In response to growing market demand and evolving regulatory landscapes, the Dubai International Financial Centre (DIFC) has unveiled plans to amend its Prescribed Company Regulations, aiming to streamline and broaden access to holding company vehicles within the region.

Jacques Visser, Chief Legal Officer at DIFC Authority, emphasized the importance of regulatory adaptability, stating, “Since the inception of the Prescribed Company Regulations in 2019, DIFC has remained committed to enhancing the regime in line with market needs. The proposed amendments represent a substantial expansion and refinement of the existing framework.”

Evolution of Prescribed Company Regulations

Introduced in 2019 and subsequently updated in 2020 and 2022 to accommodate a broader range of applicants, the Prescribed Company Regulations have continuously evolved to meet market demands. Despite these revisions, DIFC has encountered persistent requests for further expansion. With the recent introduction of UAE Corporate Tax, concerns regarding substance requirements have diminished, prompting DIFC to consider further enhancements to the regime.

Key Proposed Changes

The proposed amendments aim to simplify and widen access to Prescribed Company formation by introducing several key changes:

1. Expansion of Eligibility Criteria: Under the new regulations, Prescribed Companies can be established by GCC citizens or entities controlled by them, authorized firms, or DIFC Registered Persons. Additionally, companies primarily tasked with holding legal title to GCC Registrable Assets will be eligible.

2. Enhanced Flexibility: The amendments offer greater flexibility by allowing Prescribed Companies to serve either a Qualifying Purpose or function as holding company vehicles. Furthermore, there is no mandate for local corporate service providers or local representation on the company's management or board.

3. Clarification of Usage: Prescribed Companies will be restricted from employing any personnel, reinforcing their role strictly as holding entities rather than operational businesses.

Consultation and Transition

The proposed amendments are currently open for public consultation until June 1, 2024. Interested parties are encouraged to review Consultation Paper No. 2 of 2024 for further details. Additionally, transitional arrangements will be communicated to existing Prescribed Companies to ensure compliance with the revised criteria.

Implications and Future Outlook

DIFC’s proposed amendments signify a significant step towards aligning regulatory frameworks with market dynamics, fostering greater accessibility and flexibility in establishing holding company vehicles. If adopted, these changes are poised to benefit a wider spectrum of applicants seeking to leverage DIFC’s regulatory environment for legitimate structuring purposes and transactions.