Dubai International Financial Centre (DIFC) implemented new legislation regarding the establishment of private companies within the international financial hub. These changes involve amendments to the 'Prescribed Company' (PC) regulations, significantly broadening and simplifying the existing regime.
What is a 'Prescribed Company'?
A 'Prescribed Company' refers to a private company established by a qualifying applicant or for a qualifying purpose, as outlined in the DIFC regulations. These regulations, first enacted in 2019 and updated in 2020 and 2022, have been periodically revised to accommodate a wider range of applicants.
Changes to 'Prescribed Company' Regulations
Despite previous amendments, demand persisted for further expansion. DIFC aims to balance operating as a substantial jurisdiction while meeting the demand for special-purpose vehicles for legitimate structuring purposes. With the introduction of UAE Corporate Tax, concerns about substance requirements have diminished, making further expansion of the PC regime appropriate.
Key Changes to the Current Regime
Under the existing regime, establishing a private company was limited to qualified corporate applicants with a nexus to DIFC or those carrying out a qualifying purpose, such as structured financing. The proposed regulations expand this by allowing private companies to be established under the following conditions:
a) Controlled by one or more: i) GCC citizens or entities controlled by GCC citizens; ii) an Authorized Firm; or iii) DIFC Registered Persons, other than a PC or an NPIO.
b) Established or continued for the primary purpose of holding legal title to, or controlling, one or more GCC Registrable Assets.
c) Established or continued for a Qualifying Purpose.
Additionally, a new qualifying criterion has been added:
d) Established by any person, resident globally, provided the company appoints a director from a DFSA-registered Corporate Service Provider (CSP) with an arrangement with the DIFC Registrar of Companies for compliance and AML functions.
These changes enhance the current regime by opening access to a global base of applicants while maintaining a nexus to DIFC and the GCC. DIFC's AML procedures and risk management methods will also be updated to handle increased demand.
The amendments stipulate that a qualified private company must be used solely for its qualifying purpose or as a holding company vehicle, without employing any employees. A new commercial package will offer continued licensing benefits to existing private companies that no longer meet the new criteria.
Effective Date
The new legislation took effect on July 15, 2024, and is accessible via DIFC’s Legislative Database. These changes reflect DIFC’s commitment to market needs while maintaining a transparent and robust legal framework aligned with global best practices. The commercial package is designed to accommodate existing PCs outside the new regime and provide reduced fees and flexible licensing arrangements for qualifying applicants.
