The Dubai International Financial Centre (DIFC) has introduced significant updates to its Prescribed Company Regulations, effective from July 15, 2024. These changes are the result of an extensive consultation process that aimed to refine the framework to better serve businesses and investors, while maintaining the cost-effective and flexible environment that the DIFC is known for. The key changes in the 2024 regulations include expanded eligibility criteria and new requirements for qualifying applicants and purposes. In this article, we provide an in-depth look at these changes and their implications for businesses considering establishing or continuing a Prescribed Company in the DIFC.
Expanded Eligibility Criteria
One of the most notable changes in the 2024 regulations is the broadening of the eligibility criteria for Prescribed Companies. Under the previous regime, eligibility was limited to certain types of entities (qualifying applicants) and activities (qualifying purposes). The new regulations have expanded this to include a wider range of applicants and purposes, making it more accessible for diverse wealth management and asset holding requirements.
To incorporate or continue a Prescribed Company in the DIFC, applicants must now satisfy one of the following criteria:
1. The Prescribed Company is controlled by one or more:
a) GCC Persons;
b) Registered Persons; or
c) Authorised Firms;
2. The Prescribed Company is established or continued in the DIFC for the purpose of holding legal title to, or controlling, one or more GCC Registrable Assets;
3. The proposed Prescribed Company is established or continued in the DIFC for a Qualifying Purpose; or
4. The Prescribed Company established or continued in the DIFC has a Director appointed from a DFSA registered Corporate Service Provider
These updated changes significantly broaden the uses for DIFC Prescribed Companies, building upon the existing qualifying purposes and extending use to any situations whereby there is some form of GCC nexus, such as by way of ownership, or by way of assets held. Where such nexus cannot be established, the Prescribed Company may still be used where a DFSA registered Corporate Services Provider, such as Cavenwell, provides professional director services to the company.
Benefits of DIFC Prescribed Company
The DIFC Prescribed Company is already the preferred option for many clients establishing holding company structures. These updated requirements will provide access to the product in a wider range of circumstances and for a broader range of clients, who will now be able to take advantage of the key benefits DIFC Prescribed Companies offer, including:
- Low Setup and Maintenance Costs: Compared to a normal DIFC operational licence, the cost of setting up and maintaining a DIFC Prescribed Company is significantly lower.
- No Office Space Requirement: The company can appoint a DIFC registered Corporate Services Provider, such as Cavenwell Group, to provide its registered office.
- Tax Benefits: The company enjoys 0% taxation on dividends and qualifying income and has access to the DIFC’s network of double taxation treaties.
- Privacy Protection: There is no public register of beneficial owners, and the DIFC respects proportionate privacy. A DIFC Foundation can be used to enhance privacy, with only the Foundation’s name being public.
- Legal Certainty and Efficiency: Operating under the English common law-based legal system of the DIFC, the company benefits from more flexibility and innovation than other UAE free zones.
- Share Classes and Shareholder Agreements: The company can issue multiple share classes, establish enforceable shareholder agreements, and use instruments such as SAFEs (Simple Agreements for Future Equity).
Conclusion
The 2024 updates to the DIFC Prescribed Company Regulations are a welcome development that will further support the use of the product as the go-to holding company vehicle for MENA clients. If you are interested in learning more about how a DIFC Prescribed Company can help you achieve your wealth management and asset holding objectives, please contact us today.
Disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
