With a view to place Dubai International Financial Centre (DIFC) as the world’s top financial centre, Mohammed bin Rashid, the Vice President and Prime Minister of the UAE and the Ruler of Dubai has enacted changes to the DIFC’s legal and regulatory framework. The new law came into effect on 12th November 2018.
New DIFC Companies Regime
The new law aims to enhance growth and investment in the UAE. The new companies regime makes it easier for companies to do business in the Middle East. It will increase the ease of doing business in the DIFC along with providing appropriate levels of protection to investors in line with international best practices.
The newly enacted law aims to update the overall operating environment for entities based in DIFC, making it the most sophisticated and business-friendly common law jurisdiction in the region. Owing to the new law, DIFC companies will have to adhere to less stringent governance requirements which will allow them to focus majorly on doing their business. This robust and comprehensive legal framework will ensure that businesses and investors can operate easily and with confidence in the DIFC.
The new rule further removes all the ambiguity regarding the scope of powers and responsibilities of the directors. It clearly specifies their scope. The new law promotes transparency by clearly communicating the roles and responsibilities of the officers of DIFC companies.
The new law replaced the former Companies Law and its operating regulations. We will glance through the key changes under the Companies Law and Regulations and Operating Law and Regulations.
Key Changes to the Former Companies Regime
- Key changes in the Companies Law and Regulations
- The new law has abolished limited liability companies and has introduced a new classification of public and private companies. The private and public company regime will now allow maximum flexibility, especially for small private companies. With the introduction of the new law, private companies limited by shares (Ltd.) can have up to 50 shareholders and public companies limited by shares (Plc.) can have any number of shareholders. Moreover, there will be a distinct set of requirements for both of them.
- A public company must operate with at least two directors and a company secretary whereas a private company is not required to appoint a company secretary and can operate with just one director.
- The new law will further expand directors’ duties for DIFC companies. They are expected to disclose any interest in a transaction that is entered into or is proposed to be entered into by the company that conflicts or may conflict with the interests of the company. Furthermore, directors are required to act honestly, lawfully and in good faith keeping the best interest of the company.
- Another change is, a public company is required to have a minimum of USD 1,00,000 capital, of which at least 25% must be paid up. However, a private company is not required to have a minimum share capital.
- The new law also introduced a statutory pre-emption right for existing shareholders of the companies to guard against undue dilution of their existing rights.
- The new law has enacted a new schedule of administrative fines that the Registrar of Companies can impose on a company.
- As per the new law, companies are not required to notify ROC about the initial allotment of shares. Notification is required only in case of subsequent allotments.
- The law further provides new provisions for ‘whistle-blower’ protection.
- The law also enhanced the company accounting and auditing requirements.
- Key changes in the Operating Law and Regulations
- The new law provides a detailed framework for the role of the Registrar of Companies. ROC’s role will now include supervision and monitoring of the DIFC law and ensuring that the companies operating within DIFC are complying with the law.
- The new law further enhanced the licensing regime by providing a detailed framework concerning the licenses issued by the Registrar of Companies and their types. The new licensing regime will enable companies to conduct more business within DIFC or from DIFC. The new law requires companies to file a confirmation statement in case of license renewal.
- The law has strengthened the powers of the Registrar relating to inspection and investigations.
- The law also provides an extension of the ROC’s enforcement powers.
What are the objectives of the legislative changes?
The legislative changes are aimed at providing flexibility to the companies operating in the DIFC. The law further aims to enhance the business environment and reduce entry barriers in the DIFC. Moreover, it will increase the cost-efficiency and flexibility of small businesses, which constitutes a major portion operating within the DIFC.
How can IMC Group help you?
IMC Group is a cross-border advisory firm focusing on providing financial consultancy and advisory services in Asia, Middle East and Africa region. IMC Group can assist you in registering and securing ongoing compliance by advising you on the changes as per the DIFC regime and helping you with the incorporation of a company as per new law. For further information, you can visit www.intuitconsultancy.com or email at firstname.lastname@example.org.