Manufacturing Compliance in ADGM: Complete Guide

Where the factory goes, and where ADGM fits

Abu Dhabi Global Market is the emirate's financial free zone. It is a common-law jurisdiction with its own courts and its own regulator, the FSRA, and its licensing regime is built around financial, professional and corporate activities rather than industrial production. A company that intends to build, process, assemble or store goods does that in one of Abu Dhabi's industrial or economic zones, or on the mainland, under an industrial licence issued by the competent authority.

So the practical question for an industrial group is not whether to manufacture in ADGM. It is whether ADGM is the right place for the entity that sits above the plant: the holding company, the joint venture vehicle, the group's financing or treasury arm, the entity that owns the technology. This guide sets out what that entity is signing up to, and how its obligations differ from the operating company's.

Two legal systems in one group

An ADGM company is formed under the centre's own companies regime and litigates, if it has to, before the ADGM Courts. The operating company on the mainland is formed under the Commercial Companies Law, Federal Decree-Law No. 32 of 2021, which replaced Federal Law No. 2 of 2015, and litigates before the onshore courts. Directors' duties, shareholder remedies, register and filing obligations, and the mechanics of a share transfer are not identical across that line.

Groups run into difficulty when documents are drafted once and used on both sides. A shareholders' agreement written for the ADGM holding company will not, by itself, deliver the same rights at the level of the mainland subsidiary; the subsidiary's own constitutional documents have to carry them. Reserved matters, drag and tag provisions, and deadlock mechanisms all need to be replicated in a form that the law governing the subsidiary recognises.

Ownership is no longer the reason

Federal Decree-Law No. 26 of 2020, effective 1 June 2021, removed the requirement for 51% UAE-national ownership of mainland limited liability companies, and 100% foreign ownership is now permitted for most mainland activities, subject to a strategic-impact list. A foreign investor no longer needs a special vehicle in order to own an Abu Dhabi operating business outright. Where a foreign company registers a branch rather than a subsidiary, a local service agent arrangement remains a lawful and distinct structure. Choosing between a mainland subsidiary, a branch and an ADGM holding company is now a question of governance, financing and dispute strategy, and it is one our commercial legal services team works through with industrial clients before the first licence application is filed.

Getting the ADGM entity's activity right

The licensed activity has to match reality. Holding shares is one thing; lending to group companies, running treasury, or providing services to parties outside the group may fall within the regulated perimeter and require FSRA authorisation. Intercompany arrangements are not automatically outside it because the counterparty is an affiliate. Check the intended function against the licensing categories before the entity begins operating.

The same applies to technology and brands. Placing process know-how, patents or trade marks in an ADGM company works only if the transfer is documented and, where registration applies, registered, and if the licence back to the operating company exists as a real agreement with real terms and real payments. A structure that lives only on the organisation chart offers no protection and invites questions from every direction.

The operating company's obligations do not move

Nothing about the holding structure changes what the plant has to do. The industrial licence, environmental and safety approvals, and any sector permits attach to the operating entity and its site. Product conformity, registration and labelling requirements attach to the product placed on the market, under the schemes administered by the Ministry of Industry and Advanced Technology and the relevant sector ministries. Customs declarations attach to the importer of record and to the goods actually moving. Where the ADGM entity contracts as seller while another group company imports and delivers, the contracts and the customs paperwork must describe the same transaction.

People, data and tax

Employees of the mainland operating company are governed by the Employment Law, Federal Decree-Law No. 33 of 2021, which replaced Federal Law No. 8 of 1980. Staff based in ADGM are employed under the centre's own employment regulations. Groups that second executives between the two, or reuse a template across both, tend to create contracts whose notice, leave and end-of-service terms do not match the law that applies to the employee in question.

Data protection splits the same way: ADGM operates its own regime, while Federal Decree-Law No. 45 of 2021 applies outside the financial free zones. HR, supplier and customer data moving between the holding company and the plant is a transfer between two regimes and needs a proper basis under both.

Corporate tax is federal and reaches both entities. Under Federal Decree-Law No. 47 of 2022, for financial years starting on or after 1 June 2023, taxable income is charged at 0% up to AED 375,000 and 9% above. Relief available to free zone persons depends on conditions in the legislation and must be assessed on the entity's actual income and counterparties rather than assumed from the licence. VAT is charged at 5% under Federal Decree-Law No. 8 of 2017, as amended by Federal Decree-Law No. 18 of 2022. Economic Substance Regulations were cancelled for financial years ending after 31 December 2022 by Cabinet Decision No. 98 of 2024, but obligations remain for FY2019 to FY2022, so retain those filings and the records behind them.

Contracts and where disputes are heard

Onshore supply, distribution and manufacturing contracts are governed by the Commercial Transactions Law, Federal Decree-Law No. 50 of 2022, which replaced Federal Law No. 18 of 1993. That is the law that decides specification and acceptance disputes, rejection rights, passage of risk and the consequences of defective or late delivery, so those clauses deserve real drafting attention rather than a boilerplate paragraph.

For arbitration, Federal Law No. 6 of 2018, as amended in 2023, governs. Abu Dhabi groups should note that ADCCAC was restructured as arbitrateAD from 2024, so older clauses naming the former institution need to be reviewed rather than assumed to work. Clauses referring disputes to the DIFC-LCIA need the same treatment: that institution was abolished by Dubai Decree No. 34 of 2021 and its caseload transferred to DIAC. Auditing dispute clauses across an existing contract portfolio is a standard first step in our commercial dispute resolution work.

Practical points

• Site the production entity where industrial activity is actually licensed; use ADGM for the corporate layer.
• Replicate shareholder protections in the subsidiary's own documents, not only in the holding company's.
• Test the ADGM entity's activity against the licensing and authorisation categories before it trades.
• Keep employment and data documents separate on each side of the boundary.
• Review legacy arbitration clauses naming institutions that no longer exist in that form.

For advice on an ADGM structure above an Abu Dhabi industrial business, contact the Nour Attorneys team.

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Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.

Nour Attorneys Team

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