The New DIFC Prescribed Company Regulations 2024

The DIFC Prescribed Company Regulations 2024 (New PC Regulations) were enacted on July 15, 2024. Replacing the former PC Regulations 2019 (and the 2020 and 2022 amendments thereto), the New PC Regulations aim to streamline and broaden the Prescribed Company (PC) regime as well as introduce a new Active Enterprise Commercial Package framework (the Commercial Package), allowing more entities to establish or continue a PC in the DIFC.

The Dubai International Financial Centre (DIFC) has introduced new offerings designed to encompass a broader range of entities under the New PC Regulations that seek to preserve the DIFC as a jurisdiction where entities of commercial substance operate, while ensuring that corporate and transactional structuring aims can be facilitated for persons and entities across the Gulf Cooperation Council (GCC).

The new offerings are:

• Prescribed Company (for passive holdings)
• Commercial Package (for active enterprises

The qualifying criteria for setting up a PC have been broadened and simplified. Under the new PC Regulations, it is possible to establish a PC if such PC is:

• Controlled by one or more (1) GCC persons or entities controlled by GCC persons, (2) registered persons (excluding PCs or nonprofit incorporated organizations), or (3) authorized firms;
• Established or continued to solely hold legal title or control one or more GCC registrable assets, including, among others, land, real estate, shares in companies, partnership interests, aircraft, and maritime vessels;
• Established or continued for a qualifying purpose; and
• Established or continued by any person (natural or corporate) resident anywhere in the world, provided that such person appoints a director who is an employee of a Dubai Financial Services Authority-registered corporate service provider (CSP). This CSP must have an agreement with the DIFC Registrar of Companies to undertake specific compliance and anti-money laundering functions on behalf of the Prescribed Company.

“GCC person” is defined in the New PC Regulations as each of (1) a natural person who is a citizen of a GCC member state (Bahrain, Oman, Qatar, Kuwait, Saudi Arabia, and the UAE), (2) a body corporate or body unincorporate, including a company, partnership, or unincorporated association that is controlled by one or more natural persons that are citizens of a GCC member state, (3) a body corporate with securities listed on a securities exchange in the GCC, or (4) a government entity.

“GCC registerable asset” is defined in the New PC Regulations as an asset or property interest that must be registered with a GCC authority to establish legal ownership, secure rights or encumbrances against it, and provide public notice of such interests, including (1) land and real property, (2) shares in companies, (3) partnership interests, (4) intellectual property, and (5) aircraft and maritime vessels.

The expansion of PCs to provide flexibility for use by GCC persons for their structuring purposes likely aims to maintain the DIFC’s position as a leading freezone within the GCC, providing GCC persons with a regional alternative to traditional non-GCC offshore jurisdictions (such as the Cayman Islands, the British Virgin Islands, etc.) that offer flexible special-purpose vehicle regimes.

The definition of qualifying purpose has been streamlined, removing the former categories of “DIFC holding structure” and “innovation holding structure” owing to the new GCC registrable asset definition. The amended definition is now limited to (1) aviation structures, (2) crowdfunding structures, (3) intellectual property structures, (4) maritime structures, and (5) structured financing. Such remaining components of the Qualifying Purpose definition remain the same as their legacy definitions in the former PC Regulations.

A PC under the New PC Regulations is not permitted to have any employees. This is to ensure its use as a true holding company vehicle rather than as an operational entity. A PC can only conduct holding company business activities unless set up for a qualifying purpose. For PCs that no longer comply with the New PC Regulations, the newly introduced Commercial Package facilitates the transition of existing PCs that have become noncompliant with the New PC Regulations to a compliant status while continuing to afford them reduced fees and flexible licensing options.

The New PC Regulations introduce a grace period for PCs that are required to be set up prior to meeting relevant qualifying requirements. In the context of newly established or existing PCs set up for the purpose of holding or controlling GCC registerable assets or for a qualifying purpose, the New PC Regulations permit such PCs to meet any requirements within six months of the PC license issuance (or longer if granted by the registrar). This allows flexibility for applicants who wish to use PCs for structuring purposes but require time to implement their relevant structures, such as in the context of a preclosing structuring exercise in connection with a transaction.

PCs are exempt from the requirements applicable to other entities under the DIFC laws and regulations to establish operations in, or carry on their principal business from, the DIFC (however, this exemption does not appear to apply pursuant to the Commercial Package).

Existing PCs that no longer meet the qualifying criteria under the New PC Regulations will still benefit from a discounted license fee of $1,000 for the next two years, after which full DIFC license fees will apply (unless such PCs have transitioned to avail themselves of the Commercial Package in which case the fees set out below will apply).

The Commercial Package has been introduced to provide existing PCs that will fall outside the scope of the new regime as well as other applicants that meet certain criteria additional structuring options with reduced fees and flexible licensing arrangements. Under the Commercial Package option, companies are permitted to have employees, but they must be set up to conduct one of the following activities: (1) to act as a holding company, (2) to manage offices, or (3) to conduct proprietary investment activities (including real estate, agricultural, commercial, educational, healthcare, industrial, and retail and trade enterprises and management and oil and natural gas projects).

To make use of this option, applicant entities must also be controlled by one or more of the following: (1) a DIFC-registered entity that is not a nonprofit incorporated organization, foundation (as such terms are defined under the Non Profit Incorporated Organizations Law DIFC Law No. 6 of 2012), or PC, (2) an affiliate of a DIFC-registered entity that is not a nonprofit incorporated organization, foundation, or PC, (3) a shareholder or an ultimate beneficial owner that controls a DIFC-registered entity that is not a nonprofit incorporated organization, foundation, or PC, (4) a government entity, or (5) a family-operated business.

Companies operating under the Commercial Package option are also exempt from the full DIFC license fees (see below).

Fees for PCs are as follows (all amounts are in USD):

Fees for companies operating under the Commercial Package framework: