The Dubai International Financial Centre (DIFC) has proposed to enact changes to the Prescribed Company Regulations, to significantly “expand and simplify” the current regime.
The first Prescribed Company Regulations were enacted in 2019. In the past five years, they have been updated twice, in 2020 and 2022. In both cases, the changes sought to expand the regime to a wider base of applicants.
Despite these amendments, DIFC has been met with continued demand to expand the regime. With the introduction of UAE corporate tax, concerns around substance requirements are reduced. Thus, the entity has found this a good time to carry out the expansion.
“In response to continued market demand for greater access to holding company vehicles that can be used for structuring purposes in and from the Centre, DIFC is proposing a significant expansion and enhancement of the existing regime,” said Jacques Visser, Chief Legal Officer, DIFC Authority.
Under the existing regime, establishing a PC is limited to qualifying applicants or where the PC is carrying out a qualifying purpose, such as structured financing.
In contrast, under the proposed regulations, it will be possible to establish a Prescribed Company in the following scenarios where the PC is:
- Controlled by one or more: GCC citizens or entities controlled by GCC citizens; an authorised firm; or a DIFC-registered person other than a PC or an NPIO
- Established or continued for the primary purpose of holding legal title to, or controlling, one or more assets that are registered with a GCC authority.
- Established or continued for a Qualifying Purpose
This means there is no requirement for a local corporate service provider, in circumstances where the applicant has alternative means of providing a registered address in the DIFC, or to have any local representation in the management or board of the company.
According to DIFC, these changes “considerably enhance and simplify the current regime, opening up access to this type of vehicle to a far wider base of applicants than is currently the case”.
The proposed amendments also provide that a prescribed company must only be used for either its qualifying purpose or as a holding company vehicle and, may not employ any employees. These changes ensure that prescribed companies are used as true holding company vehicles, rather than operational entities.