DUBAI (WAM)
Dubai International Financial Centre (DIFC) has proposed to enact amendments to the Prescribed Company Regulations. The proposed regulations seek to significantly expand and simplify the current Prescribed Company (“PC”) regime in the DIFC.
Jacques Visser, Chief Legal Officer, DIFC Authority, said: “Since the introduction of the Prescribed Company Regulations in 2019, DIFC has committed to keeping the regime under review. In response to continued market demand for greater access to holding company vehicles that can be used for structuring purposes in and from the Centre, DIFC is proposing a significant expansion and enhancement of the existing regime.”
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.
Under the existing regime, establishing a PC is limited to Qualifying Applicants (for the most part those that can establish an existing nexus to the 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:
-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).
-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).
-Established or continued for a Qualifying Purpose (in line with the existing regime).'
DIFC is of the view that these changes considerably enhance and simplify the current regime, opening up access to this type of vehicle to a far wider base of applicants than is currently the case.
This expansion may be of particular benefit to interested parties, as there is no requirement for a local corporate service provider (in circumstances where the applicant has alternative means of providing a registered address in the DIFC), or to have any local representation in the management or board of the company.
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. Transitional arrangements will be communicated to existing PCs that may not continue to meet this criteria if the amendments are adopted in their proposed form.
Further details about the proposed Prescribed Company Regulations can be found in Consultation Paper No. 2 of 2024, available via the following link:
https://www.difc.ae/business/laws-and-regulations/legal-database#consultation-papers.
The proposed regulations have been posted for a 30-day public consultation period, with the deadline for providing comments ending on 1 June 2024.