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DIFC’s Family Arrangements Regulations with Fresh Opportunities for Family Businesses

DIFC's Family Arrangements Regulations with Fresh Opportunities for Family Businesses

The business landscape in the United Arab Emirates (UAE) is witnessing a profound transformation with the enactment of the DIFC Family Arrangements Regulations. This regulatory evolution, effective from January 31, 2023, marked a decisive shift from the Single-Family Office (SFO) regime of Dubai International Financial Centre (DIFC), aligning seamlessly with the recently introduced UAE Family Business Law.

The Regulations replace the prior DIFC Single Family Office system, which underwent several rounds of consultation since its inception. This change aims to meet the requirements of an increasing number of local and global family enterprises seeking to set up operations in the DIFC. The Regulations follow the recent enactment of UAE Decree-Law No. 37 of 2022 (UAE Family Business Law), which applies to all regions of the UAE, including the DIFC, as long as it does not contradict the legal provisions of that particular jurisdiction.

Let’s dive into elements of the DIFC Family Arrangements Regulation.

Simplified Registration Process:

Noteworthy is the simplification of the registration process for this. Family Offices are no longer bound to register as Designated Non-Financial Businesses or Professions (DNFBP) with the Dubai Financial Services Authority (DFSA). However, it is nuanced for multifamily offices, necessitating DFSA authorization and licensing for those engaging in financial services for multiple families.

Certification and Accreditation Programs:

Recognizing the unique needs of family businesses, the DIFC introduces certification and accreditation programs. These programs are designed to fortify the support system for family businesses and their advisors, aligning with the overarching goals of the UAE Family Business Law.

Flexibility for Single Families:

The regulations extend a degree of flexibility for Single Families, allowing Family Entities or Family Offices to operate beyond the DIFC’s jurisdiction. This flexibility is contingent upon demonstrating a substantial presence in the UAE and appointing a Corporate Service Provider as a registered agent in the DIFC.

Confidentiality at the Forefront:

The DIFC maintains a special register of Family Businesses, offering a private repository for sensitive information, shielding it from public disclosure. This move underscores a commitment to safeguarding the proprietary details of family businesses with the utmost confidentiality.

Licensing Requirements and Minimum Net Asset:

To be licensed as a Family Office, entities must meet specific criteria. Submission of relevant documentation and maintaining a minimum net asset requirement of USD 50 million are central to the licensing process. The assessment of net assets can be determined through fair market value or, alternatively, a book value assessment.

Alternative Dispute Resolution (ADR):

The regulations lay a strong foundation for Alternative Dispute Resolution (ADR) within Family Structures. This provision allows for arbitration to resolve disputes, aligning with the UAE Family Business Law’s emphasis on establishing committees in each Emirate to oversee family business disputes.

The DIFC Family Arrangements Regulations emerge not merely as a legal framework but as a commitment by the DIFC to nurture the growth and success of family businesses in the region. As the DIFC launches the Global Family Business and Private Family Wealth Centre, it underscores its dedication to providing unparalleled support for family businesses, ultra-high net worth individuals, and private wealth offices operating within its jurisdiction. These regulations set the stage for a more transparent, flexible, and supportive environment, reflecting the evolving needs of family businesses in the dynamic landscape of the DIFC.

To explore more about the vibrant DIFC community and its latest happenings, please check our insights page.

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Al Reem Island Businesses: Assess your Business Activity and Category for ADGM License Advancement

Al Reem Island Businesses: Assess your Business Activity and Category for ADGM License Advancement

Establishing and operating a business in Al Reem Island involves navigating through various categories and licensing requirements. As the transition to ADGM is ongoing, knowing your business category and the pre-application steps is crucial. Simplifying this process ensures compliance and sets the stage for smooth growth and success in the vibrant Al Reem Island business scene. Plus, it paves the way for an easy license conversion process before the deadline, ensuring a seamless transition to ADGM.

The Activities are classified into 3 categories by the ADGM authorities:

  • FINANCIAL – CATEGORY A
  • NON-FINANCIAL – CATEGORY B
  • RETAIL – CATEGORY C

i)Category A: Financial Businesses

Financial businesses fall under Category A and are required to obtain an Investment Promotion Approval (IPA) from the Financial Services Regulatory Authority (FSRA) of ADGM before proceeding with the commercial license registration. The FSRA oversees financial activities and ensures compliance with regulatory standards. For more information and contact details, applicants can refer to the FSRA’s official resources and rulebook.

ii)Category B: Non-Financial Businesses

Non-financial businesses, categorized under Category B, contain a range of activities subject to additional regulations and license conditions, particularly Controlled Activities. One sub-category within this group is the Designated Non-Financial Businesses and Professions (DNFBPs), which includes:

  1. Real estate agencies
  2. Dealers in precious metals or stones
  3. High-value item dealers
  4. Accounting, audit, insolvency, or taxation consulting firms
  5. Law firms, Notary firms
  6. Company Service Providers (CSPs)

Each sub-category from (a to f) has specific requirements and may require the appointment of a Money Laundering Reporting Officer (MLRO) and adherence to Anti-Money Laundering (AML) rules.

