Dubai International Financial Centre (DIFC) have just confirmed the expansion of the criteria for those who want to set-up a Prescribed Company, making it more accessible than ever. Before we look at the new regulations, let’s recap on why these structures are so useful.
Prescribed Companies (PC’s) have been designed to allow applicants to conduct a wide variety of passive activities from DIFC in a more time and cost-efficient manner. They have access to DIFC’s business-friendly and advanced regulatory environment, including DIFC Courts. They are of particular interest to funds, private equity firms, single family offices, proprietary investment companies, and private individual investors in order to structure and hold certain assets and investments.
Prescribed Companies are also a popular risk management tool. A DIFC-based fund manager can use these structures to hold and isolate liabilities and assets away from other structures within the same group.
Prescribed Company’s have very light regulatory requirements, and it is not necessary to have an office as the regulations allow a PC to have its registered office at the office space of (a) its Qualifying Applicant (see below) or, where applicable, (b) the registered office of a corporate service provider such as Alpha Management.
Additionally, the annual compliance obligations are reduced for these entities- they are not required to audit or file their accounts
Who is eligible?
Under the PC Regulations, a Prescribed Company can be established by a “Qualifying Applicant” or for a “Qualifying Purpose”. The highlighted points are those that DIFC have recently added:
The criteria for Qualifying Applicants now includes majority shareholders or UBO’s of any of DIFC based entity. In addition, an “affiliate” of a DIFC Based Qualifying Applicant – i.e. a legal entity that is under the same group structure and has one or more persons (directly or indirectly) that own the majority of shares in both the DIFC Based Qualifying Applicant and the affiliate, will be eligible. Family Owned Businesses must have two of the following to be counted as eligible:
- total asset value of 10 million USD in the UAE
- 100+ employees in the UAE
- 30,000+ sq. ft. of space in the UAE (including offices, retail, schools, manufacturing); or
- all shareholders are UAE nationals.
Any non-retail DIFC entity, other than a Prescribed Company, will also be eligible.
In terms of the additional Qualifying Purpose, a “DIFC Holding Structure” is defined as as a structure of one or more Qualifying Applicants established for the sole purpose of holding shares in one or more DIFC entities.
Prescribed Companies can be used in all types scenarios. Some of the common uses we have seen are: consolidating a portfolio of Real Estate assets (with a Foundation on top), separating investments into different risk categories, and Estate Planning for future generations. The recent regime expansion by DIFC will serve to increase the popularity of these low-cost, highly-useful structures. Please contact us if you are interested in learning more.