How to Set Up a Family Office in ADGM

Setting up a family office in the Abu Dhabi Global Market (ADGM) has become an increasingly popular choice for high-net-worth individuals and families seeking a sophisticated, flexible structure to manage their wealth and investments. With its strong regulatory framework, tax-friendly environment, and strategic location, ADGM offers an appealing base for family offices in the UAE.

In this article, we’ll guide you through the essential steps to establish a family office in ADGM, from choosing the right legal structure to navigating the regulatory requirements. We’ll also highlight the advantages of basing a family office in this rapidly growing financial centre and offer insights into how to tailor your setup to meet your family’s unique needs and objectives.

So, let’s start with some definitions.

What is a family office?

A family office in ADGM can vary widely in scope, but there are two main types:

• Single-family office (SFO): An SFO is dedicated to managing the wealth of a single family. This structure offers personalised and exclusive services, with complete control over investment strategies, operational processes, and governance. SFOs are particularly suitable for families with substantial wealth, as they require significant resources to operate effectively.

• Multi-family office (MFO): An MFO serves multiple families, pooling resources to provide similar services to several clients. This setup can be more cost-effective than an SFO, allowing smaller families to benefit from high-quality wealth management services without the overhead of a dedicated office. MFOs often offer a range of customisable services, allowing families to select what best meets their unique needs.

Purpose of setting up a family office in ADGM

Here’s how a family office structure can address some of the most crucial aspects of family wealth management:

• Wealth preservation: Family offices in ADGM can implement robust, diversified investment strategies to grow and protect family wealth across generations. By centralising wealth management and leveraging ADGM’s favourable tax environment, families can maximise returns and reduce the risk of asset depletion.

• Succession planning: One of the biggest challenges for high-net-worth families is ensuring a smooth transfer of wealth from one generation to the next. Family offices can establish structured governance and succession plans tailored to the family’s values, ensuring that the next generation is prepared to carry forward the family legacy.

• Philanthropy: Many families view their family office as a platform to formalise and expand their philanthropic efforts. A family office in ADGM can help structure philanthropic initiatives, enabling families to make a lasting impact through carefully planned donations, charitable trusts, or foundations. This helps reinforce the family’s values and build a legacy beyond financial wealth.

Benefits of setting up a family office in ADGM

Let’s look at some of the benefits of setting up a family office in ADGM:

• Regulatory framework: The ADGM operates under a regulatory structure based on English common law, providing a familiar and transparent legal environment. This foundation benefits family offices seeking clarity and stability in their governance, especially when dealing with international investments and multi-generational wealth planning.

• Tax efficiency: ADGM offers family offices a range of tax advantages, including exemptions from corporate and income taxes. With no currency restrictions or capital repatriation limits, the ADGM enables tax-efficient structures that help family offices manage and grow wealth while optimising tax liabilities.

• Comprehensive wealth management solutions: ADGM’s ecosystem is designed to accommodate complex family office needs, including investment management, succession planning, and estate structuring. The market’s access to top-tier service providers simplifies the process of building a tailored, efficient wealth management framework.

• Strategic geographic location: Situated at a global crossroads, ADGM provides access to markets in the Middle East, Africa, and Asia. Family offices can leverage Abu Dhabi’s connectivity and proximity to major economic centres, facilitating international trade and investment while enhancing accessibility for family members and business partners.

Legal structure options for family offices in ADGM

Let’s look at the Legal Structure Options for Family Offices in ADGM:

• Foundations: A foundation is a separate legal entity that manages wealth, supports succession planning, and protects assets. Unlike a trust, it can hold assets and conduct transactions in its own name, providing flexibility, enhanced asset protection, and minimal personal liability for family members.

• Limited Liability Partnerships (LLPs): The LLP structure offers flexibility and limited liability, making it suitable for investment-focused family offices. It allows shared management duties while limiting liability and streamlining tax and administrative responsibilities, ideal for collaborative wealth management.

• Special Purpose Vehicles (SPVs): SPVs are single-purpose entities used to isolate and manage specific assets, such as real estate or venture investments. They offer a secure, tax-efficient option for holding high-value assets, supporting asset segregation and risk management in diversified portfolios.

Factors to consider when choosing a structure

When selecting the most appropriate legal structure for a family office in ADGM, you should consider the following:

• Purpose and activities: The primary function of the family office will influence the choice. Foundations are often favoured for wealth preservation and legacy planning, while LLPs or SPVs might be more appropriate for investment-heavy or asset-specific purposes.

• Tax and regulatory implications: Each structure offers unique tax benefits, so understanding ADGM’s specific regulatory requirements and tax exemptions is essential. The right structure will balance regulatory compliance with optimised tax treatment.

• Asset protection and liability: Different structures provide varying levels of asset protection and personal liability. When deciding, family members should assess their risk tolerance and the degree of protection needed for their assets.

• Control and governance: For families desiring more direct control, an LLP may be preferable, while a foundation offers controlled, formal governance that can simplify intergenerational transitions.

• Administrative requirements: Each structure has distinct administrative obligations. Family offices should consider their capacity to handle reporting and compliance, as more complex structures may require additional administrative support.