Additional Criteria for DNFBPs Under Sub-Categories (d to f)

  • Audit firms:

They need to comply with the ADGM audit regime.

  • Law firms:
  1. Be a registered company or a branch/subsidiary of an existing legal entity.
  2. Operate for at least 8 years.
  3. Maintain at least two offices, either in different jurisdictions or within the same country.
  4. Each managing partner must have a minimum of 10 years of post-qualification experience.
  5. Employ at least 8 partners and 25 qualified legal professionals.
  6. Possess professional indemnity insurance covering activities in Al Reem Island upon registration.
  • CSPs:

Although currently under moratorium until June 30, 2024, CSPs facilitate business incorporation and serve as the main contact for ADGM. Eligible entities may explore the dual licensing regime, enabling them to operate in mainland Abu Dhabi without physical office presence, subject to regulatory requirements.

iii)Category C: Retail Businesses

Retail businesses fall under Category C and operate in the retail sector. These businesses may need to adhere to general commercial licensing regulations and any specific requirements for retail operations in Al Reem Island.

Dual Licensing

Additionally, Al Reem Island businesses have the opportunity for dual licensing, allowing eligible entities holding ADGM commercial licenses to operate in mainland Abu Dhabi without needing a physical presence on the mainland. This arrangement aims to promote business activity between ADGM and mainland Abu Dhabi, enhancing competitiveness in the region.

However, it’s essential to ensure compliance with both ADGM regulations and those imposed by mainland authorities, such as the UAE Central Bank or Securities and Commodities Authority. Depending on your business activities, you may need further licenses from onshore authorities.

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The Future of Healthcare M&A in 2024: Opportunities and Challenges

The Future of Healthcare M&A in 2024: Opportunities and Challenges

Mergers and Acquisitions (M&A) can reap success if it is done with the proper planning and strategical execution. The obstacles that led to a downturn in the M&A market last year are gradually receding, opening up opportunities for the current year. The year 2024 promises to be a pivotal one for the healthcare and life sciences industries, particularly in the realm of M&A. Despite facing challenges such as high interest rates, regulatory scrutiny, and macroeconomic uncertainty, the healthcare sector is expected to shine in the M&A market with the wide range of possibilities awaiting.

Positive Trends Driving Healthcare M&A

Several factors contribute to the anticipated surge in healthcare M&A activity this year:

  1. Leveraging Synergies: Larger pharmaceutical companies are eyeing mid-sized biotech firms to fill gaps in their pipelines. This trend is driven by changes in industry technology and evolving patient needs, particularly in chronic illness care and long-term health management.
  2. Remote Patient Technology: Advances in remote patient technology, including patient sensors and wearable devices, are attracting investors’ attention. As preventive and proactive healthcare gains importance, the market for remote patient monitoring is expanding, offering lucrative opportunities for M&A.
  3. Rise of AI Healthcare Startups: AI healthcare startups, specializing in areas like teletherapy, administration, and drug discovery, are gaining traction. This trend is expected to fuel M&A activity as startups mature and consolidate to create more robust platforms.
  4. Shift in Funding Dynamics: Venture capital funding for digital health is gradually declining, making M&A a natural path for startups seeking growth and expansion.

Navigating Market Dynamics and Macroeconomic Challenges

While the outlook for healthcare M&A appears promising, it’s essential to consider market dynamics and macroeconomic factors:

  1. Interest Rates and Valuation Gaps: Fluctuating interest rates and valuation gaps may influence deal-making decisions. However, pent-up demand from the first half of 2023 could drive a return of deal activity in 2024.
  2. Regulatory Landscape: New federal regulations introduced by the US government may impact deal timelines and requirements. Companies should stay agile and adapt to regulatory changes to capitalize on opportunities.

Emerging Trends and Opportunities in Healthcare M&A

Several emerging trends and opportunities are shaping the landscape of healthcare M&A:

  1. Digital Health Innovation: Telehealth, health tech, and analytics companies are poised to address staffing challenges and cost pressures faced by healthcare providers. M&A in this space offers opportunities to enhance operational efficiency and improve patient care.
  2. Consumer Healthcare: Demographic shifts and changing consumer preferences are driving demand for consumer health products. Companies specializing in consumer health areas, such as OTC medicine and supplements, remain attractive acquisition targets in 2024.

