DIFC

PRESCRIBED COMPANY

REGULATIONS

Consolidated Version No. 4

In force on 15 July 2024

The Board of Directors of the DIFCA, in the exercise of the powers conferred on them under Articles 132 and 151 of the Companies Law, hereby make these regulations.

1. INTRODUCTION

1.1 Application and interpretation

1.1.1 These Regulations may be cited as the “Prescribed Company Regulations 2024”.

1.1.2 These Regulations apply to:

• (a) every person who falls within the definition of a Prescribed Company;
• (b) every person applying for the incorporation or continuation of a Prescribed Company in the DIFC; and
• (c) the Registrar.

1.1.3 The Relevant Laws apply to a Prescribed Company unless specified otherwise in these Regulations.

1.1.4 To the extent that a Prescribed Company also qualifies as a Special Purpose Vehicle, the provisions of these Regulations shall not exempt it from any requirements resulting from any DFSA administered legislation applicable to it. To the extent any provision in these Regulations conflicts with any provision in DFSA administered legislation in respect of their application to a Prescribed Company that is also a Special Purpose Vehicle, the relevant DFSA administered provision shall prevail.

1.1.5 Defined terms are identified throughout these Regulations by the capitalisation of the initial letter of a word or phrase. Where capitalisation of the initial letter is not used, an expression has its natural meaning.

1.1.6 Any reference to enacted law or regulations, is a reference to that enactment as amended from time to time, and includes a reference to that enactment as extended, applied or otherwise amended by or under another enactment.

1.1.7 The following defined terms have the meaning given below:

1.1.7 An undefined term that is used in these Regulations and is also used in the Relevant Laws shall have the same meaning in these Regulations.

1.1.8 The rules of interpretation in the Relevant Laws apply to these Regulations.

1.2 References to writing

1.2.1 If a provision in these Regulations refers to a communication, notice, agreement or other document “in writing” then, unless the contrary intention appears, it means in legible form and capable of being reproduced on paper, irrespective of the medium used. Expressions related to writing must be interpreted accordingly.

1.2.2 Regulation 1.2.1 does not affect any other legal requirements which may apply in relation to the form or manner of executing a document or agreement.

2. STATUS

2.1.1 A Prescribed Company is a prescribed company incorporated or continued in the DIFC pursuant to the provisions of Article 132 of the Companies Law.

2.1.2 Except as otherwise provided in these Regulations, the provisions of the Relevant Laws apply to Prescribed Companies as if it is a Private Company.

3. ESTABLISHMENT

3.1 Qualifying requirements

3.1.1 An applicant wishing to incorporate or continue a Prescribed Company in the DIFC must satisfy the Registrar of one of the following criteria set out at Regulation 3.1.1(a) to 3.1.1(d):

• (a) that the Prescribed Company is Controlled by one (1) or more:
  • (i) GCC Persons;
  • (ii) Registered Persons; or
  • (iii) Authorised Firms;
• (b) the Prescribed Company is established or continued in the DIFC for the purpose of holding legal title to, or Controlling, one (1) or more GCC Registrable Assets;
• (c) the proposed Prescribed Company is established or continued in the DIFC for a Qualifying Purpose; or
• (d) the Prescribed Company established or continued in the DIFC has a Director that is an Employee of a Corporate Service Provider and that Corporate Service Provider has an arrangement with the Registrar pursuant to Regulation 3.3.2.

3.1.2 The Articles of Association of a Prescribed Company:

• (a) serving a Qualifying Purpose shall limit its objects and activities to only its Qualifying Purpose and activities ancillary to such purpose; or
• (b) established for the purposes of holding legal title to, or Controlling, one (1) or more GCC Registrable Assets shall limit its objects and activities to only that purpose and activities ancillary to such purpose.

3.1.3 Where a Prescribed Company is established or continued in the DIFC pursuant to Regulation 3.1.1(b) or Regulation 3.1.1(c), the Prescribed Company must satisfy the Registrar that it:

• (i) holds or Controls one or more GCC Registrable Assets; or
• (ii) has begun to carry on its Qualifying Purpose,

within six (6) months of the date of issue the Prescribed Company’s Licence, which period may be extended at the Registrar’s sole discretion.

3.2 Financial services and public offers of Securities

3.2.1 A Prescribed Company may be used by a Fund Manager, a Trustee or a General Partner as a Special Purpose Vehicle to hold property on behalf of a Fund.

3.2.2 A Prescribed Company shall not be used to be the Fund Manager, the Trustee or the General Partner of a Fund or as the Fund itself.

3.2.3 A Prescribed Company whose Qualifying Purpose is a Crowdfunding Structure:

• (a) may be used to hold assets invested through a Crowdfunding Platform as part of a Crowdfunding Structure but shall not be used to be the Crowdfunding Operator; and
• (b) shall be exempted from the requirement to have no more than fifty (50) shareholders under Article 27(1)(b) of the Companies Law.

