Structures · room 05 of 11
Holding chains.
The sequence of entities standing between a fund and its asset, drawn tier by tier with the country leg written against each. Every link answers one question or it is only cost.
01 · The question
The chain and the question
A link does something the tier above cannot, or it is only cost.
A holding chain is the sequence of entities standing between the fund and the asset. Each link exists for a reason: to isolate liability, to hold a title or a licence that has to be held locally, to sit where a permission or a position requires it to sit, or to provide a clean object that can be pledged or sold without touching the asset itself.
Each link also costs. A set of accounts, a board, a bank account, a filing calendar, and a place at which value can be taxed, trapped or challenged.
Five strata, four country legs, eight constraints and five failure points. Two questions arrive, and one question sits underneath both.
The general partner sits in one centre, the assets in two countries, the investors in a third. Where does the chain create a taxable presence, and where does value leak on the way up that the model has not priced. The model shows one line from the asset to the fund. There are four.
The target holds its assets through three different chains inherited from a fund in wind-down. What has to be fixed before signing so the transfer does not need consents that can no longer be obtained. The existing chain is a diligence subject in its own right, and it is frequently the item that sets the timetable.
What does this entity do that the tier above it cannot. A link that cannot answer is a cost and a risk at once, and neither of them was priced. The discipline of this page is to put that question to every link on the chart, including the ones that were inherited and the ones that were copied.
02 · The chain, drawn
Tiers and country legs
Capital flows down the chain, and every up-leg is a border.
Five strata, read downward, with the country leg written against each. One of them cannot be fixed after the fact, and it is marked.
The chain, top to bottom
- 00 The fund Where the commitments sit and where the terms were fixed. Tier and domicile were settled at formation, and they are not re-chosen for the convenience of an asset that arrives later. The fund domicile
- 01 Master holding company Where the consolidated accounts are prepared, where fund-level or portfolio-level borrowing attaches, and where the equity of the whole chain beneath is pledged. Jurisdiction A
- 02 Intermediate holding company Interposed where the asset's own jurisdiction requires a particular kind of shareholder, or where the intended exit is a sale of this entity's shares rather than a sale of the asset. Both reasons are tested against what the entity actually did in the years before anyone asked. Jurisdiction B · binding
- 03 Local operating or property company The asset's own country. Holds title, holds the licences that have to be held locally, employs the people, files locally, and answers to a register that has its own view of a foreign shareholder. Jurisdiction C
- 04 The asset Beneath tier 03 and outside the corporate boxes. Title is a fact about a register, not a fact about a group chart. The register
Equity and shareholder loans travel down. Distributions, interest, repayments of principal and disposal proceeds travel up, and each up-leg crosses a border with its own treatment, its own documentation and its own evidential requirement. Tier 02 is the stratum marked, because it is the only one whose usefulness depends on facts established before anyone knew they would be needed.
The overlays, drawn beside the chain
- Where the people are
The manager's own team sits somewhere, and it is often none of the jurisdictions on the chart. It is the fifth place in the drawing, and it is the one nobody draws.
- Where the boards meet
Per tier, and by whom attended. A board minute records a place. Whether the meeting happened in that place, and who was in the room while it did, is a question of evidence, and it is asked years after the minute was signed.
- Where decisions are taken
Per tier, and distinct from where they are recorded. The two are the same thing only where somebody arranged for them to be, and arranging for it is an operating cost that has to be carried every year the position is claimed.
- Who signs, and where they stand
Contracts are signed by named individuals on behalf of named entities. Which entity, and where the signatory was standing at the moment of signature, are both facts about the chain. Neither is usually anywhere in the model.
The chart shows entities. The overlays show conduct, and conduct is what the chart is eventually tested against.
03 · Every link, tested
Link by link
The drawing asks one question, and it asks it of every link.
Four links, four questions each. The plane below is read across before it is read down: a link that answers the first column and fails the third is the expensive kind.
| By link · by question | What it does that the tier above cannot | What it costs to run | What has to be true for its position to hold | What breaks it |
|---|---|---|---|---|
| Tier 00 · the fund | Holds the commitments and the terms the investors agreed. Nothing beneath it can change what the constitutional documents fixed. | The vehicle's own running cost, its oversight arrangements, its valuation cycle and its reporting cycle. | Its tier and its domicile were chosen for the investors it actually has, rather than for the asset it is buying this quarter. | A vehicle re-chosen mid-life for an asset. Tier and domicile were fixed at formation, and the investors agreed their terms against that fix. |
| Tier 01 · master holding company | Consolidates. It is the single object the fund holds, and the single object beneath which the whole chain hangs and the whole equity is pledged. | Accounts, a board, a bank account, a filing calendar, and an audit that has to reconcile everything under it. | It is genuinely where the consolidated view is prepared and where the borrowing is agreed, rather than where the chart is symmetrical. | A tier that holds nothing the fund could not have held directly. It is a cost every year and a consent at exit. |
| Tier 02 · intermediate holding company | Sits where the asset's jurisdiction requires a particular kind of shareholder, or where the exit is a sale of this entity's shares rather than of the asset. | The same annual cost as any other link, plus the standing evidential burden of whatever position it exists to hold. | Decisions are taken where it sits, by people competent to take them, recorded when they are taken. Which regime tests that, and what it asks for, is read from primary text for this entity and never borrowed from another country's answer. | An entity formed for a position that holds nothing else, has no independent board and takes no decisions where it sits. |
| Tier 03 · local operating or property company | Holds title, holds the licences that have to be held locally, employs the people, and files where the asset is. | Local audit, local filings, local directors, and the local law that attaches personal duties to each of them. | The register in that country accepts the shareholder standing above it, on that register's own terms and on its own timetable. | A licence that does not transfer with the shares. The exit is re-cut as an asset sale, with a different consent chain and a different price. |
04 · When it is reached for
When the chain is drawn
A chain is cheap at entry and priced again at exit.