Strategies for Success in Healthcare M&A

To capitalize on the opportunities presented by healthcare M&A in 2024, companies should consider the following strategies:

  1. Maintain a Robust Deal Pipeline: Continuously revise target lists and deal models in response to changing market dynamics and emerging technologies.
  2. Invest in Disruptive Technology:  Follow emerging technologies, such as generative AI, to stay ahead of competitors and drive innovation within the organization.
  3. Anticipate Competitors’ Moves: Stay informed about competitors’ strategies and anticipate market shifts to position the company for success in M&A.
  4. Focus on Growth Sectors: Invest in subsectors demonstrating growth potential, such as digital health, AI-based technologies, and remote patient monitoring.
  5. Navigate Regulatory Challenges: Consider interregional M&A deals as a strategy to navigate regulatory changes and mitigate risks associated with new regulations.

Focus on M&A healthcare with MS 

As the future of healthcare in M&A is opening the door of opportunities, it is always better to have a trusted partner to make your M&A journey seamless. MS can help you with this. Our expertise ensures that you have the insights and guidance needed to tackle the complexities of business valuation, allowing you to focus on the bigger picture – your business’s success. Our suite of M&A services in the UAE is designed to ensure the success of your business transactions. From thorough due diligence to seamless integration, our dedicated team is poised to deliver outcomes that surpass expectations, driving your business towards enhanced growth and prosperity.

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DIFC Tech Innovation License in Dubai: A step-by-step guide on the stages and requirements

DIFC Tech Innovation License in Dubai: A step-by-step guide on the stages and requirements

The Dubai International Financial Centre (DIFC) has emerged as a leading hub for technology and innovation in the region, attracting startups and established businesses alike. With a 20-year track record of facilitating trade and investment, the DIFC Innovation License acts as a platform for technology firms spanning various sectors, providing access to the latest advancements in technology across the MEASA region. Offering a subsidized fee structure, the DIFC Innovation License is a Commercial License accessible to technology and innovation firms of all stages, fostering growth opportunities. It specifically targets firms looking to pioneer or experiment with new and innovative products.

If you’re considering establishing your tech venture in the DIFC, understanding the license application process is crucial. In this blog, we’ll walk you through the stages and requirements for obtaining a DIFC Tech Innovation License.

Stages of obtaining DIFC Tech Innovation License in Dubai

If your tech activity falls under the list of activities allowed for the DIFC Tech Innovation License, you may initiate the application process to obtain an In-Principal Approval. Upon receiving this approval, you can proceed with registering your technology entity within the DIFC.

There are certain stages for applying for the In-Principle Approval.

Stage I – Submit for In-Principal Approval

Step 1:

Initial Application:  The journey begins with filling out and submitting your online Initial Approval application, which will be sent via email. Make sure to select the option for Digital Passport Verification to advance the process.

Step 2:

Review Process Your application: In this step, you will undergo a thorough review for Initial Approval by the authorities.

Step 3:

In-Principal Approval: Upon successful review, you’ll obtain the In-Principal Approval, marking an important milestone in the process.

Stage II: Register the Legal Entity

Step 1:

Document Submission: Submit the necessary documents and complete the required payments. Payment methods include credit/debit card, bank transfer, or cash.

Step 2:

 Incorporation Complete: Once the submission is processed, the incorporation of your legal entity will be completed. You’ll receive all corporate documents automatically via email.

Step 3:

Annual Renewal: Ensure to renew your license annually as per the terms, depending on your chosen payment method.

Now let’s look at the specific information that should be included in the application.

Application Form – Key Information Required

  1. Business Activities: Provide detailed information about your technology and innovation, including a value proposition, revenue model, and product details. If setting up a Tech R&D entity, a signed undertaking letter confirming no financial activities will be conducted is necessary.
  2. Entity Background: Furnish a summary of the entity being established, ownership structure, and biographies of shareholders/directors/UBOs.
  3. Source of Income: Detail the funding sources for the DIFC entity, financial background of shareholders, and how the wealth was accumulated. Supporting documents such as bank statements or investor agreements may be required.
  4. Documents Required: Ensure to provide necessary documents such as passport copies of shareholders/directors/UBOs, bank statements, audited financial statements (if applicable), and an attested Certificate of Incorporation if the entity will be owned by a parent entity.

If you get an In-Principle Approval after the application, the next step is to register your entity in the DIFC.

Registering your Entity in the DIFC – Guidelines

Once you receive In-Principle Approval, follow these steps to complete the registration process:

  1. Log in to the Client Portal to fill out the application for Registration with DIFC.
  2. Submit certified passport copies of Shareholders/Directors & Company Secretary.
  3. Provide a Board Resolution for incorporation if the entity has a shareholder body corporate.
  4. Apply and pay for Co-working Space (Flexible desk) if required.
  5. Submit your final application on the DIFC portal and complete the DocuSign of the Articles sent by email.