3.2.4 A Prescribed Company whose Qualifying Purpose is a Structured Financing that is making an offer of its Securities to the public to facilitate a bond or sukuk issuance shall, where applicable:

• (a) not be regarded as falling within the definition of a Public Company under Article 27(4)(a) of the Companies Law; and
• (b) be exempted from the following provisions of the Companies Law:
  • (i) the prohibition in Article 42 (Prohibition of public offers by Private Companies); and
  • (ii) the requirement to have no more than fifty (50) shareholders under Article 27(1)(b).

3.2.5 A Prescribed Company shall not provide any Financial Services unless it is authorised by the DFSA to do so.

3.2.6 Nothing in this Regulation is to be construed as exempting a Prescribed Company from the general prohibition of public offers of its Securities under Chapter 4 of the Companies Law or the financial promotion restrictions or requirements in respect thereof imposed by applicable markets or securities laws and related regulations.

3.3 Application to incorporate or continue

3.3.1 An application to incorporate or continue a Prescribed Company in the DIFC shall be made to the Registrar in the prescribed form and accompanied by the documentation required to be lodged in connection with an application for the incorporation or continuation of a Private Company.

3.3.2 The Registrar may enter into an arrangement with a Corporate Service Provider under which:

• (a) any document, form or fee required by these Regulations or the Relevant Laws to be lodged with or paid to the Registrar for the incorporation or continuation of a Prescribed Company in the DIFC, may be lodged with or paid to the Registrar by the Corporate Service Provider;
• (b) the Corporate Service Provider is required to perform some or all assessments, checks and verifications required under these Regulations or the Relevant Laws to ascertain and confirm whether an applicant:
  • (i) adheres to all AML Requirements, the UBO Regulations and other requirements of the Relevant Laws;
  • (ii) meets the applicable qualifying requirements set out at Regulation 3.1; and
  • (iii) maintains Accounting Records in accordance with Regulation 4.4.1,

and to provide a certification of such matters to the Registrar in an agreed format.

3.3.3 The Registrar in the performance of any function under the Relevant Laws may in good faith rely, without further enquiry, upon the certification of a Corporate Service Provider given under Regulation 3.3.2, provided that a Corporate Service Provider shall not be liable to the Registrar for doing so, unless it has acted in breach of its agreed obligations to the Registrar, in which case (without limiting the generality of its application) Regulation 3.3.4 shall apply.

3.3.4 The Registrar may:

• (a) revoke any arrangement entered into with a Corporate Service Provider under Regulation 3.3.2 if the Registrar is satisfied that the Corporate Service Provider has acted in breach of its agreed obligations to the Registrar;
• (b) inform the DFSA of any facts or circumstances that may amount to a breach of a Corporate Service Provider’s regulatory duties under applicable law; and
• (c) inform law enforcement agencies of any alleged or suspected criminal offences on the part of a Corporate Service Provider or its clients.

3.3.5 Where an applicant is represented by a Corporate Service Provider in an application to incorporate or continue a Prescribed Company, the Registrar shall be permitted to communicate directly with such Corporate Service Provider with no need to directly communicate with the applicant pursuant to these Regulations.

3.4 Name requirements

Unless determined otherwise by the Registrar, the proposed name of a Prescribed Company shall end with “Limited” or “Ltd.” and comply with the requirements in the Relevant Laws relating to names.

3.5 Permission to incorporate

3.5.1 Upon deciding to grant permission to incorporate or continue a Prescribed Company, the Registrar shall without undue delay inform the applicant in writing of:

• (a) such decision;
• (b) the date on which the Licence applicable to the Prescribed Company shall be deemed to take effect; and(c) any conditions and restrictions applicable to the Licence.

3.5.2 The Licence of a Prescribed Company established for:

• (a) a Qualifying Purpose shall be restricted to the activities specific to the Qualifying Purpose stated in its application to incorporate or continue the Prescribed Company in the DIFC; or
• (b) any other permitted purpose under these Regulations shall be restricted to the activity of Holding Company.

3.5.3 Upon deciding to refuse to grant permission to incorporate or continue a Prescribed Company, the Registrar shall without undue delay inform the applicant in writing of such refusal.

3.6 Incorporation Fees

The application for incorporation shall be accompanied by the relevant fee prescribed in Regulation 5 and set out in Appendix 1.

4. CONDUCT OF BUSINESS

4.1 Registered Office

4.1.1 Subject to Regulation 4.1.2, a Prescribed Company’s registered office for the purpose of Article 13 of the Operating Law shall either be:

• (a) the registered office of a Corporate Service Provider appointed for this purpose by:
• • (i) the person(s) responsible for the incorporation or continuation of the Prescribed Company, acting on behalf of the Prescribed Company to be incorporated or continued in the DIFC;
• • (ii) the Prescribed Company, or
• (b) the registered office in the DIFC of a Registered Person that is, or will be after incorporation, an Affiliate of the Prescribed Company, provided that such registered office shall not be a premises designated for any retail purposes in the DIFC.