Five entries. Three of them say when the chain is drawn. Two of them say when a chain already drawn is the wrong one.
The asset's jurisdiction and the investors' jurisdictions differ. In this market that is every transaction, which is why the chain is a design subject rather than a formality carried out after the terms are agreed.
At entry, before anything is formed. A tier added at formation costs a formation. The same tier added later costs consents at every level above it and below it, and the consents are asked for at a moment when somebody else already knows they are needed.
On any acquisition of a target that already has one. The chain arrives with its own consents, its own registers, its own filings and its own history, and none of it was built with your transfer in mind.
Where a link exists because a precedent structure had one. It answers nothing the tier above could not have answered, and it carries a set of accounts, a board and a consent at exit for the privilege.
Where the exit is a share sale of an intermediate vehicle, that vehicle has to have been clean from the day it was formed. Cleanliness is not retrofittable, which is why the shape of the exit is settled at entry and not discovered at it.
05 · The binding constraints
Where each constraint surfaces
A chain is bound by facts, not by the certificates that describe them.
Eight constraints. Each one attaches at a named tier, and each one surfaces at a different stage, none of which is the stage at which it was created.
A position claimed by reference to where an entity is registered is tested by what actually happened there: decisions taken in the place, by people competent to take them, recorded at the time. Which regime does that testing, and what it asks for, is established per entity from the text that applies to it. It surfaces years after formation, and by then the position has been claimed for every one of those years.
Where an entity is registered is one fact. Where its people sit, and who habitually concludes contracts on its behalf, are different facts, and it is the second set the question is asked about. Each country asks it in its own words and answers it under its own law. The arrangement is made in week one, when the deal team's desks are allocated, and it is discovered in year four.
Both centres write a territorial test into the sentence that closes their perimeter: the question is where business is carried on, not how substantial anyone's involvement was. A chain whose entities sit in one place while the people who run them work in another has to answer that question with facts about conduct. The test is read in full at the regulated perimeter, and it is asked on any question about where a manager is actually operating from.
Portfolio management is routinely delegated, and delegating it leaves a question behind. What has to remain inside the licensed entity for its regulator to accept that the entity is real is a separate question in each centre, read against that centre's own outsourcing and delegation text. It is asked at authorisation and asked again on any supervisory visit.
Ownership of the asset is what the asset's own land, share or asset register says it is. That register has its own requirements of a foreign shareholder, and satisfying them is frequently the longest lead item in the conditions to signing. It is a register in a country, not a clause in a bundle, and it keeps its own hours.
Shareholder consents, pre-emption rights, licence conditions and change-of-control clauses sit at every tier, and a change at the top of a chain runs down through all of them. They are identified at entry, when they are only a list, and they are enforced at exit, which is when they are most expensive.
Value coming up the chain crosses a border at each tier. Each crossing carries its own treatment, its own documentation and its own evidential requirement, settled per leg, per income type and per year. It is tested on the first distribution, or on an audit, whichever comes first.
If the exit is a share sale of an intermediate vehicle, that vehicle has to have held nothing else, carried no legacy liability, and be capable of being diligenced. The test is applied by the buyer's counsel, at exit, across the entity's whole history, and there is nothing to be done about the years already in it.
Every one of these is cheap to establish while the chain is being drawn. Each one is priced by somebody else at the audit, at the register, or at the exit.
06 · Where it breaks
What the buyer finds
The buyer diligences the chain, not the person who drew it.
Five failure points. The first is marked, because it is the one that stops a signing rather than costing money, and it arrives on a timetable the transaction does not have.
- 01 The inherited chain with three routes Three different chains to comparable assets, each carrying consents that can no longer be obtained, because the counterparty who granted them has gone or has no reason to help. The remedy is a pre-signing restructuring, and the timetable for it does not exist.
- 02 The company that exists for a position It holds nothing else, has no independent board and takes no decisions where it sits. The position was a document rather than a fact, and the examination that finds it looks back across every year the position was claimed.