Choose MS for DIFC Tech Innovation Company Formation
Partnering with MS at DIFC simplifies the process of obtaining an innovation license. With expertise in local regulations and connections within DIFC, we accelerate the licensing procedure, allowing businesses to focus on innovation. MS provides essential assistance to tech startups aiming for the DIFC Innovation License, guiding them through licensing requirements with personalized advisory services. We foster collaboration and networking opportunities within the startup community, contributing to the success of ambitious entrepreneurs in Dubai’s tech industry.

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Deadline Approaching: Ensure compliance with crucial DFSA & FSRA filings by April 30th, 2024

Deadline Approaching: Ensure compliance with crucial FSRA & DFSA filings by April 30th, 2024

The Abu Dhabi Global Market’s and Dubai International Financial Centre’s vision for a fair, efficient, and transparent marketplace is always advocated by the Financial Services Regulatory Authority (FSRA) and Dubai Financial Services Authority (DFSA) by upholding compliance standards and making a progressive global financial hub. The regulatory requirements mandated by these bodies play a major role in bringing the registered entities in line with the standards of these international financial centres.

Both authorities have an upcoming deadline: April 30th, 2024, for several crucial filings this year. It is imperative for businesses to ensure they fulfill these obligations promptly to maintain compliance and avoid potential penalties.

What are DFSA & FSRA?

FSRA and DFSA stand as significant pillars in the financial landscape, each playing a crucial role in regulating and safeguarding the financial services of ADGM and DIFC.

The Dubai Financial Services Authority (DFSA) operates as an independent regulatory body within the Dubai International Financial Centre (DIFC). Its jurisdiction spans a wide array of financial activities including asset management, banking, securities, insurance, and more. Moreover, it diligently enforces anti-money laundering (AML) and counter-terrorist financing (CTF) measures, ensuring the integrity and security of the financial environment within the DIFC.

On the other hand, the Financial Services Regulatory Authority (FSRA) holds sway in the Abu Dhabi Global Market (ADGM). This regulatory body is dedicated to upholding internationally recognized standards and best practices, ensuring that financial entities operate on a level-playing field while prioritizing the interests of customers and investors.

What sets the FSRA apart is its adaptive regulatory framework. It keeps pace with evolving global standards and market innovations, maintaining a keen eye on international standard-setting bodies. FSRA actively engages with stakeholders through public consultations, fostering transparency and inclusivity in its regulatory processes.

We have made the list of filings due on April 30th, 2024, that you must follow and comply with.

  • Regulatory Returns Auditor’s Report – FSRA & DFSA Regulated Entities
  • Financial Statements and Auditor’s Report – FSRA & DFSA Regulated Entities
  • Internal Risk Assessment Process (IRAP) – FSRA & DFSA Regulated Entities
  • Internal Capital Adequacy Assessment Process (ICAAP) – FSRA & DFSA Regulated Entities
  • Client Money Auditor’s Report – FSRA & DFSA Regulated Entities
  • Safe Custody Auditor’s Report – FSRA & DFSA Regulated Entities
  • Annual Report on Controllers – FSRA & DFSA Regulated Entities
  • Public Listed Company Auditor’s Report – FSRA & DFSA Regulated Entities
  • Quarterly EPRS Returns – FSRA & DFSA Regulated Entities
  • AML Return – FSRA & DFSA Regulated Entities & DNFPB Entities
  • ADGM FATCA & CRS SCF – For all ADGM entities

MS as your compliance partner in both ADGM and DIFC

Our team comprises finance, compliance and legal professionals equipped with the expertise, competence, and up-to-date regulatory knowledge necessary to support your finance function. MS is committed to ensuring absolute compliance with ADGM and DIFC’S regulatory requirements without fail. Take the first step towards planning your crucial filings for the month ahead with our seamless plan and proactive guidance.

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Marking milestones: DIFC celebrating 20 years of success with 20 Days of Finance

Marking milestones: DIFC celebrating 20 years of success with 20 Days of Finance

“I once read an article in a foreign newspaper saying: luck smiles back at Dubai. I respond: when they want to diminish your achievements, they attribute them to luck.”

These words from His Highness Sheikh Maktoum bin Mohammed bin Rashid Al Maktoum, the first Deputy Ruler of Dubai, Deputy Prime Minister and Minister of Finance of the UAE, and President of DIFC, encapsulate the essence of Dubai’s remarkable journey of achievements. Dubai, a city that never settles for anything less than the first place, has evolved into a hub of growth, innovation, and prosperity, earning its status as the epitome of a dream city. Dubai’s ascent to becoming a global hub is attributed to the dedication and collective efforts of numerous individuals and groups within the region.