Steps to set up a family office in ADGM

Let’s look at the steps to setting up a family office in ADGM. For comprehensive assistance and tailored support, contact Creative Zone to help you navigate the ADGM’s registration and licensing process.

Step 1: Define the objectives and scope of the family office: Before formalising the structure, it’s essential to outline the family office’s core objectives, activities, and asset management scope. This stage includes decisions on whether the office will focus primarily on wealth management, succession planning, or philanthropic endeavours.

Step 2: Select a legal structure: Choose the most suitable legal structure—Foundation, Limited Liability Partnership (LLP), or Special Purpose Vehicle (SPV)—based on the family’s goals and assets. Each structure has unique governance, liability, and tax efficiency implications, so this decision is critical. Creative Zone’s advisors can help assess which structure best aligns with your family’s requirements.

Step 3: Register with ADGM: Submit an application to register the family office entity with ADGM. This involves creating an account on the ADGM online portal and providing essential details, including the chosen structure, business activities, and preliminary office information.

Step 4: Prepare required documentation: To proceed with registration, compile and submit the necessary documents. These typically include:

• Proof of identity for directors and shareholders
• The entity’s memorandum and articles of association
• A business plan detailing the family office’s objectives and operational scope
• Address verification for a physical office within ADGM (although virtual options may be permitted)

Creative Zone’s experts can assist in preparing these documents, ensuring accuracy and compliance with ADGM’s requirements.

Step 5: Apply for a family office license: Once registered, apply for a family office license through ADGM. This license formalises the family office’s operations, granting legal standing to perform wealth management, investment, and other permitted activities. The licensing process requires submission of the registration documents, background checks, and payment of applicable fees.

Step 6: Establish compliance and ongoing reporting: ADGM has specific compliance and reporting standards that all family offices must adhere to, including anti-money laundering (AML) protocols, annual reporting, and other governance requirements. Family offices should establish an internal compliance process to meet these obligations consistently.

Key requirements and compliance documentation

To maintain compliance, family offices in ADGM must provide:

• Identification and background checks: ADGM requires directors and shareholders to undergo background verification.
• Annual financial statements: Regular submission of audited financial reports is a standard requirement.
• AML and counter-terrorism financing (CTF) compliance: Family offices must implement robust AML/CTF policies, including staff training and reporting mechanisms.
• Board meeting minutes and operational records: Accurate records of all meetings and decisions are essential to uphold governance standards.

For assistance with each step, whether selecting a legal structure or preparing compliance documentation, contact Creative Zone and let us assist you on your journey.

Compliance and regulatory requirements

The ADGM requires all family offices operating within its jurisdiction to meet rigorous compliance and regulatory standards:

• General regulatory compliance: Family offices must follow ADGM FSRA standards, including regular audits, financial disclosures, and accurate record-keeping of directors, shareholders, and financial statements. Annual report submission is mandatory for transparent governance.

• Anti-money laundering (AML) requirements: Family offices must create AML policies, monitor and report suspicious transactions, and designate a compliance officer to oversee AML protocols, including risk assessments and due diligence.

• Know Your Customer (KYC) Obligations: ADGM requires family offices to verify client identities through KYC, collecting relevant data to assess risk and detect suspicious activities, with ongoing checks for compliance.

• Reporting and record-keeping: Family offices must keep detailed records of financial transactions and governance activities and report any changes or suspicious transactions that may affect compliance.

• Data protection and confidentiality: Family offices must implement data protection measures, safeguarding client data with secure storage and regular audits to prevent unauthorised access.

Family office management and governance

These are the best practices when it comes to family office management and governance:

• Establishing a governance framework: A clear governance framework defines roles and decision-making, often involving a board or family council. Regular meetings and structured reporting maintain transparency and accountability, reducing conflicts.

• Creating an investment strategy: An investment strategy aligned with family goals and risk tolerance is key. Policies should outline asset allocation, risk diversification, and regular portfolio reviews to adapt to market changes.

• Implementing risk management policies: Family offices need robust risk policies to identify, mitigate, and monitor financial and operational risks.

• Succession planning: A formal succession plan outlines leadership and ownership transfers, prepares younger family members, and sets criteria for advisors, ensuring continuity across generations.

• Creating family and corporate policies: Clear policies reflecting family values provide guidelines on ethical practices, philanthropic goals, and conflict resolution, fostering unity and purpose.

• Engaging professional advisors: External experts like investment managers and legal advisors enhance governance, helping family offices navigate complex financial and regulatory landscapes objectively.

About Creative Zone

Creative Zone, one of the UAE’s largest and most trusted company formation specialists, brings extensive expertise in helping families establish offices in ADGM. With over a decade of experience and more than 12,000 successful registrations, we offer a team highly skilled in navigating the specific requirements and regulations of ADGM, ensuring a smooth setup process with quick turnaround times. Our personalised assistance includes support across all stages, from structuring governance to compliance and strategic planning, making it seamless for families to establish and operate confidently within ADGM. Contact Creative Zone today.