ADGM Company Restructuring and Conversion
Converting by re-registration without dissolving, and where creditors and the ADGM Courts come into a restructuring
How the ADGM Companies Regulations 2020 govern restructuring and conversion, and the roles of the Registration Authority and the ADGM Courts. It sets out the steps for a restructuring and for a conversion and compares them in a table. It then covers why companies change form or structure, what may follow a missed filing or approval, and tax and stakeholder points.
Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant
An ADGM company that needs to adapt to changing commercial, regulatory or strategic conditions has formal legal avenues to modify its corporate form or internal structure. Conversion lets it move into another permitted corporate form by re-registration, without dissolving. Restructuring can take place through mechanisms such as a merger, division or scheme of arrangement. The choice affects the documents filed and whether court approval is required.
The rules that govern an ADGM restructuring
ADGM is a financial free zone with a distinct legal regime, tailored to support international financial and commercial activities. Its legal framework is based on English common law principles. It offers a flexible but strictly regulated environment for company restructuring.
The core legal instrument for companies is the ADGM Companies Regulations 2020 (the Companies Regulations). They contain provisions on corporate formation, governance, restructuring and conversion. They define the types of company permitted, including private companies limited by shares and public companies. They explicitly address the procedures for company restructuring, including mergers, divisions, schemes of arrangement and conversions between company types.
ADGM operates as an independent jurisdiction, and ADGM companies are primarily governed by the Companies Regulations. Federal Decree-Law No. 32 of 2021 on Commercial Companies does not apply to companies incorporated in the free zones where a special provision to that effect is stipulated in the free zone's laws or regulations.
What each mechanism does, and who supervises it
Mergers and divisions allow companies to consolidate or split their business operations. A scheme of arrangement is a court-sanctioned process for restructuring that binds members and creditors. A conversion enables an ADGM company to change its corporate form by re-registration, without dissolving.
The ADGM Registration Authority (RA) oversees all registrations, filings and approvals related to company restructuring and conversion. It enforces compliance with the Companies Regulations and issues procedural guidelines for restructuring activities.
The ADGM Courts have jurisdiction to supervise and approve restructuring transactions where required. In doing so, they uphold procedural fairness and the protection of creditors and members.
How a restructuring proceeds from board plan to court sanction
- Board approval of a restructuring plan. The process typically begins with the board of directors approving a formal restructuring plan. The plan must detail the nature of the restructuring, the reasons for undertaking it and its impact on shareholders, creditors and other stakeholders.
- Shareholder approval. After board approval, the plan must be submitted to shareholders for approval. The Companies Regulations specify the required majority, depending on the type of restructuring. It is often a special resolution, passed by a majority of not less than 75%.
- Creditor protection. Where the Court orders a creditors' meeting to be summoned on a compromise or arrangement, every notice summoning the meeting that is sent to a creditor must be accompanied by a statement complying with the Companies Regulations. In some cases the company must also obtain creditor consent or court approval. The ADGM Courts may intervene to ensure that creditor interests are adequately safeguarded.
- Filing with the Registration Authority. Once the plan is approved, the company must file the restructuring documents, including the resolutions and the restructuring plan, with the RA. The RA will review the submission for compliance and update the company's registration details accordingly.
- Court sanction, where required. For certain restructuring mechanisms, such as schemes of arrangement, court sanction is mandatory. The ADGM Courts will assess the fairness of the scheme and confirm that all statutory requirements have been met before granting approval.
Conversion: eligibility, approvals and a new certificate
Conversion changes an existing ADGM company into another permitted corporate form without liquidation. The process is governed by Part 7, Chapter 1 of the Companies Regulations.
- Eligibility. Only certain company types are eligible for conversion. For example, a private company limited by shares may convert into a public company or an unlimited company, subject to compliance with the relevant regulatory conditions.
- Board and shareholder approval. The board must approve the conversion plan, and the requisite shareholder consent must then be obtained, typically by special resolution.
- New constitutional documents. The company must draft new constitutional documents, such as the memorandum and articles of association, consistent with the requirements of the target corporate form.
- Application to the Registration Authority. The company submits an application to the RA, including the approved resolutions, the new constitutional documents and any other prescribed forms.
- Review and issue of a new certificate. The RA reviews the application to verify compliance. Once satisfied, it registers the conversion and issues a new certificate of incorporation reflecting the company's new status.
Nour Attorneys offers practical legal support on company type conversion.
Restructuring and conversion compared step by step
| Step | Restructuring | Conversion |
|---|---|---|
| Initiation | Board approval of restructuring plan | Board approval of conversion plan |
| Shareholder Approval | Special resolution (usually 75% majority) | Special resolution |
| Documentation Preparation | Restructuring plan, notices, resolutions | New constitutional documents, resolutions |
| Filing with ADGM Registration | Submission of restructuring documents | Submission of conversion application |
| Court Approval | Required for schemes of arrangement and some mergers | Not typically required |
| Registration Outcome | Updated company registration and status | Issuance of new certificate of incorporation |
Why companies change form or structure
Businesses in the UAE frequently seek to reorganise their corporate structures to optimise operational efficiency, comply with evolving legal requirements or realign strategic objectives.
Restructuring can provide enhanced operational flexibility, improved capital structures and alignment with evolving commercial objectives. Conversions allow a company to adopt a corporate form better suited to its business scale or investor requirements, without the disruption of liquidation. For example, converting a private company to a public company may help it raise capital through public offerings. Restructuring via a merger may enable complementary business units to be consolidated for efficiency gains.
What may follow a missed filing or approval
Compliance with the Companies Regulations and procedural mandates is non-negotiable. Failure to adhere to filing requirements, obtain necessary approvals or protect creditor rights may result in invalidation of the restructuring, penalties or litigation.
Full due diligence must be conducted before restructuring, to identify contractual obligations, regulatory restrictions and stakeholder interests. This includes reviewing shareholder agreements, creditor arrangements and any outstanding litigation.
Tax, accounting and stakeholder communication
Restructuring and conversion may trigger taxable events or accounting adjustments. Companies should consult tax advisers to assess the impact and to comply with applicable tax laws.
Transparent communication with shareholders, creditors, employees and regulators is essential to mitigate risks and maintain trust. Detailed disclosure of the objectives, timelines and effects of a restructuring helps to secure stakeholder buy-in and minimise disputes.
Nour Attorneys also offers practical legal support through its corporate restructuring services.