The Dubai International Financial Centre (DIFC) has been instrumental in shaping Dubai into what it is today, emerging as the eminent global financial hub for the Middle East, Africa, and South Asia (MEASA) region. Its two-decade reign has surpassed all projections, underscoring its pivotal role in solidifying Dubai’s position within the global financial services landscape. Adding more colour to this success story, DIFC has announced an exciting series of finance events and activities spanning 20 days, in celebration of the Centre’s 20th Anniversary. The 20 Days of Finance is primarily anchored around the 2nd edition of the Dubai FinTech Summit held under the patronage of the President.

DIFC: 20 Days of Finance

From April 29th to May 29th, attendees will have the chance to participate in a variety of activities including events, seminars, workshops, networking sessions, and special celebrations. The ‘20 Days of Finance’ series by DIFC aims to unite leaders in the industry, policymakers, investors, and entrepreneurs to mark DIFC’s twenty years of prominence in the global financial sector.  

The 20-day lineup of events will commence with the Dubai World Insurance Congress on April 29th to 30th at Atlantis, The Palm. Following that, the 2nd edition of the Dubai FinTech Summit will take place on May 6th to 7th at the Madinat Jumeirah, succeeded by the inaugural HFM Summit on May 15th at The Conference Centre, DIFC, which will unite the hedge fund sector in collaboration with With Intelligence. Additionally, the Institute of International Finance (IIF) will be partaking in DIFC’s 20 Days of Finance, marking their 10th anniversary in the Centre and DIFC’s 20th anniversary with the IIF MENA CRO Forum on May 21st.

Throughout the month, activities will be organized for DIFC clients in the corporate and investment banking, as well as wealth management sectors. In April, DIFC will also serve as a platinum partner for the AIM Summit in London, the leading event for professionals in alternative investments.

Global excellence through financial innovation

The DIFC has been instrumental in fostering economic growth and innovation in the region. It has attracted top-tier institutions and talent from across the globe. Aligned with DIFC’s Strategy 2030 and Dubai’s Economy Agenda (D33), which aims to establish Dubai as a premier business hub globally, DIFC encourages financial institutions to partake in the ‘20 Days of Finance’ by organizing their own events across the city. This initiative aims to draw high-profile attendees and showcase the city’s vibrant thought leadership and progressive governance. The ‘20 Days of Finance’ initiative underscores DIFC’s dedication to excellence and innovation in the financial sector. By spearheading innovation and digital transformation, DIFC facilitates the success of businesses not only in Dubai but also on a global scale.

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How ADGM is empowering Tech Startups in Abu Dhabi to rise and shine

How ADGM is empowering Tech Startups in Abu Dhabi to rise and shine

Abu Dhabi’s transformation into a global economic powerhouse is nothing short of extraordinary. Reflecting this success, Abu Dhabi Global Market (ADGM) has emerged as an epitome of growth and progress in the financial world. In just eight years, ADGM has become one of the world’s largest financial districts and the fastest-growing international financial center in the region, securing its place as a Falcon economy. The journey of ADGM is a testament to the power of vision and unwavering commitment. It underscores the remarkable results that come from consistent effort, persistence, and alignment with economic goals. As ADGM declared 2023 as a “year of success” for the international financial center of the UAE, the role of tech startups in building ADGM’s ecosystem cannot be overstated.

Hub71: The launchpad of tech startups in ADGM

Hub71, a vibrant tech ecosystem based in ADGM, offers global startups access to capital, market opportunities, longer-term visas, and a highly skilled talent pool. ADGM provides competitive tech startup licenses that enable entrepreneurs to grow and scale their businesses within an award-winning regulatory framework. Abu Dhabi’s strategic advantages make it an ideal launchpad for tech startups. With a multi-billion Dirham commitment to programs like Ghadan 21, the government is actively supporting innovation, committing AED 1 billion to help startups and entrepreneurs build a technology-enabled future.

Here’s why tech startups should consider ADGM as their hub:

  1. Cost-Effectiveness: ADGM’s Tech Startup License is incentivized for up to three years, providing a favorable environment for startups to establish themselves.
  2. Visa Benefits: Entrepreneurs can avail 3-year and 5-year visas, facilitating their stay and operations in Abu Dhabi.
  3. Sector Agnosticism: The ADGM Tech Startup License is open to startups across all sectors, fostering diversity and innovation.
  4. Access to Ecosystem: Through Hub71 and ADGM’s innovation cluster, startups benefit from a strong network of government entities, corporates, funders, and industry partners.
  5. Access to Investors: ADGM hosts a growing community of venture capital firms, banks, financiers, and investors, providing capital for growth.
  6. Rule of Law: ADGM offers a robust legal framework based on English common law, ensuring transparency, fairness, and enforceability of contracts.

ADGM Tech Startup License

The ADGM Tech Startup License offers an expedited setup process for entrepreneurs in the UAE, with two distinct stages: Seed and Emergent. Notably, this license is for innovative tech startups, excluding technology service providers.

