![STOCK DIFC](https://imagevars.gulfnews.com/2023/09/07/STOCK-DIFC_18a6f302904_medium.jpg)
Dubai International Financial Centre (DIFC) on Monday enacted a new legislation on how private companies can be established at the international financial hub.
DIFC said in a statement that it is enacting amendments to the 'Prescribed Company' regulations, which "significantly expand and simplify the current 'Prescribed Company' regime in DIFC".
Changes to 'Prescribed Company' regulations
"Despite these amendments, DIFC has been met with continued demand to further expand the regime. DIFC has sought to balance the objective of operating as a jurisdiction of substance against demand for access to special purpose style vehicles used for legitimate structuring purposes and transactions," DIFC added.
"With the introduction of UAE Corporate Tax, concerns around substance requirements are reduced and DIFC is of the view that further expansion of the PC regime is now appropriate."
What are the key changes to the current regime?
Under the existing DIFC regime, establishing a private company is limited to for the most part those qualified corporate applicants that can establish an existing nexus to DIFC and certain other low risk applicants, or otherwise where the private company is carrying out a qualifying purpose, such as a structured financing.
Under the proposed regulations, it will be possible to establish a private company where it is:
a) Controlled by one or more: i) GCC citizens or entities controlled by GCC citizens; ii) an Authorised Firm; or iii) a DIFC Registered Persons, other than a PC or an NPIO (in line with the existing regime).
b) Established or continued for the primary purpose of holding legal title to, or controlling, one or more GCC Registrable Assets (i.e. assets that are registered with a GCC Authority).
c) Established or continued for a Qualifying Purpose (in line with the existing regime).
Importantly, following public consultation, a further qualifying limb has been added.
d) Established by any person (natural or corporate), that is resident anywhere in the world, provided that the qualified private company appoints as a director an employee of a DFSA registered Corporate Service Provider (CSP) and that CSP has an arrangement with the DIFC Registrar of Companies to carry out certain compliance and Anti-money laundering (AML) functions on behalf of the PC.
"DIFC is of the view that these changes considerably enhance the current regime, opening up access to this type of vehicle to a global base of applicants, whilst ensuring that a sufficient nexus to DIFC and the GCC is maintained. In addition, DIFC’s AML related procedures and ongoing risk management methodology is also being updated to seamlessly deal with any increase in demand," it added.
DIFC added that the proposed amendments also provide that a qualified private company must only be used for either its qualifying purpose or as a holding company vehicle and may not employ any employees.
"These changes ensure that the companies are used as true holding company vehicles, rather than operational entities. A new commercial package will provide existing private companies that no longer meet the relevant criteria with continued licensing benefits akin to the previous regime, which will be communicated to these entities," it said.
When do the new norms come into effect?
The new legislation came into effect on July 15, 2024, and can be accessed via DIFC’s Legislative Database: here.
"The new laws reflect the DIFC’s commitment to facilitating market needs whilst maintaining a transparent and robust legal and regulatory framework aligned with global best practice," it added.
"The commercial package has been designed not only to capture existing PCs that fall outside of the new regime but to provide further structuring options with reduced fees and flexible licensing arrangements to applicants that meet certain criteria."