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The Dubai International Financial Centre (DIFC) has introduced a new classification called Prescribed Companies, aimed at consolidation, expansion and fee reduction for intermediate special-purpose vehicles (ISPVs) and special purpose companies (SPCs).
The new business-friendly regulatory framework will replace ISPVs and SPCs with a unified, simplified and more expansive regime with a competitive cost-structure.
“The prescribed companies are essentially structured vehicles and not meant to be operational like a day-to-day trading vehicle,” Jacques Visser, Chief Legal Officer, DIFC Authority, told Zawya.
“The existing fintech companies and holding companies will continue along the path they have currently in the centre. However, they will use Prescribed Companies as an additional structuring tool or to set up subsidiaries.”
The new regime builds on the previous one to also allow certain firms to establish themselves in the DIFC with more flexible office requirements. These include firms that are either regulated by Dubai Financial Services Authority (DFSA) or a recognised international financial services regulator.
“Fintech firms, family offices, holding and investment firms as well as aviation companies and firms involved in structured finance will also be eligible to establish a Prescribed Company in the Centre,” Visser told Zawya.
“If you have looked at what we have done in the context of prescribed companies, we have made it very easy for fintech firms and family offices to come to set up structures, and it’s the same with foundations and trusts, which are typically the vehicles they use,” he added.
Regarding the fee structure, Visser said that it is all consolidated into $1,000 a year; previously the SPC and ISPVs were charged $1,000 and $3,500, respectively.
The DIFC is expecting to roll out the new initiative formally within the next month or so, as Visser explained: “As far as the formal enactment of the regulations are concerned, the consultation period for the regulations end on July 7, and from that point to enactment will probably be a month. However, the DIFC authority board has already given us all of the approvals and waivers required, so if somebody comes today, we will be able to give him an established entity in accordance with these requirements and fees.”
DIFC being a leading financial hub for the Middle East, Africa and South Asia with more than 2,100 companies operating from the centre, attracted 437 new companies in 2018, a 39 percent year-on-year increase. However, targeting big numbers is not necessarily the mandate behind initiatives such as the Prescribed Companies regime.
"DIFC continues to see consistent organic growth in line with previous years. We are not targeting a specific growth percentage as a consequence of the Prescribed Companies regime. With this initiative we do not see companies doubling overnight. That is not the intention at all," he said.
The Prescribed Companies regime is expected to further enhance the legal and regulatory framework at the centre following the recent enactment of the new DIFC Insolvency and Employment Laws.
The Dubai government approved a new employment law that applies in the Dubai International Financial Center that is expected to go into effect on August 28, 2019.
The law introduces updated benefits for employers and employees, covers employment termination and cancelation of residence permits among other topics.
(Reporting by Seban Scaria; editing by Daniel Luiz)
© ZAWYA 2019
