When Does an SPV Become an Investment Fund in ADGM? The Legal Perimeter Explained

By CRYPTOVERSE Legal Consultancy | September 2026

Three investors want to buy a minority stake in a technology company. They form an ADGM special purpose vehicle (SPV), each contributes money, and one founder takes responsibility for the investment.

Is the SPV simply a holding company—or has the group created a collective investment fund that falls within the FSRA’s regulatory perimeter?

The answer cannot be found on the company’s registration certificate. It depends on what the investors agreed to, who controls the property, how returns are shared, and what the vehicle actually does.

This distinction matters for property ventures, startup syndicates, private equity deals and crypto investment clubs. An SPV can be a useful holding vehicle. It cannot be assumed to provide an exemption from fund regulation merely because its shareholders call it an SPV.

An SPV describes a vehicle, not its regulatory status

ADGM describes SPVs as passive holding companies used to ring-fence assets and liabilities. They are formed through ADGM’s registration framework and cannot be used to conduct operational business or hire staff. That description explains what an SPV is designed to do as a company. It does not decide whether an investment arrangement involving the company is a fund under financial services law. (adgm.com)

The FSRA perimeter question begins with section 106 of the ADGM Financial Services and Markets Regulations 2015 (FSMR) and the exclusions in FUNDS Chapter 2.

The section 106 test

Section 106 defines a Collective Investment Fund by reference to arrangements involving property, including money, whose purpose or effect is to let participants share in profits or income from acquiring, holding, managing or disposing of that property.

The section then adds two features:

1. The participants do not have day-to-day control over managing the property, even if they can be consulted or give directions; and
2. Both their contributions and relevant profits or income are pooled and the property is managed as a whole by or on behalf of the fund manager.

The word “both” matters. The legal test requires analysis of the complete arrangement; observing one feature in isolation does not settle the question. The FSRA’s FUNDS guidance also notes that the statutory definition is wide, subject to the specified exclusions in Chapter 2. (Rulebook)

A practical first question is therefore:

Are investors joining a shared investment arrangement whose property is managed for their collective return, without each investor controlling its day-to-day management?

If the answer appears to be yes, the sponsor must test the arrangement carefully against section 106 and the FUNDS exclusions. It should not stop at the fact that investors hold ordinary shares in a company.

The closed-ended company exclusion—and its limit

One provision is especially important for SPVs. FUNDS Rule 2.1.10 addresses an arrangement comprising a closed-ended partnership or body corporate.

Such an arrangement does not constitute a Fund under that exclusion unless, on reasonable grounds, its purpose or effect appears to be the discretionary management of investments for a collective purpose and for the benefit of its shareholders or partners. (Rulebook)

This is why the legal analysis cannot be reduced to “company equals no fund” or “several shareholders equals fund.”

Consider the difference between:

• A company formed to acquire and hold a specified operating-business stake under a defined transaction agreed by its shareholders; and
• A company raising capital from passive investors so a sponsor can select investments, reinvest proceeds and manage a portfolio for their collective benefit.

The second structure raises a substantially stronger fund-perimeter question. The decisive facts are the powers and economic arrangements created by the documents and exercised in practice.

Nor does a “single deal” label automatically resolve the issue. Even where a vehicle starts with one identified asset, the analysis should examine discretion over acquisitions, follow-on investments, disposals, reinvestment and investor returns.

Five ADGM SPV structures that need different answers

These are illustrations, not predetermined legal classifications. Changes to investor rights or manager discretion can change the answer even when the assets and corporate form remain the same.

“The investors can vote” is not the end of the control question

Sponsors sometimes point to shareholder voting rights as proof that investors control the SPV. Section 106(2) expressly says participants may lack day-to-day control even if they have a right to be consulted or to give directions.

A vote on major matters—such as replacing a director, approving a sale or changing constitutional documents—may be significant corporate governance. The perimeter analysis still asks who makes the ordinary investment and management decisions.

