The Board of directors of DIFC have approved the regime for establishment of intermediate special purpose vehicles on 19 September, 2016 which shall come into force with immediate effect. It will again be innovative initiative by the DIFC that will allow the limited and listed companies in DIFC to enjoy the benefits of having an intermediate SPV, which is an advantage available only to companies having a physical presence in DIFC before the approval of this new regime. We shall be discussing the important provisions of this new regime below.
Background
These new vehicles are “Intermediate” which means that these SPV’s are neither the operating entities and nor can be the ultimate holding entities and shall have very limited application. Prior to approval of this new regime, the DIFC did not have any provision of establishment of non- regulated SPV and the entities, that already having a substantial presence in DIFC can establish SPV but must undergo a detailed application and compliance process for the same. The professional advisors however, always preferred use of SPVs for better efficiency and structuring perspective. The DIFC authorities considering the interest of entities and demand of professionals permitted the use of intermediate SPV’s.
The authorities are still in process of reviewing their companies law and related regulations and it is anticipated that this new regime will be explained and structured in the revised regulations. It is important to note here that intermediate SPV will be allowed for companies already registered with DIFC.
The Qualification Requirements
The guidelines set out by DIFC mentions the eligibility requirements for incorporating or establishing an intermediate SPV. As per the requirement criterion laid down by the authorities, applicants will only be able to qualify to incorporate an intermediate SPV, if they are one of the following:
- Holding Entity or entities, Single Family offices or proprietary investment vehicles already have a presence in DIFC;
- A collective investment scheme (CIS) established in DIFC;
- A CIS established outside DIFC but managed by a fund manager regulated by Dubai Financial Services Authority (DFSA)
If any entity does not come under any of three categories mentioned above, it shall not be a qualifying applicant for incorporating an intermediate SPV in DIFC.
Advantages
The Intermediate SPV’s registered in DIFC shall enjoy the following advantages:
Cost Saving: The new regime allow formation of these intermediate SPV’s in a more cost effective manner, rather than forming a holding entity.
Lesser Compliances: The applicants do not have to go through the long application procedure, or comply with detailed compliance requirement, which shall save lot of time and efforts.
Limited Liability: They shall enjoy all the benefits available to companies registered in DIFC e.g. UAE status and limited liability of shareholders.
No Restrictions on Foreign Ownership: These SPV’s will also have no restriction on foreign capital investments and can be owned wholly by foreign nationals or entities.
Conclusion
It is a very business friendly evolution of DIFC regulations and an significant step from the authorities. The competitive fee, easier compliances and no restriction of foreign capital shall make incorporating intermediate SPV a preferred choice for companies registered in DIFC to structure their businesses and increase efficiency.
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