Accounts and Audit Requirement in ADGM 

As we are through with conclusion of another year of audit season, we witnessed unique circumstances and challenges faced by our clients and market and we can see a paradigm shift in the market behavior and priorities of our clients. We embraced these challenges by continuing to focus on our quality and maintaining the highest standards of integrity. We made our best efforts toaddress the challenges faced by our clients and support them to meet their compliance goals.

We are sure of experiencing new and unpredictable challenges in the coming years and we intend to address the knowledge gaps noted among the clients through series of technical publications in the coming weeks. These may be effectively considered by the organization to meet the relevant compliance requirements.

 In this publication, we hereby address the following topic:

Introduction

Abu Dhabi Global Market (ADGM) is a leading and award-winning International Financial Centre located in Al Maryah and Al Reem Island of Abu Dhabi, United Arab Emirates. ADGM’s legal framework is based on the English common law legal framework.

ADGM permits the following entities to obtain commercial license and operate within its jurisdiction:

 (a) Duty to maintain accounting records and file annual accounts:

Generally, every ADGM entity must maintain accounting records for a minimum of 10 years and file annual accounts with the ADGM Registration Authority (RA) for a particular financial year or period ending on Accounting Reference Date (ARD).

Applicable Legal Framework

Depending on the legal form, the entities are required to comply with the applicable legal framework as follows:

(b) Requirement for audited accounts :

Generally, unless exempted, every ADGM entity must obtain its accounts audited by a statutory auditor registered with ADGM.
Audited annual accounts of an Entity should include:

(c) Key considerations:

     1. Special Purpose Vehicle

If SPV holds control in subsidiaries and fails to meet small companies’ exemption, then the group accounts shall be prepared comprising of operations of all subsidiaries (globally) in compliance with IFRS 10, Consolidated Financial Statements, and engage the ADGM approved auditor to carry out the audit of group accounts. (Section 389 of Companies Regulations 2020).

2. Consolidation Exemption

If the ultimate or intermediate parent of ADGM registered entity is listed on the recognised stock exchange, then such entity may be eligible to claim exemption from filing consolidated financial statements in accordance with Section 390 of Companies Regulations 2020.

3. Ineligible Group

If a company is part of an ineligible group (i.e., any of its group entities is a financial institution or public interest entity, regardless of their jurisdiction), then such company is required to obtain the accounts audited and file with RA though it meets the small company threshold conditions. (Reference Section 371 of Companies Regulations 2020).

4. Standalone Exemption

A company (having subsidiaries) is exempt from audit of individual accounts for a financial year if it itself is a subsidiary undertaking and its parent undertaking is established under the law of the Abu Dhabi Global Market subject to fulfillment of certain conditions, as referred in Section 452A of the Companies Regulations 2020.

5. Migrated Entity

When a company is migrated into ADGM from other jurisdiction, it does not create a new company, rather the existing company continues in ADGM. Consequently, the existing financial year remains the same in ADGM.

Considerations in relation to Financial Institutions will be addressed in a separate publication.

Note: the above contents are for general reference only and cannot be construed as our formal opinion and the entities are required to assess the compliance requirements based on the applicable facts and circumstances.