In a world where one-size-fits-all solutions often fall short, DIFC Prescribed Companies are reshaping the landscape with their targeted approach. DIFC Prescribed Companies stand out by catering to specific operational needs with precision. The recent overhaul has fine-tuned these entities to focus on distinct Qualifying Purposes, each designed to support unique business objectives.

Let’s take a closer look at what is a DIFC Prescribed Company and the updated regulation.

What is a DIFC Prescribed Company?

In 2019, the DIFC introduced Prescribed Companies (PCs) to replace and expand upon Special Purpose Companies (SPCs) and Intermediary Special Purpose Vehicles (ISPVs). This new framework aims to streamline operations and reduce costs for DIFC-based businesses.

Recently, on July 15, 2024, the DIFC amended the PC regulations to further simplify the regime. These changes are designed to clearly position PCs as pure holding companies, distinct from operational entities, and to foster a more efficient business environment within the DIFC.

Key Features of DIFC Prescribed Company:

Simplified Structure: Prescribed Companies enjoy a streamlined regulatory framework compared to regular companies.  

Ownership Flexibility: They can be owned by individuals or entities from the GCC, authorized firms, or other DIFC-registered entities.  

Director Requirement: Must appoint a director employed by a DFSA-registered Corporate Service Provider (CSP) with specific compliance obligations.  

Qualifying purpose: The primary function of Prescribed Companies is to own and manage assets including real estate, shares, and other investments. This understanding is crucial for recognizing PC’s place within the DIFC and exploring their utility in asset management and corporate organization.

Let’s delve into the various qualifying purposes of Prescribed Companies, exploring how their structure supports the management and ownership of assets.

Qualifying Purposes of DIFC Prescribed Companies

A Prescribed Company can be formed in the DIFC for several specific Qualifying Purposes, each catering to distinct business needs:

1. Aviation Structure

Facilitate the owning, financing, securing, leasing, or operating of aircraft. This structure is ideal for entities involved in the aviation sector, managing assets related to aircraft and aviation operations.

2. Crowdfunding Structure

Hold assets invested through a crowdfunding platform operated by a DFSA-licensed crowdfunding operator. This setup supports businesses that operate in the crowdfunding space, allowing for effective management and growth of invested assets.

3. Family Holding Structure

Consolidate holdings of family members, their spouses, and/or descendants in a family office, holding company, or proprietary investment company. This structure is tailored for families looking to manage and consolidate their investments and assets.

4. Structured Financing

Hold assets to leverage and/or manage risk in complex financial transactions. This includes various financial instruments such as complex lending arrangements, derivative transactions, hybrid securities, and securitized debt instruments.

5. DIFC Holding Structure

Hold shares in one or more DIFC entities. This structure allows for the consolidation of shareholdings within the DIFC, streamlining management and oversight.

6. Innovation Holding Structure

Hold shares in entities globally that use, develop, or test new, novel, or innovative technology. This includes companies providing innovative products and services, reflecting a focus on technological advancement.

Regulatory Aspects of Qualifying Purposes for DIFC Prescribed Companies

In terms of regulatory aspects, a DIFC license for a Qualifying Purpose Prescribed Company restricts activities to those specifically aligned with its Qualifying Purpose. This restriction ensures that the company remains focused on its defined role. Additionally, the company’s articles of association must limit its activities to its Qualifying Purpose and related ancillary activities. This requirement reinforces the company’s commitment to its designated purpose, ensuring that its operations remain within the scope outlined by DIFC regulations.

DIFC Prescribed Companies are designed to cater to niche markets and specialized business needs through clearly defined Qualifying Purposes. Whether your focus is aviation, crowdfunding, family holdings, structured financing, DIFC entity holdings, or innovation, the DIFC provides a robust framework to support your business objectives. By aligning with these Qualifying Purposes, companies can benefit from a streamlined regulatory environment that supports their specific operational focus.

The regulatory landscape of the Dubai International Financial Centre (DIFC) just got more exciting with the recent updates to the Prescribed Company Regulations. As of July 15, 2024, the DIFC has expanded its criteria, making it easier than ever for diverse entities to establish a Prescribed Company. But what truly sets this new framework apart? It’s the pivotal role of Corporate Service Providers (CSPs) in shaping the future of business operations within DIFC.

CSPs are the unsung heroes of the Prescribed Company setup process. They bring unparalleled expertise in regulatory compliance, anti-money laundering (AML) measures, and administrative efficiency. From appointing qualified directors to managing compliance requirements, CSPs ensure that your Prescribed Company meets all legal standards while thriving in DIFC’s dynamic business environment.

