DIFC expands business opportunities with new company structures

The Dubai International Financial Centre (DIFC) is further solidifying its position as a global financial hub by introducing flexible and efficient company structures. Leevyn Isabel, Commercial Director, and Shahida Rajabalee, Senior Manager, take us through the new Prescribed Company Regulations, effective July 15, 2024, which introduce both Passive Company and Active Enterprise options. These structures are designed to streamline operations, enhance security, and attract a wider range of businesses to the region.

Evolution of the prescribed company regime

Introduced in 2019 and subsequently refined in 2020 and 2022, the DIFC's Prescribed Company Regulations have served as a cornerstone for facilitating structured finance and other specialised operations within the Centre. Initially balancing the need for substantive economic activity with the demand for flexible special-purpose vehicles, the DIFC has steadily expanded the scope of the regime. The implementation of UAE Corporate Tax has mitigated concerns around substance requirements, enabling a more expansive approach to Prescribed Companies.

What are the key changes to the Prescribed Company Regime?

1. Expanded eligibility for prescribed companies

The amended regulations significantly broaden the scope of entities eligible to establish a Prescribed Company (PC). Previously restricted to entities with a DIFC nexus or specific purposes, the new rules introduce the following qualifying criteria:

• GCC ownership: PCs can now be controlled by GCC citizens or entities they control.
• Authorised firms and DIFC registered persons: Entities holding these designations may establish PCs.
• Holding of GCC assets: PCs can be formed primarily to hold or control GCC-based assets.
• Existing qualifying purposes: The previous qualifying purposes for PCs remain valid.
• Global access with CSP oversight: Entities worldwide can establish PCs by appointing a director employed by a DIFC-registered Corporate Service Provider (CSP) with specific compliance and AML obligations.

These expanded eligibility criteria enhance the DIFC's appeal as a platform for a wider range of business structures and investment strategies.

2. Restricted activities for Prescribed Companies

Prescribed Companies (PCs) are subject to specific limitations. They must be utilised exclusively for their designated qualifying purpose or as holding companies. To maintain their status as pure investment vehicles, PCs are prohibited from employing staff.

3. Transitional arrangements for existing Prescribed Companies

To accommodate existing Prescribed Companies that may no longer meet the revised eligibility criteria, the DIFC is offering a commercial package. This package provides ongoing licensing benefits similar to the previous regime, coupled with flexible structuring options and reduced fees for qualifying applicants.

What is a Prescribed Company (Passive Company Structure)?

The Prescribed Company structure is specifically designed for entities seeking to isolate and protect their assets and liabilities from potential financial and legal risks. Primarily functioning as holding companies, these entities are ideal for businesses that do not engage in active trading activities but focus on asset ownership and management.

What are the key features of a Prescribed Company?

Robust asset protection: A core benefit of the Prescribed Company structure is its ability to effectively ring-fence assets and liabilities, providing a strong shield against financial and legal challenges.

Broad eligibility: This structure is accessible to a wide range of qualifying applicants, including those holding investments, intellectual property rights, and other eligible assets.

Passive business focus: Prescribed Companies are tailored for passive business operations, ensuring a clear and efficient approach to asset management.

What is an Active Enterprise structure?

The Active Enterprise structure is designed for businesses engaged in active commercial operations. This structure offers a comprehensive commercial package to support effective business management, making it a versatile option for various business activities. Unlike the Prescribed Company, Active Enterprises can employ staff and operate as private companies.

What are the permitted activities of an Active Enterprise structure?

1. Holding company: Can function as a holding company for other entities.
2. Managing office: Can operate as a management office for a group of companies.
3. Proprietary investment activities: Can undertake investment activities on its own account.

What are the key features of an Active Enterprise structure?

The Active Enterprise structure offers several key advantages for businesses seeking a dynamic presence within the DIFC:

• Business flexibility: Active Enterprises enjoy the versatility to operate as holding companies, management offices, or proprietary investment firms, accommodating a wide range of business models.
• Talent acquisition: The ability to employ staff directly within the DIFC is a significant benefit of the Active Enterprise structure, allowing businesses to build and retain talent within the financial hub.
• Operational efficiency: By leveraging DIFC's world-class infrastructure and support services, Active Enterprises can streamline operations and enhance overall business performance.

DIFC’s tailored solutions for business success

The DIFC's Prescribed Company and Active Enterprise structures provide businesses with unparalleled flexibility and security to navigate the complexities of the global marketplace. Whether safeguarding assets or driving active commercial pursuits, these options cater to diverse strategic objectives. The recent amendments to the Prescribed Company Regulations significantly expand accessibility, ensuring alignment with international standards and supporting the dynamic needs of businesses worldwide. By fostering a robust and adaptable business environment, the DIFC solidifies its position as a leading financial hub.

How can Ocorian help?

Ocorian, a registered Corporate Service Provider (CSP) in the DIFC, offers comprehensive company formation, secretarial, accounting and directorship services to support your business aspirations. Our expertise and local knowledge enable us to guide you through the intricacies of the DIFC's regulatory landscape.

To explore our full range of services, visit United Arab Emirates | Ocorian.