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DIFC's consultation paper to widen scope and offer clarity on establishing "prescribed companies"

Hala Harb, BSA associate provides her comments to Arabian Business on the consultation paper.

The Dubai International Financial Centre (DIFC) – the leading global financial centre in the Middle East, Africa, and South Asia (MEASA) region – has published its Consultation Paper No. 2 of 2022, which proposes amendments to the Prescribed Company Regulations 2019.

The consultation paper aims to consider amendments to the definitions of the “qualifying applicant” and the “qualifying purpose” that are necessary to establish a “prescribed company” under the DIFC.

Explaining this further, Hala Harb, said: “Generally, anyone wishing to establish a prescribed company in the DIFC needs to satisfy certain eligibility requirements. Notably, the prescribed company must be controlled by one or more qualifying applicants or be established for a qualifying purpose. “The 2019 regulations provided for a limited definition of qualifying applicants and qualifying purpose. The DIFC’s latest consultation paper proposes to broaden such definitions, hence allowing for a larger category of entities to be established as a prescribed company in the DIFC.”

The latest consultation paper builds on the DIFC’s decision in May 2020 to expand the “prescribed company” regime in order to continue to attract companies to establish regional headquarters and operations in the DIFC.
Some of the key benefits of a “prescribed company” include exemptions from the requirement to conduct principal business activities in the DIFC, the requirement to produce and file audited accounts, as well as substantially lower incorporation and licensing fees.

Through its recent consultation paper, the DIFC is now seeking to formalise and further expand the criteria to qualify as a prescribed company by clarifying the definitions of “qualifying applicant” and “qualifying purpose” contained in the Prescribed Company Regulations 2019.

The definition of structured financing is also being expanded to cater for structures which involve the issuance of securities intended to facilitate bond or sukuk issuances.

Impact of consultation paper’s proposed changes on crowdfunding firms

The regulations will continue to allow for crowd funding structures, upholding the DIFC’s reputation as an attractive market for innovators and entrepreneurs to base their operations.

“However, another important change mentioned in the proposed consultation paper is the exemption of companies operating under the qualifying purpose of a crowdfunding structure or a structured financing from certain requirements imposed by the DIFC Companies Law, such as the prohibition to have more than 50 shareholders,” Harb added.

The consultation paper has also added a requirement on prescribed companies to comply (where applicable) with the Economic Substance Regulations issued in 2020.

The consultation paper is currently under review and the DIFC is awaiting public comments until 4 May, 2022.

The full article can be read on Arabianbusiness.com: DIFC's consultation paper to widen scope and offer clarity on establishing "prescribed companies"

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