Before we dive into that, let’s take a look at what defines a Prescribed Company in DIFC.

What is DIFC Prescribed Company?

A Prescribed Company in DIFC is a private company established under the DIFC Prescribed Company Regulations, which can be set up by Qualifying Applicants such as DIFC-registered entities, their affiliates, shareholders, ultimate beneficial owners controlling a DIFC-registered entity, authorized firms, funds, UAE government entities, or family-operated businesses. Effective from July 15, 2024, the DIFC has introduced significant updates to its Prescribed Company Regulations, expanding the eligibility criteria for Prescribed Companies beyond the previously restricted specific types of entities and activities. These updates aim to enhance the flexibility and attractiveness of the DIFC as a business hub.

To qualify as a Prescribed Company, a company must meet at least one of the following conditions:

Ownership and Control

• Controlled by one or more GCC citizens or entities owned by GCC citizens.
• Controlled by an Authorized Firm.
• Controlled by a DIFC Registered Person (excluding Prescribed Companies and NPIOs).

Purpose

• Primarily established to own or control GCC Registrable Assets including land and real estate property, shares in companies, partnership interests, aircraft and maritime vessels, etc.
• Established for a Qualifying Purpose (as defined by existing regulations).

Director Requirement

• Must appoint a director who is an employee of a DFSA-registered Corporate Service Provider (CSP) with an AML arrangement with the DIFC. The CSP must also have an agreement with the DIFC Registrar of Companies to handle specific compliance and AML tasks for the company.

The requirement for a mandatory director from a DFSA-registered CSP directly links to the extensive role CSPs play in Prescribed Company management. By appointing a director, CSPs not only ensure regulatory compliance but also provide the foundation for their broader involvement in the company’s operations. This includes handling compliance and AML functions, acting as a registered address, and conducting necessary regulatory assessments.

Who are Corporate Service Providers (CSPs)?

A Corporate Service Provider (CSP) is a company or individual offering a range of essential services to businesses, including company formation and registration, secretarial services, tax planning and compliance, accounting and bookkeeping, legal assistance, business advisory, payroll management, and office space solutions. These services help businesses manage complex regulatory environments, handle administrative tasks, and ensure compliance with local and international laws, enabling them to focus on core operations and strategic growth.

The Role of Corporate Service Providers (CSPs) in PC Setup

CSPs play a pivotal role in the establishment and ongoing management of Prescribed Companies. Here’s how CSPs facilitate the process:

1. Appointing Directors
   • Individuals or entities that do not meet the qualifying requirements can still establish a Prescribed Company by appointing a director who is an employee of a DFSA-regulated CSP.
2. Compliance and AML Functions
   • The CSP assumes responsibility for ensuring that the Prescribed Company adheres to all relevant regulatory requirements, including AML compliance.
   • The CSP handles annual reporting requirements and Ultimate Beneficial Ownership registration requirements.
3. Registered Address
   • The CSP can provide a registered address for the Prescribed Company, ensuring a professional and compliant business presence within the DIFC.
4. Regulatory Assessments and Checks
   • The CSP conducts all necessary assessments and checks to ensure the Prescribed Company remains compliant with DIFC regulations.

The updated DIFC Prescribed Company Regulations mark a significant development in the DIFC’s efforts to enhance its appeal as a premier business destination. By widening eligibility criteria and emphasizing the role of DFSA-registered CSPs, the DIFC has created a more flexible and attractive framework for businesses seeking to operate within its jurisdiction. CSPs are pivotal in this process, providing essential services that ensure regulatory compliance, facilitate smooth company operations, and uphold stringent anti-money laundering standards. For businesses considering the DIFC as their base, understanding these regulations and leveraging the expertise of CSPs will be key to capitalizing on the benefits of this evolving regulatory environment.

The Dubai International Financial Centre (DIFC) took a significant step on July 15th, 2024, with the enactment of a new amendment in the existing Prescribed Company (PC) Regulations. This amendment expands and simplify the current regime in the DIFC, and the changes ensure that the companies are used as true holding company vehicles, rather than operational entities.

This landmark regulatory change aims to streamline investment processes and provide greater clarity for businesses operating within the DIFC. By strictly limiting PC activities to holding company functions, the center is ensuring a more focused and efficient investment environment.