- 03 The licence that does not transfer The local operating entity holds an approval that cannot move with its shares. The whole exit is re-cut as an asset sale, with a different consent chain, a different result on every up-leg, and a different price.
- 04 Directors appointed for convenience A jurisdiction that imposes real personal duties on a director does not care that the appointment was administrative. A claim lands on an individual, and the validity of the indemnity written for that individual becomes a question in that jurisdiction's own law.
- 05 The instrument whose treatment was assumed A shareholder loan, priced into the model on an assumed treatment. The treatment is a position that has to be established under each regime that reads the instrument, and it is held up by documentation and by pricing rather than by the label on the note.
Each of these is a chain that was drawn correctly in the model. It was built differently in the documents, and the documents are the chain.
07 · ADGM and the DIFC
The zone and the country
The zone and the country are two legal places. A chain that touches both has a leg in each.
Six readings of the two centres, each one changing a chain that touches them. The tier at which a chain crosses from the zone into the country is a decision, not an accident of formation.
- The zone
An English-language jurisdiction with its own body of law, its own registrar and its own regulator, seated inside the emirate. A house licensed in the zone is licensed in the zone, and nowhere else in the country.
- Two legal places
The free zone and the onshore United Arab Emirates are separate legal places, not two names for one. A file that treats them as one has made its first error before a single document is read.
A chain with a tier in the zone and a tier onshore is drawn against that sentence.
- The boundary, from the other centre
A free zone is not a separate country. It sits inside Dubai, it ends where the zone ends, and each tier standing outside it is read under the law of the place where it stands.
- The territorial test
In ADGM, four words carry a territorial test, asking where business is carried on rather than how substantial a party's involvement was. In the DIFC, Article 41(1) asks where an activity is carried on, not how substantial it is, and what is absent is a location rather than a volume of work. The two readings sit at FSMR and at the DFSA.
- Two questions, one geography
That territorial test is regulatory, and it decides a regulatory thing. The tax question uses different words for a related idea, it is answered by different advisers under different instruments, and neither answer ever stands in for the other. A chain that has settled one of them has settled one of them.
- The registrar as a public fact
The zone keeps its own registrar, so the corporate existence of a firm there is a public fact rather than a claim made about itself. In a chain that a counterparty has to diligence, a tier whose existence can be checked without asking anyone is worth what it costs.
The chain, constrained from the other end
Two constraints that arrive from where the capital comes from rather than from where the asset sits. Each one reorders a chain rather than adjusts it.
An investor's own exchange-control position decides at which tier its capital can enter the chain, and in which country and account it can sit once it has. That is asked of the investor before the chain is drawn rather than after it, because the answer moves a tier rather than a clause. The regimes are read at where you live, and the approach rules beside them at marketing and placement.
The states around these centres legislate separately, and a chain touching more than one of them answers each on its own terms. The tier at which a chain crosses out of a centre and into any state around it is a decision taken at the drawing, and a chain drawn against a single regional assumption has one assumption too few.
Where the reading stops · August 2026
The territorial test of each centre is read on this site, and it is a regulatory test. At which tier a chain may cross out of a centre and onto a register in the country around it, and what that register then requires of a shareholder registered inside the zone, is read from the primary text of the place the register sits, and nothing published here answers it.
08 · Where our part ends
Tax, local law and counsel
We draw the chain and every crossing on it. Your advisers answer for what each one costs.
Almost all of the consequence on this page is tax and local law, and our structural work provides the framework within which the advisers who carry it answer. Six questions belong to the client's own regulated, legal and tax advisers, each of them to a named one, and the last row below is what the room hands them.
Every position claimed by any entity in the chain, the conditions attaching to it, and the documentation that has to exist before it is claimed. Answered by your tax advisers in each jurisdiction concerned, and answered again when the text beneath the position moves.
The analysis in every case, and the standing arrangements for managing it once the answer is known. The concept is stable. The application never is, and it is not the same question twice in two countries.
One in each jurisdiction of asset, of register and of entity. The register's own requirements of a foreign shareholder are answered there and nowhere else, and the answer is the item that most often sets the date of signing.
The transfer pricing and financing analysis on every instrument standing between two entities in the chain, including the ones written as a convenience at formation and never looked at again.
In each jurisdiction where a person is appointed, together with the validity, under that jurisdiction's own law, of the indemnity written for them.
Settled with the same advisers, and settled at entry, because the entity that will be sold cannot be repaired in the year it is sold.
What this room ends on: every entity, every tier and every crossing on one page with the country leg written against each, every link tested against what it does that the tier above it cannot, and each link that answers nothing marked for removal before it is formed.
We draw every entity, every tier and every crossing on one page, write the country leg against each, and ask of each link what it does that the tier above it cannot. The right question then reaches the right adviser about the right leg, before the structure is built rather than after it is audited.
Read against the readings published on this site · August 2026