New regulations from the Dubai International Financial Centre (DIFC) will see special purpose companies (SPCs) and intermediate special purpose vehicles (ISPVs) re-classified as ‘prescribed companies’ in a move that officials say will encourage transparency and improve the flexibility of DIFC’s regulatory environment.
The new prescribed companies regime will also allow certain firms to establish themselves within DIFC with more flexible office requirements, provided that they are either regulated by the Dubai Financial Services Authority (DFSA) or another recognised international financial services regulator.
Additionally, fintech firms, family offices, holding and investment companies, as well as aviation companies and firms involved in structured finance will also be eligible to establish a prescribed company in the centre.
“The new prescribed companies regime is a very positive regulatory development that is going to make the DIFC an even more accessible jurisdiction for businesses looking to tap into the MEASA opportunity,” said the DIFC Authority’s chief legal officer, Jacques Visser.
“By replacing intermediate special purpose vehicles and special purpose companies with a unified, simplified and more expansive regime with a competitive cost-structure, we are well aligned with international best practices while also ensuring local market needs are met,” he added.
Salmaan Jaffery, DIFC Authority’s chief business development officer, told reporters that the regulations are partly driven by the fact that companies were deviating from the “very specific purpose” of the DIFC’s previous SPC regime.
“It was meant for companies to do financing and no other reason,” he said. “We noticed that a lot of these companies were using them not just for that purpose, which was a cause of concern for us.”
Additionally, the annual licensing fee for prescribed companies has been reduced to $1,000 from approximately $4,000, with an incorporation fee of $100.
“We are here to facilitate financing, and that must be quick, smooth, flexible and cost effective,” Jaffery added. “In this environment, cost is very important.”
Jaffery added that the move was not prompted by any particular incident, such as the collapse of embattled private equity firm Abraaj.
“Abraaj is something that has its own kind of press life cycle, but this has been in play now at least for a year or two, simply because the needs of our clients have continued to evolve,” he explained.
Among the most substantive changes, Jaffery added, is an “enhanced role” for corporate service providers.
“[That is] ranging from their ability to on-board clients et cetera,” he said. “I wouldn’t characterise it [the regulations] as additional requirements, but there is a bit more clarity that I think will drive tighter usage from our perspective.”
A consultation phase for the new regulations ends on July 7, and Jaffery said that the rules would be implemented as soon as possible after that, with the timing depending on the level of feedback DIFC receives.
However, companies that wish to apply under the new regulations can already do so.
While he declined to give a firm number, Jaffery said that are “several hundred companies that currently fall within SPC and ISPV regulations.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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