Amendments to regulations expand and simplify existing regime, maintains Centre’s reputation as a jurisdiction of substance
Dubai International Financial Centre (DIFC) has announced significant amendments to the Prescribed Company (PC) Regulations, further expanding and simplifying the existing regime. These changes, effective from July 15, 2024, aim to address the increasing demand for access to special-purpose vehicles used for legitimate structuring purposes and transactions, while maintaining the Centre’s reputation as a jurisdiction of substance.
Evolution of the Prescribed Company Regulations
Initially enacted in 2019 and updated in 2020 and 2022, the Prescribed Company Regulations have continually evolved to accommodate a broader base of applicants. Despite these amendments, there has been persistent demand for further expansion. With the introduction of UAE Corporate Tax reducing concerns around substance requirements, DIFC has deemed it appropriate to further expand the PC regime.
Key Changes to the Regime
The amendments introduce several key changes to the PC regime, expanding the scenarios under which a Prescribed Company can be established. Under the existing regime, establishing a PC was limited to Qualifying Applicants with an existing nexus to DIFC or for specific purposes such as Structured Financing. The new regulations will allow the establishment of a PC in the following scenarios:
- Controlled by GCC Entities or DIFC Registered Persons: PCs can be controlled by one or more GCC citizens or entities controlled by GCC citizens, an Authorised Firm, or DIFC Registered Persons, excluding PCs or Non-Profit Organisations (NPIOs).
- Holding GCC Registrable Assets: PCs can be established or continued for the primary purpose of holding legal title to or controlling one or more GCC Registrable Assets.
- Qualifying Purpose: PCs can be established or continued for Qualifying Purposes, as defined in the existing regime.
- Global Applicants with DIFC Compliance: Following public consultation, a new provision allows any person, natural or corporate, resident anywhere in the world to establish a PC, provided they appoint a director from a DFSA registered Corporate Service Provider (CSP) that has an arrangement with the DIFC Registrar of Companies to carry out compliance and AML functions on behalf of the PC.
These changes significantly enhance the current regime, opening up access to a global base of applicants while maintaining a sufficient nexus to DIFC and the GCC. DIFC’s updated AML procedures and risk management methodology will seamlessly address any increase in demand.
Additional Amendments
The amendments stipulate that a Prescribed Company must only be used for its Qualifying Purpose or as a holding company vehicle and may not employ any employees. This ensures that PCs function as true holding company vehicles rather than operational entities. Furthermore, a new commercial package provides existing PCs that no longer meet the criteria with continued licensing benefits akin to the previous regime. Transitional arrangements will be communicated to these entities.
Enactment and Commercial Package
The new legislation, effective from July 15, 2024, can be accessed via DIFC’s Legislative Database. The updated regulations reflect DIFC’s commitment to facilitating market needs while maintaining a transparent and robust legal and regulatory framework aligned with global best practices.
The commercial package is designed not only to accommodate existing PCs falling outside the new regime but also to provide additional structuring options with reduced fees and flexible licensing arrangements for applicants meeting specific criteria.
In conclusion, these amendments to the Prescribed Company Regulations mark a significant step in enhancing DIFC’s regulatory framework, providing greater flexibility and accessibility to a wider range of global applicants, and reinforcing the Centre’s position as a leading global financial hub.
For more information, contact Alpadis Group.