Eligible applicants include local, regional, and international startups with innovative tech business models that leverage technology to solve customer challenges and address specific market needs. These startups should demonstrate potential for regional or global scalability and support sustainable economic development.

Benefits of the Tech Startup Commercial License in ADGM are comprehensive, including:

  • An operational commercial license irrespective of sector.
  • Competitive annual license fees, with USD 1,000 for the seed stage (up to two years) and USD 4,300 for the emergent stage (up to three years) within the first five years of operation in ADGM
  • Provision of three visas for every desk space.
  • Eligibility to apply for dual license recognition with the Abu Dhabi Department of Economic Development, subject to meeting criteria.
  • Access to potential funding and equity-free subsidies through the Hub71 Incentive Program.
  • Potential access to the Hub71 community, including accelerator programs like Plug & Play.
  • Access to a network of local and international entrepreneurial mentors and experts.
  • The assurance of an independent jurisdiction under an internationally recognized English common law framework.

Furthermore, eligibility for the incentivized license is determined upon application, with a fixed duration. For instance, approval for the seed stage incentivized license grants two years in the seed stage, automatically transitioning into the emergent stage in the third year of operations, irrespective of full-time employee count.

 Applying for a tech startup license in ADGM is seamless. Here is how to do that:

Application Process for Obtaining a Tech Startup License in ADGM

Submission: To obtain the ADGM Tech Startup License, startups can apply online. Along with the application, a business plan, office space lease, initial annual license fee, as well as other necessary documentation mentioned by ADGM is required.

Review: ADGM will assess the application and notify applicants via email if additional information is needed.

Approval: Upon completion of the evaluation, applicants will receive an email informing them of the status of their application.

Incorporation and License Issuance:  Once approved, the registration and incorporation process are handled by the ADGM Registrar and the license is issued. Applicants will receive email confirmation of the license issuance and can proceed with their operations.

Why MS in ADGM?

With extensive knowledge of local regulations and established connections within ADGM, we can guide you. Through personalized advisory services, we guide startups through licensing requirements, fostering collaboration and networking opportunities within Abu Dhabi’s tech industry. This support contributes significantly to the success of ambitious entrepreneurs in the startup community.

Disclaimer: 

Registered in Abu Dhabi Global Market (Registered No. 000007218),
We are not an ADGM Registered Corporate Service Provider.

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Mastering valuation and M&A success in the UAE: Understanding the What, Why, and How ?

In every business environment, uncertainty is a constant companion. Today’s success could be tomorrow’s challenge, making it vital for business owners to be prepared for any eventuality that can come at any time. One crucial aspect that often gets overlooked until a crisis strikes is business valuation. Understanding the true worth of your company helps in navigating turbulent times and paves the way for seizing opportunities and making informed decisions. Valuing a business includes an understanding of its industry dynamics, unique attributes, and market perception. While various valuation models exist, their efficacy depends on informed judgment derived from hands-on experience.

Let’s explore the significance of business valuation in M&A, its various applications, and the methodologies involved.

Why should you value your business?

Capitalizing on Opportunities

Business valuation serves as a crucial tool for raising capital swiftly when unforeseen opportunities arise. Whether it’s seizing a new market or investing in innovation, knowing the worth of your company enables effective fundraising from investors or lenders.

Mergers, Acquisitions, and Sales

Knowing the actual value of your business empowers you during negotiations. Whether you’re considering a merger, acquisition, or sale, a precise valuation ensures that you secure a fair deal. It enables you to articulate the value proposition of your company convincingly, thus maximizing the outcome of the transaction.

Valuation for Financing

Banks and financial institutions require a validated assessment of your business’s worth before extending capital. A comprehensive business valuation enhances your credibility as a borrower and facilitates smoother financing arrangements.

Estate Planning and Gifting

For business owners incorporating their enterprise into estate planning or contemplating gifting interests, a valuation is indispensable. It ensures fair distribution of assets and facilitates seamless succession planning.

Are you trying to figure out the valuation methods? Here are a few successful methods:

Methods of business valuation

Income Approach

The income-based approach assesses the future earning potential of a business. Techniques such as the Earnings Capitalization Method (ECM) and Discounted Cash Flow (DCF) analysis help estimate the company’s value based on projected cash flows.

Market Approach

The market-based approach relies on comparing your business to similar entities that have been sold or are publicly listed. Analyzing market transactions and comparable enterprise values provides insights into your business’s worth.

Asset-Based Approach

This method evaluates the value of a company’s assets, considering factors like net asset value, book value, fair market value, and replacement cost. While technically complex, asset-based valuation provides a tangible assessment of the company’s intrinsic worth.

How to choose the best valuation method?

