DIFC Announces Enactment of updated Prescribed Company Regulations

Dubai, UAE, July 15, 2024:  Dubai International Financial Centre (DIFC), the leading global financial centre in the Middle East, Africa and South Asia (MEASA) region, is enacting amendments to the Prescribed Company Regulations. The amended regulations significantly expand and simplify the current Prescribed Company (“PC”) regime in DIFC. 

Prescribed Company Regulations

The Prescribed Company Regulations were enacted in 2019 and were further updated in 2020 and 2022. In both cases to expand the regime to a wider base of applicants. 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. 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.  

Key Changes to the Regime 

Under the existing regime, establishing a PC is limited to Qualifying Applicants (for the most part those that can establish an existing nexus to DIFC and certain other low risk applicants), or otherwise where the PC is carrying out a Qualifying Purpose (such as a Structured Financing). Under the proposed regulations, it will be possible to establish a Prescribed Company in the following scenarios.

Where the PC 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 PC 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 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.

Other Important Amendments 

The proposed amendments also provide that a Prescribed 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 Prescribed Companies are used as true holding company vehicles, rather than operational entities. A new commercial package will provide existing PCs that no longer meet the relevant criteria with continued licensing benefits akin to the previous PC regime. Transitional arrangements will be communicated to these entities.

Enactment

The new legislation came into effect on 15 July 2024, and can be accessed via DIFC’s Legislative Database: here.
The new laws reflect the Centre’s commitment to facilitating market needs whilst maintaining a transparent and robust legal and regulatory framework aligned with global best practice.

Commercial Package

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. For further information on the commercial package see link[https://shorturl.at/Ew4me].