Important update to the Prescribed Company regime in DIFC

The Dubai International Financial Centre (DIFC) announced an update to the Prescribed Company Regulations, which expands and simplifies the current PC regime, effective as of 15 July 2024.

DIFC Prescribed Companies

Established by the DIFC Prescribed Company Regulations in 2019, a Prescribed Company (PC) is a Private Company limited by shares that offers reduced fees and maintenance requirements and the flexibility to accommodate the needs of a broad range of investors.

Introduced to replace the previous regimes for Intermediate Special Purpose Vehicles (ISPVs) and Special Purpose Companies (SPCs), the PC is designed to as special purpose-style holding or interim holding entities within wider transaction, financing or asset holding structures.

The PC Regulations were updated in both 2020 and 2022 to expand the regime to a wider base of applicants for legitimate structuring purposes and transactions.

Despite these amendments, the DIFC said there had been continued demand for further expansion.  With the introduction of UAE Corporate Tax, concerns around economic substance requirements had reduced and it was now of the view that further expansion of the PC regime was appropriate.

The new commercial package has been designed not only to capture existing PCs that fall outside of the new regime but to provide further structuring options with reduced fees and flexible licensing arrangements to applicants that meet certain criteria.

Key changes to PC regime

Under the previous regime, establishing a PC was limited to Qualifying Applicants – mainly those with an existing nexus to DIFC or certain other low risk applicants – or to Qualifying Purposes, such as a structured financing.

Under the new regulations, it will be possible to establish a PC in cases where the PC is:

• Controlled by one or more GCC citizens or entities controlled by GCC citizens; or by an Authorised Firm; or by DIFC-registered persons other than a PC or a Non-Profit Incorporated Organisation (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.
• Established or continued for a Qualifying Purpose, in line with the existing regime.
• Established by any person (natural or corporate), that is resident anywhere in the world, provided that the PC appoints an employee of a DFSA-registered Corporate Service Provider (CSP) as a director, and that CSP has an arrangement with the DIFC Registrar of Companies to carry out certain compliance and AML functions on behalf of the PC.

The DIFC said these changes will significantly enhance the PC regime, opening access to a global base of applicants, whilst ensuring that a sufficient nexus to DIFC and the GCC is maintained. In addition, DIFC’s AML procedures and ongoing risk management methodology are also being updated to accommodate any increase in demand.

Other important amendments

The proposed amendments also provide that a PC must only be used for either its Qualifying Purpose or as a holding company vehicle and may not employ any employees. These changes are designed to ensure that PCs are used as true holding company vehicles and not as operational entities.

A new commercial package will provide existing PCs that no longer meet the relevant criteria with continued licensing benefits that are equivalent to the previous PC regime. Transitional arrangements will be communicated to these entities.

Sovereign PPG

Sovereign PPG has extensive experience with setting up both financial and non-financial businesses for our clients. Setting up a non-financial company structure in DIFC involves a two-step process. Obtaining initial approval through the DIFC portal, followed by submission of the required documents.

Sovereign PPG can advise and assist clients to determine the appropriate structure and governance of the PC. We will then assist clients to establish the PC and prepare and submit the required documentation to the DIFC Registrar.

Once the PC is established, we can also provide company secretarial, administrative, accounting and reporting services. Sovereign PPG is in direct contact with DIFC regulators and officials and is always up to date with the latest information and changes to DIFC company regulations and registration requirements.

The DIFC offers businesses a number of important advantages, which include:

• 100% foreign ownership
• 0% corporate tax rate on qualifying income
• No restrictions or constraints on capital or profit flows
• An independent and transparent regulatory environment
• An independent common law judicial system based on English Common Law
• A wide range of corporate vehicles
• Low licensing fees
• World-class infrastructure and flexible office solutions
• A wide network of double tax treaties
• A US dollar-denominated environment

If you require any assistance in setting up in the DIFC, contact Sovereign PPG and we will be delighted to assist you. Please contact Sovereign PPG Head of Operations Zana Jablan Musa LLM.