To accommodate existing PCs and businesses seeking alternative structures, the DIFC has introduced transitional arrangements and a new commercial package, named “Active Enterprise” which provides flexible options and reduced fees for qualifying applicants seeking alternative structures with the option to have employees.

Let’s explore more about the DIFC Active Enterprises.

Understanding DIFC Active Enterprises

Previously, the DIFC’s Prescribed Company (PC) structure was primarily for passive holding companies. With the evolving business landscape, the DIFC recognized the need for a more versatile entity. Active Enterprises were introduced to fill this gap with the implementation of the new regulations.

An Active Enterprise is a private company that can be established by a qualifying applicant. Unlike PCs, Active Enterprises can:

• Can employ staff.
• Engage in proprietary investment activities.
• Function as a holding company or managing office.

This broader scope allows for a wider range of business operations within the DIFC including activities across various sectors such as real estate, agricultural enterprises, management, and healthcare.

Key Benefits of DIFC Active Enterprises

Cost-Effective Setup: Establishing an Active Enterprise is relatively affordable. The DIFC charges a one-time application fee of US$ 100 and an annual commercial license fee of US$ 1,000. Additional costs may include Corporate Service Provider (CSP) fees for registered addresses and related services.

Flexible Address Options: An Active Enterprise has various address options. It can have its own DIFC office space, a co-working desk, share office space with a DIFC affiliate, or use an appointed DIFC corporate service provider, such as 10 Leaves, to provide a registered address.

Ability to Hire Employees: An Active Enterprise can hire employees, provided it secures office space. Visa allocations are generally calculated at 80 sq. ft. per visa.

Common Law Jurisdiction: The DIFC is a financial free zone with its own civil and commercial laws. It offers access to DIFC Courts, where proceedings are conducted in English under Common Law principles.

Quick Registration: In-Principal Approvals may be granted within three business days from the application submission. Establishing the legal structure of an Active Enterprise with the DIFC Registrar of Companies typically takes 3-5 working days.

Globally Competitive and Attractive Tax Regime: An Active Enterprise may qualify for zero tax, with the maximum tax liability being 9%.

Transfer of Domicile: The DIFC allows for the domicile of incorporated companies to and from the DIFC.

Other Advantages: No attestations are required for corporate documents, there are zero currency restrictions, 100% foreign ownership is permitted, and there are no restrictions on capital repatriation.

Types of Activities Allowed in DIFC Active Enterprise

Active Enterprises can be structured in three primary ways:

1. Holding Companies: These entities primarily hold shares or equity in other companies to exert control or influence over their management.
2. Managing Offices: Acting as strategic and organizational decision-makers, managing offices oversee other company operations. They can also provide services to their group, such as treasury, IT, and administration.
3. Proprietary Investment Companies: These companies invest their funds in various commercial activities like transport, contracting, and financing. They can also manage subsidiary companies.

Who Can Establish a DIFC Active Enterprise?

1. A DIFC Registered Entity other than a Prescribed Company, Foundation and a Non-Profit Incorporated Organization
2. Controlling shareholder or UBO of a DIFC Registered Entity, other than a Prescribed Company, Foundation and a Non-Profit Incorporated Organization.

3. A Government Entity – which means any of the following:

  (a) the Federal Government, the government of Dubai or the government of any Emirate.

 (b) a person in which a government entity listed above owns (directly or indirectly) an interest of at least twenty-five percent (25%) (or such other percentage approved by the Board of Directors of DIFCA).

 (c) Controlled by a government entity listed above.

4. A Family Operated Business.

Setting Up a DIFC Active Enterprise

The process involves:

1. Document Preparation: Comprehensive Know Your Customer (KYC) verification of shareholders and directors is conducted, along with the compilation of necessary documentation.
2. Registered Address: This can be a physical address at the DIFC or can be provided by a CSP and Registered Agent. Do note that Active Enterprise will not be able to apply for visas if it uses a registered address provided by a CSP.
3. Initial Submission: Submission of the completed application to the DIFC Registrar of Companies.
4. Regulatory Review: Evaluation of the submitted application by the DIFC, including potential requests for additional information or clarifications.
5. Legal Documentation: Drafting of essential legal documents such as resolutions and articles of association.
6. Final Approval: Receipt of final approval from the DIFC, officially establishing the Active Enterprise.

DIFC is Ready. Are You?

The introduction of Active Enterprises marks a significant step forward for the DIFC. By offering greater flexibility and reduced barriers to entry, the DIFC aims to attract a wider range of businesses and solidify its position as a leading international financial center.