Selecting the optimal valuation method for M&A transactions isn’t a one-size-fits-all method. It hinges on various factors, including the valuation’s purpose, data accessibility and quality, industry dynamics, market conditions, and stakeholders’ preferences. Hence, employing multiple methods and cross-referencing their outcomes is prudent to derive a valuation range and gain deeper insights into the target company. Evaluating each method’s pros and cons and comparing them to your circumstances is crucial. Ultimately, the most suitable valuation method is the one that accurately captures the target company’s value and facilitates the realization of your M&A objectives.

MS for successful valuation of your business

Business valuation is crucial whether you’re strategizing for the future, going through crises, or seizing new prospects. By understanding the true value of your enterprise, you can navigate challenges, capitalize on opportunities, and make informed decisions that propel growth and sustainability. At MS, we offer valuation services to businesses of all sizes and structures. Our expertise ensures that you have the insights and guidance needed to tackle the complexities of business valuation, allowing you to focus on the bigger picture – your business’s success.

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 ADGM Transition Essentials: 8 Must-Know Steps for Al Reem Island Firms

 ADGM Transition Essentials: 8 Must-Know Steps for Al Reem Island Firms

As an Al Reem Island business entity undergoing transition, you might encounter various administrative tasks and legal requirements. From updating employment contracts to notifying counterparties, each step plays a crucial role in ensuring a smooth transition and compliance with ADGM regulations. In a recent collaboration, MoHRE and ADGM have signed an MoU to simplify the transfer of work permits and licenses for Al Reem Island-based companies to ADGM.

As the deadline nears, it’s crucial for companies aiming to establish or transition to ADGM to closely follow ADGM guidelines and processes for a smooth transition. Take advantage of fee waivers and incentives available to transitioning companies before the conclusion of the transition period to maximize benefits.

Here are key factors to consider throughout and after the migration process for Al Reem Island firms

Establishment card and employee visa update.

  • Businesses can experience automatic linking of the existing visas and IDs to the ADGM-issued license through smart devices or the ICP system and no cancellation is required. 
  • If you hold an investor visa, apply for a change of job title once visas are linked to your ADGM entity.
  • New employees can obtain new visas through ADGM’s AccessADGM government services portal.
  • Residency visas for employees’ dependents will remain valid as is. They can continue to enjoy their residency privileges without any adjustments.

Employment contracts

  • Following the ADGM Employment Regulation, prepare a new employment contract, and provide them for employee review, before registering a new entity.
  • Proceed to sign them individually. 
  • Ensure employees receive their entitled end-of-service payments according to onshore laws, with a possibility to transfer accumulated benefits to the new contract.

Work permits

  • The employers will have to apply for work permit services for employees with a valid visa under the newly licensed ADGM entity.
  • Employers obtain temporary work permits via AccessADGM for part-time employees with employment visas from other jurisdictions.
  • Employers procure full-time non-sponsored employee Work Permits through AccessADGM for UAE/GCC nationals, dependents, or long-term visa holders (Golden/Green)

Bank account transition

  • Notify bank managers of upcoming changes to existing accounts (should be completed before the registration of a new entity)
  • Provide all necessary documentation (constituent documents, commercial license) confirming migration to ADGM, including corporate documents issued by ADGM.
  • Updation of account names if necessary (Additional rules may apply based on individual bank policies).

Lease agreement

  • Update your lease agreements to reflect new company details and comply with ADGM Real Estate Regulations by December 31, 2024. Ensure registrations are done according to ADGM rules. 

Power of Attorney

  • Prior to registering a new entity, it is essential to prepare new Powers of Attorney (PoAs) with updated company details and issue them as required.
  • Update PoAs with counterparties and authorities, where necessary.

Compliance alert for Onshore entities

  • If your entity interacts with onshore or foreign authorities, holds licenses/permits, or registrations, or is involved in legal proceedings, notify the relevant authority or court promptly about any changes in name, legal form, or other relevant details.
  • Some authorities may urge the need for licenses to be reissued due to these alterations, so it’s crucial to be aware of any further steps or formalities that might be required.

Notices for counterparties

It is important to notify the counterparties to ensure transparency, compliance, and smooth continuation of business operations.

  • Alert the counterparties like suppliers, customers, banks, and service providers about upcoming changes.
  • Update commercial contracts to reflect changes in company details, bank accounts, signatories, and addresses as needed.

MS in Al Reem Island

MS offers comprehensive advisory services tailored for new businesses acquiring licenses on Al Reem Island in ADGM, while also providing seamless transition services for existing businesses leveraging our Mainland and Free zone license. MS can be your advice partner during this transition, With MS by your side, navigating the transition for Al Reem Island businesses to ADGM becomes simpler and more manageable.

Disclaimer :

Registered in Abu Dhabi Global Market (Registered No. 000007218),
We are not an ADGM Registered Corporate Service Provider.