4.1.2 A Corporate Service Provider appointed under Regulation 4.1.1(a) shall consent in writing to such appointment in a format prescribed by the Registrar.

4.1.3 Where the registered office of a Prescribed Company is, pursuant to the provisions of Regulations 4.1.1(b), the same as that of another Registered Person, the Prescribed Company or the applicant(s) for its incorporation or continuation shall be required to submit proof to the Registrar that consent to share the premises has been obtained from the Registered Person.

4.2 Operation in the DIFC

Article 13(3) of the Operating Law (conducting principal business activity in the DIFC) and Regulation 2.1.4 of the Companies Regulations (establishment of operations in the DIFC) shall not apply to a Prescribed Company.

4.3 Employees

A Prescribed Company shall not be permitted to employ any Employees.

4.4 Accounting Records

4.4.1 A Prescribed Company shall maintain Accounting Records and prepare accounts as required under the Companies Law.

4.4.2 A Prescribed Company that has a Qualifying Purpose of a Structured Financing shall be exempt from any requirement to file its accounts with the Registrar or have them audited.

4.4.3 Without prejudice to Article 127 of the Companies Law, a Prescribed Company that has a Qualifying Purpose of a Crowdfunding Structure with an annual turnover of not more than $5,000,000 calculated on a consolidated basis including all Subsidiaries, but that has more than twenty (20) Shareholders, shall be exempt from the requirements under Article 124(b), Article 124(d) and Article 125 of the Companies Law in respect of preparing audited accounts and filing such accounts with the Registrar.

4.5 Reporting and disclosure

4.5.1 The Confirmation Statement filed by a Prescribed Company shall:

• (a) comply with the requirements of the Relevant Laws as they apply to a Private Company; and
• (b) confirm that it continues to meet the qualifying requirements set out at Regulation 3.1.1 (as applicable).

4.5.2 Each Director of a Prescribed Company whose Qualifying Purpose is a Structured Financing that does not have an Authorised Firm involved as either an Initiator or a Transaction Party shall file with the Registrar, at incorporation or continuation of the Prescribed Company in the DIFC, additional confirmations stating that, after due and careful enquiry, the Director making the confirmation is satisfied that the Structured Financing of the Prescribed Company is not being used and will not be used, whether in the UAE or elsewhere, to:

• (a) circumvent foreign ownership restrictions;
• (b) change the nationality of a shareholder or interest holder in an entity to avoid foreign investor registration requirements;
• (c) evade the imposition of any tax or duty as a consequence of the UAE nationality of the Prescribed Company.

4.5.3 The additional confirmations referred to in Regulation 4.4.2 shall be repeated by each Director of such Prescribed Company and filed with the Registrar along with its Confirmation Statement.

4.5.4 Any report, disclosure or confirmation made by a Corporate Service Provider on behalf of a Prescribed Company pursuant to this Regulation 4 shall be done as the Prescribed Company’s agent and the Corporate Service Provider may require self-certification of the content by the members of the Prescribed Company’s board of Directors. The Corporate Service Provider shall not be liable to the Registrar in respect of any such report, disclosure or confirmation where it has acted with due care in ensuring their contents are correct and has not omitted any material facts or circumstances of which the Corporate Service Provider is aware of, or ought reasonably be aware of.

4.5.5 Without limiting the generality of the application of Regulation 3.3.4, the Registrar may revoke any arrangement with a Corporate Service Provider under Regulation 3.3.4 in circumstances where a Corporate Service Provider has acted in contravention of Regulation 4.5.4.

4.6 Revocation of status

4.6.1 If:

• (a) there is a change of circumstances resulting in Prescribed Company no longer meeting the qualifying requirements set out in Regulation 3.1.1 (as applicable); or
• (b) a Prescribed Company in any way fails to comply with these Regulations,

the Registrar may, after following the Decision-Making Procedures and in the case of a Prescribed Company authorised by the DFSA to provide Financial Services, notifying the DFSA, revoke its status as a Prescribed Company.

4.6.2 If a Prescribed Company’s status is revoked under Regulation 4.6.1, it shall:

• (a) cease to be a Prescribed Company;
• (b) no longer be entitled to the benefit of any exemption or concession (including as to fees) in these Regulations; and
• (c) be required to adhere to all the requirements of the Relevant Laws.

5. FEES

For the purposes of Article 151(2)(h) of the Companies Law, Regulation 9.1 of the Companies Regulations and Regulation 2.3.2 of the Operating Regulations, the fees in respect of matters set out in Appendix 1 of these Regulations shall be paid to the Registrar instead of the fees specified in the Relevant Laws.