New DIFC Companies Regime Now in Effect
Watch a short video about the update here.
The Dubai International Financial Centre (“DIFC”) has introduced a new companies regime under its new Companies Law (DIFC Law No. 5 of 2018), Operating Law (DIFC Law No. 7 of 2018), Companies Regulations and Operating Regulations (“New Legislation”) all of which came into effect on 12 November 2018.
Under the new regime, private DIFC companies will be subject to significantly less stringent governance requirements which will allow them to focus primarily on the commercial side of doing business.
The historical uncertainty about the scope of powers and responsibilities of directors is no more as the new legislation specifically prescribes these.
Not only are the provided solutions more suitable for businesses interested in actively growing their business but, they are also more transparent as to what is required of officers of DIFC companies.
The new pieces of legislation replace the former Companies Law (DIFC Law No. 2 of 2009) and its operating regulations.
Key Changes to the Former Companies Regime
Companies Law and Regulations
The key changes to the former regime introduced under the Companies Law and Regulations are as follows:
- Introduction of private (up to 50 shareholders, “Ltd.”) and public companies (any number of shareholders, “Plc”) limited by shares and a distinct set of requirements concerning each of these;
- Abandoning minimum share capital requirement for a Ltd.;
- Introducing minimum of USD 100,000 capital for a Plc;
- Introduction of a statutory pre-emption right (which can be excluded under the Ltd.’s Articles of Association);
- One director and no company secretary for a Ltd.;
- Duties of directors – dedicated chapter;
- New schedule of administrative fines that the ROC can impose on a company;
- New standard DIFC Articles;
- Allotment of shares notification only for the subsequent allotments not for the initial ones;
- Abandoning limited liability companies; and
- Replacing the requirement for a legal opinion to be provided alongside the modified Articles of Association with the incorporators statement (for initial Articles) or director’s certification (for post-incorporation revisions) of DIFC law compliance of the proposed articles changes.
Operating Law and Regulations
- The main focus of the Operating Law and Regulations are:
- The role of the DIFC Registrar of Companies (“ROC”);
- Detailed framework concerning the licenses issued by the ROC and their types;
- Requirement to file a confirmation statement upon license renewal;
- Inspection and investigation powers of the ROC; and
- Contraventions and enforcement of administrative actions of the ROC.
Who Would be Interested?
The New Legislation has been long awaited by a wide variety of international and regional parties. These include medium and small size private companies limited by shares, their shareholders and directors, as well as legal and financial professionals advising entities considering the DIFC as its jurisdiction to operate from or those already operating in the DIFC.
Objectives of the Legislative Changes
While the scope of the Legislative changes is broad, in general the changes seem to be aimed at giving more flexibility to the Companies operating in the DIFC and relying more on their internal checks and balances and the prudence of the board of directors whilst prescribing a robust sanctions regime should the Companies not comply with DIFC law.
Similarly to some other jurisdictions globally, the ROC’s role will be to supervise and monitor DIFC law compliance by the Companies rather than overregulate the day-to-day operation.
Examples of provisions that indicate the above are allowing for one director only to manage an Ltd., abandoning the requirement that a Company file the initial allotment of shares notification with the ROC whilst introducing, on a statutory basis, a list of duties and responsibilities of directors of a Company.
How we can help:
Our team will be delighted to assist you in registering and securing ongoing compliance of a Company by:
- Advising you on the DIFC regime changes that are most relevant to your business;
- Assisting you with the incorporation process of a Company under the new regime;
- Revising the Articles of Association of a DIFC company to comply with the Legislative Changes; and
- Adopting changes to the Ltd. Board of Directors composition (should you wish to have one director, only).