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Corporate Tax and the Transfer Pricing impact for the UAE businesses

Corporate Tax and the Transfer Pricing impact for the UAE businesses

The corporate tax era in the United Arab Emirates (UAE) has significantly altered the tax landscape of the nation. Compliance with transfer pricing (TP) regulations now stands as a pivotal aspect of the corporate tax framework. This not only influences businesses’ effective tax rates but also dictates how they distribute, report, and validate income within their corporate groups in a sustainable and defensible manner.
The UAE tax authorities are emphasizing the importance of adhering to transfer pricing regulations to ensure accurate calculation of the tax base, particularly in situations where transaction prices could be manipulated by involved parties. This practice has already been adopted by over 60 countries globally, with the United States pioneering these regulations as early as 1994. The OECD (Organization for Economic Co-operation and Development) issued its initial transfer pricing guidelines in 1996, which have since been expanded in subsequent years, gaining adoption from many European Union nations, 19 out of 20 G20 members, and numerous other countries.
The implementation of these regulations has brought distinct changes across the businesses in the UAE irrespective of Mainland or Free Zones. Notably free zones are an integral part of the United Arab Emirates (UAE) economy and play a critical role in driving economic growth and transformation in the country. This has been a widespread discussion among the premier International Financial Centres (IFCs) in the UAE including the Abu Dhabi Global Market (ADGM) and the Dubai International Financial Centre (DIFC) recently. Despite a flat tax rate structure, exemptions within free zones, relief provisions for small businesses, or income falls below the taxable threshold can yield tax benefits through adept management of transfer pricing.

What is Transfer Pricing?

Transfer pricing (TP) regulations worldwide aim to ensure accurate tax calculations by preventing manipulation of transaction prices, particularly by related parties seeking to avoid taxes by shifting profits to lower-tax jurisdictions. These rules establish guidelines, with the arm’s length principle at their core, ensuring transactions reflect those that would occur between unrelated parties under similar circumstances.

Violation of TP regulations can result in additional taxes and penalties for tax underpayment. Tax authorities have the authority to adjust prices in controlled transactions, calculating taxable income as if parties had adhered to the arm’s length principle. The potential additional tax liabilities are substantial, and TP audits and discussions with tax authorities are complex and time-consuming, given the nuances of each case.

Consequently, it’s advisable to proactively prepare documentation justifying prices and complying with TP regulations. Ideally, TP planning and oversight should be integrated into a company’s business processes.

Calculating the arm’s length value

The fundamental principle of an arm’s length value is that a transaction should be evaluated as if it were conducted between unrelated parties, each acting in their own self-interest, without one party unduly influencing the other. The Corporate Tax decree law confirms the acceptability of certain transfer pricing practices for determining the arm’s length value, including:

  • The Transactional Net Margin Method
  • The Transactional Profit Split Method
  • The Cost-Plus Method
  • The Comparable Uncontrolled Price Method
  • The Resale Price Method

These methods are established and align with OECD transfer pricing guidelines. Typically, the standard method is employed when applying these techniques, although taxpayers may benefit from the guidance of a transfer pricing specialist. Additionally, the decree-law permits the use of alternative practices if it can be demonstrated that none of the listed methods are reasonably applicable.

What transfer pricing documentation should the UAE companies maintain and what are the contents of the TP documentation?

UAE companies are required to maintain transfer pricing documentation as per Article 55 of Federal Decree-Law No 47 of 2022 on the Taxation of Corporations and Businesses. This documentation encompasses a master file and a local file, both outlined by the tax authority.

The master file should include comprehensive information relevant to the entire multinational enterprise group. This includes details on the group’s organizational structure, business operations, transfer pricing policies, allocation of income, and other key aspects. It serves as a blueprint for the MNE group, following guidelines outlined in Clause 5.19 of the OECD Transfer Pricing Guidelines.

The local file, on the other hand, focuses on specific transactions of the local taxpayer. It comprises three main sections:

  • Information about the local entity, such as its management structure, business strategy, and key competitors.
  • Details of controlled transactions, including descriptions, related companies involved, transaction values, intercompany agreements, comparability analysis, TP method selection, financial information, and any existing APAs or tax rulings.
  • Financial information, including local entity financial accounts, allocation schedules, and summary schedules of relevant financial data for comparison.

In essence, transfer pricing documentation for UAE companies should provide a thorough overview of both the multinational enterprise group and the local entity’s transactions, ensuring compliance with regulatory requirements.

Why MS for Transfer Pricing Regulations compliance in the UAE

The successful financial destiny of your company with strategic tax services is what MS guarantees you in the UAE. The evolving tax landscapes and their complexities in a globally connected market can be tough to deal with, but Team MS drafts tax strategies that fulfill the unique needs of each client providing a roadmap for sustainable financial growth. Regulatory adherence, optimization of deductions, and fostering competitiveness are all guaranteed here without compromise. Accurate and precise TP advisory can make your business excel in the ever-changing tax landscape of the UAE.

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