Accounting and bookkeeping in ADGM

People conflate these and it causes real problems a year or two in.

Keeping records is continuous, applies to every entity, and is what makes everything else possible.

Filing accounts is annual and depends on the structure: companies and LLPs file, branches and Foundations do not, and RSCs file only on notice[ADGM — Annual Accounts][ADGM RA — Schedule of Fees].

The failure mode is predictable. An entity relieved of filing concludes it has no accounting obligation, keeps nothing beyond a bank statement, and then cannot respond when the Registrar asks — or, more commonly, cannot substantiate its position when the Federal Tax Authority does[Federal Tax Authority], since federal tax obligations are entirely separate from ADGM's filing rules.

ADGM requires annual accounts to be denominated in US dollars[ADGM — Annual Accounts].

Straightforward if you bank and trade in dollars. Less so if your revenue is in dirhams, euros or sterling, because it makes the conversion approach an accounting policy decision rather than an afterthought — and one that should be settled at the start of a period rather than reconstructed at the end of it.

Worth noting the mismatch it creates: ADGM accounts are in USD, while federal tax thresholds are in AED — AED 375,000 for corporate tax and for mandatory VAT registration. Whoever prepares your figures needs to be tracking both currencies against different rules. See corporate tax and VAT.

"Small" is a defined status in the Companies Regulations 2020, not a description. Getting it right changes what you prepare, so it is worth knowing the mechanics rather than the headline.

The two conditions

A company meets the qualifying conditions in a year in which it satisfies both of the following[ADGM — Companies Regulations 2020]:

• Turnover — not more than USD 13.5 million
• Number of employees — not more than 35

Both, not either. A twelve-person company turning over USD 20 million does not qualify, and neither does a USD 2 million business with 40 staff.

Two details that decide borderline cases

Employees are an average, computed monthly. The Regulations define the number of employees as the average number of persons employed by the company in the year, found by taking the number employed for each month of the financial year[ADGM — Companies Regulations 2020].

So a company that runs at 30 staff and spikes to 45 for one quarter is measured on the average, not the peak. Equally, you cannot duck the threshold by cutting headcount in December.

Short periods are pro-rated. For a period that is a company's financial year but is not in fact a year, the maximum figures for turnover must be proportionately adjusted[ADGM — Companies Regulations 2020].

This bites in year one. A first financial period of eight months does not get the full USD 13.5 million — it gets eight twelfths of it. A company that incorporates mid-year and trades hard can fail the turnover test on a pro-rated ceiling it never knew applied.

First year versus later years

The Regulations treat the two differently. A company qualifies as small in relation to its first financial year if the qualifying conditions are met in that year; for a subsequent financial year, qualification is subject to further conditions[ADGM — Companies Regulations 2020].

The practical reading: small status is not granted once and kept. It is tested against the years around it, so a business crossing the threshold should expect its status to follow — and should plan for the audit that comes with losing it. See audit requirements, where the exclusions that override this regime are set out.

The small companies regime sits at sections 368 to 371 of the Companies Regulations 2020[ADGM — Companies Regulations 2020]. If your numbers are anywhere near either threshold, read them with your accountant rather than relying on a summary.

• Companies and LLPs — full records, annual accounts filed within nine months of the accounting reference date, audited unless the small-company exemption applies[ADGM — Annual Accounts]. See audit requirements.
• SPVs — an SPV cannot trade or employ, so the volume is low, but it is not zero: acquisitions, disposals, intercompany balances and financing all need recording. A dormant-looking holding vehicle with a mortgage and a shareholder loan has a real balance sheet.
• Foundations — records required, no annual filing[ADGM — Annual Accounts]. Given a Foundation may exist for generations, the records are arguably more important here than anywhere: the people who will need them have not met the founder.
• Branches — records required, no annual ADGM filing, though the parent's own reporting obligations continue in its home jurisdiction.

ADGM does not mandate a particular bookkeeping system, so the useful advice is ordinary rather than jurisdictional:

• Decide the reporting currency and conversion policy before the first period ends, given the USD filing requirement.
• Keep the entity's records genuinely separate from personal or group records — particularly in layered holding structures, where intercompany balances are where audits get expensive.
• Diarise the obligations separately. ADGM accounts, the commercial licence renewal, the separate USD 300 data protection renewal[ADGM RA — Schedule of Fees], and FTA corporate tax filing all run on different clocks with different authorities.
• Confirm whether you qualify as small before commissioning an audit — the thresholds are USD 13.5 million turnover and 35 employees[ADGM — Annual Accounts].

The operative requirements sit in ADGM's Companies Regulations[ADGM Legislation], and ADGM publishes the full set of ongoing obligations[ADGM — Ongoing obligations].