To answer it, read the shareholders’ agreement and articles alongside any investment management, advisory and side-letter arrangements. Then ask how decisions are actually made. A document giving every investor broad approval rights may offer little comfort if a promoter selects assets and executes the strategy in practice.

Common assumptions that lead to the wrong structure

“It has only one asset.” The number of assets is relevant context, but the statutory test concerns the arrangement’s purpose and effect, pooling, management and investor control. The powers to replace or add assets also matter.

“Everyone is a shareholder, so it cannot be a fund.” FUNDS Rule 2.1.10 specifically addresses closed-ended bodies corporate. It is a conditional exclusion, not a blanket exemption for companies.

“We are raising money only from friends.” The investor relationship may matter to a particular exclusion—for example, FUNDS Rule 2.1.15 concerns arrangements in which every participant is a Close Relative. An informal description of investors as “friends and family” does not establish that test. (Rulebook)

“The SPV has an ADGM commercial licence.” Company registration and FSRA financial services authorisation address different questions. Registration does not itself authorise the regulated activity of managing a collective investment fund.

“The manager is just helping with the deal.” The person who establishes, operates or is legally accountable for a fund’s management may fall within the regulated activity of Managing a Collective Investment Fund under paragraph 59 of Schedule 1 to FSMR. Other roles—such as advising or arranging—should also be scoped according to what the person actually does. (Rulebook)

What documents reveal the real answer?

Before incorporating or offering an SPV to investors, review the entire transaction package:

• Investment memorandum and pitch deck: Are investors promised exposure to one specified transaction or to a managed investment strategy?
• Articles and shareholders’ agreement: Who may decide on acquisitions, disposals, borrowing and distributions?
• Subscription and funding terms: Are investor contributions and returns pooled?
• Management and advisory agreements: Who has discretion, and who receives a management or performance fee?
• Exit provisions: Can the promoter reinvest proceeds or substitute assets without fresh investor decisions?
• Actual conduct: Does the way the vehicle operates match the rights written into its documents?

These documents should tell a consistent story. Calling a vehicle a “passive SPV” in its incorporation application will not be persuasive if its investor materials describe an actively managed investment portfolio.

What if the arrangement is a fund?

A finding that the proposed structure falls within the ADGM definition of a fund does not necessarily end the project. It changes the launch path.

The sponsor will need to consider an appropriate fund structure—such as an Exempt Fund or Qualified Investor Fund, depending on the investor base and subscription terms—and who may lawfully manage and offer it. FSRA fund manager authorisation, fund documentation, notification, investor classification and marketing requirements then become central to the plan.

The better commercial decision may be to design a regulated fund from the outset. In other cases, the parties may be able to document a genuine joint commercial investment arrangement that fits the facts and an applicable exclusion. The choice should follow the proposed business model.

A practical perimeter test for sponsors

Before presenting an ADGM SPV to outside investors, answer these questions in writing:

1. Who are the participants, and what do they contribute?
2. What economic return is each promised?
3. Are contributions and returns pooled, and is the property managed as a whole?
4. Who makes day-to-day decisions concerning the property?
5. What discretion does a promoter, director or adviser have over investments?
6. Does a specific FUNDS Chapter 2 exclusion apply to the actual arrangement?
7. What regulated activities, if any, will each person perform in or from ADGM?

The answers give the sponsor a defensible basis for choosing between an SPV arrangement and a fund structure—and for identifying where FSRA engagement or authorisation is required.

The takeaway

An ADGM SPV does not become an investment fund merely because it owns an asset or has multiple shareholders. Nor does it avoid fund regulation merely because it is incorporated as a company.

The boundary is drawn by FSMR section 106, read with FUNDS Chapter 2, especially the conditional exclusion for closed-ended companies and partnerships in FUNDS Rule 2.1.10.

For sponsors, the safest time to decide which side of that boundary a proposed vehicle occupies is before investors receive a pitch deck or transfer their money.

CRYPTOVERSE Legal Consultancy advises sponsors on ADGM SPV and investment fund perimeter assessments, FSRA fund manager licensing, and the structuring of collective and joint investment arrangements.

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