"Dubai Financial" Presents a paper for consultation on the updated regulatory framework for the specified companies system
Dubai, May 9 / WAM / The Dubai International Financial Center has proposed making amendments to the regulatory framework of the designated companies system, aiming to expand and simplify the current system.
The specified companies are private companies with restricted shares that fall under the small companies system, according to the center’s corporate law, where a company of this type can be established by a qualified entity or applicant to achieve a qualified purpose according to the current system.
Jack Visser, Chief Legal Officer at the DIFC, said: “The DIFC has been conducting a periodic review of the regulatory framework for the Defined Companies System since its issuance in 2019, and the Center proposes to expand and improve the current system in response to the ongoing market demand to expand access to the DIFC system.” Holding companies, which can be used for structuring purposes within and from the centre.”
The regulatory framework for the specified companies system was issued in 2019, and was amended in 2020 and 2022 in order to expand its scope to include a broader base of applicants. Despite these amendments being made, the Center witnessed an increasing demand to expand the scope of this system.
The Center sought to balance the operational purpose of the existing company with meeting the demand for special-purpose structures that can be used for legal structuring purposes.
With the entry into force of the corporate tax system in the UAE, concerns about physical presence requirements have subsided; The Dubai International Financial Center believes that the time has come to expand the scope of the specified companies regime.
Under the current system, setting up a specified company is limited to eligible applicants (often those who can establish an existing link with the DIFC and certain other low-risk applicants), or where the specified company carries out a qualifying purpose (such as structured finance).
Under the proposed regulations, it will be possible to establish a specific company according to several scenarios. The first is if the specific company is controlled by one or more citizens of the Gulf Cooperation Council countries or by entities controlled by a licensed company. or persons registered in the DIFC other than specified companies or non-profit organizations “in accordance with the current system”, and the second for companies established or continuing for the primary purpose of retaining legal ownership of one or more registrable assets in the GCC countries or Controlled “any assets registered in one of the Gulf Cooperation Council countries,” and the third scenario is if they were established or are continuing to carry out a qualifying purpose “according to the current system.”
The Dubai International Financial Center believes that these changes will greatly enhance and simplify the current system, and make room for a broader segment of applicants to access this type of structure, and this expansion may benefit interested parties given the lack of significant conditions on local service providers.” In cases where the applicant has alternative means of providing an address registered in the DIFC, or has any local representative in the executive management or board of directors of the company.
The proposed amendments also stipulate that the designated company must only be used either for its qualifying purpose or as a holding company, and may not appoint any employee.
These changes ensure that the designated companies operate as true holding companies rather than operating entities, and will be rolled out to existing designated companies that may not continue to meet these standards if the proposed amendments are adopted.
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