DIFC Prescribed Companies in UAE Overview

The Prescribed Company in the UAE is similar to the Special Purpose Vehicles (SPV) company structure. Prescribed-companies-DIFC are designed to facilitate passive investment holding activities for family businesses, family offices, private wealth structures, funds, and private equity firms. Moreover, it can serve as a holding company or financial vehicle for domestic, regional, or international assets.

The Dubai International Finance Centre (DIFC) introduced the Prescribed Company Regulations on October 31, 2019. This new framework based on Special Purpose Companies (SPC) and Intermediate Special Purpose Vehicles (ISPVs) ensures a relaxed, cost-efficient, and flexible environment for light. 

What is a Prescribed Company?

A Prescribed Company is a private company limited by shares, classified as a Small Private Company under the Companies Law. The transition under the New Regulations automatically converts existing SPCs and ISPVs into Prescribed Companies. Additionally, other eligible entities may also establish themselves as Prescribed Companies.

The Evolution from Former Regimes

Previously, SPCs and ISPVs were used for specific financial-related transactions and required stricter governance, including the appointment of a corporate service provider as a company secretary. Additionally, the ISPV regime allowed existing DIFC businesses to expand their operations but was limited to companies structured as limited by shares.

The New Regulations introduce a more flexible framework, allowing a broader range of businesses to operate within the DIFC.

Eligibility Criteria for Prescribed Companies

Additionally a Small Private Company qualifies as a Prescribed Company is established by one of the following:

• Authorised Firm: A firm regulated by the Dubai Financial Services Authority (DFSA) or a recognized international financial services regulator.
• Fund: A DFSA-regulated fund or a fund domiciled in approved jurisdictions.
• Family Office: Formed under DIFC Family Office Regulations.
• Fintech Entity: Licensed to conduct financial technology activities in the DIFC.
• Foundation, Government Entity, Holding Company, Private Trust Company, Proprietary Investment Company: Registered in the DIFC.

Qualifying Purposes

Prescribed Companies can be established for specific purposes, including:

• Aviation Structure: Owning, financing, securing, leasing, or operating aircraft.
• Crowdfunding Structure: Holding assets invested through crowdfunding platforms.
• Family Holding Structure: Consolidating holdings for family members.
• Structured Financing: Managing assets to leverage and manage risks in financial transactions.

Benefits of the New Regulations

Cost Efficiency

Moreover, the New Regulations offer significantly lower costs, with a registration fee of just USD 100 (compared to USD 8,000 for typical private companies) and an annual license fee reduced to USD 1,000 (from USD 12,000).

Flexibility and Reduced Compliance

Prescribed Companies benefit from flexible compliance, as they do not need to file or audit accounts. Additionally, they may share a registered address with their Qualifying Applicant or a corporate service provider, removing the requirement for a separate registered office.

Corporate Service Provider

Prescribed Companies can engage a Corporate Service Provider to handle functions like providing a registered address, ensuring compliance with AML and reporting requirements, and maintaining Ultimate Beneficial Ownership registration.

Economic Substance Regulations

Additionally, introduced in April 2019, the Economic Substance Regulations require UAE businesses to demonstrate substantial economic presence. Prescribed Companies must assess their operations to determine if these regulations apply.

Introducing the New Regulations marks a significant step forward for the DIFC, offering various entities a more flexible, cost-effective, and business-friendly environment. Dubai’s strategic location may increase the number of companies utilizing Prescribed Companies to expand their operations.

Additionally, it remains to be seen whether Prescribed Companies will become a popular choice for businesses in the DIFC, but the new framework undoubtedly marks a positive development for the free zone. Contact NH Management for expert advice and guidance on establishing a Prescribed Company in the DIFC. We’ll guide you through the process and help you maximize your business potential. Reach out to our consultants to learn more at info@nhmanagement.com or +97142221327.