBP) 

• AML policy and supplementary documents (applies only to DNFBP) 

• Data Protection Contact Person details: 

1. 1. How to complete the Data Protection Registration in ADGM Registry Solution 2.0 
   2. ADGM – Office of Data Protection 

• Beneficial Owner’s details 

• NOC from ADDED (for entities choosing Continuation into ADGM) 

• Modify employment contracts to reflect ADGM’s employment regulations. 

• Fulfill federal tax obligations where applicable. 

• Comply with International Financial Reporting Standards (IFRS). 

Dual Licensing: Navigating Operations Across ADGM and Abu Dhabi Mainland 

ADGM and the ADDED have an agreement to facilitate a dual licensing regime for entities established 

in the ADGM. Under this agreement, certain entities holding ADGM commercial licenses will be eligible for mutual license recognition with the ADDED provided that they satisfy and fulfill the respective licensing 

requirements of each jurisdiction and operate according to their respective rules and regulations. This 

means that eligible ADGM entities may be permitted to service businesses in onshore Abu Dhabi 

without having an office presence on the mainland. 

ADGM entities providing financial services to customers in mainland Abu Dhabi will remain subject to 

any other relevant regulatory obligations and applicable laws that may be imposed on the mainland 

by the Federal regulators (such as the UAE Central Bank or Securities and Commodities Authority). 

Some businesses may be required to obtain further licenses from other onshore authorities, 

depending on the scope of their activities. Dual licensing allows businesses to maximize their market reach while benefiting from ADGM’s global standards. 

Key takeaways 

The transition of Al Reem Island to ADGM jurisdiction marks a pivotal regulatory change, offering businesses a globally competitive legal framework. By understanding the new regulatory environment, adhering to compliance requirements, and leveraging dual licensing opportunities, businesses can thrive in this enhanced ecosystem.