DIFC Announced Proposed New Companies Regulations, Operating Law and Regulations and Ultimate Beneficial Ownership Regulations for Public Consultation

Dubai, UAE – 24 May 2018: Dubai International Financial Centre (DIFC), the leading international financial hub in the Middle East, Africa and South Asia (MEASA) region, has proposed the enactment of legislation to enhance the regulation of the conduct of business in the DIFC, bringing it in line with international best practice and the global trend towards transparency and accountability. In doing so, DIFC Authority has taken into account specific factors relating to the DIFC and the need to provide an appropriate regulatory environment for businesses to operate in or from the Centre.

The Consultation Papers seek public comments on various legislative proposals:

1. the new Companies Regulations are the subject of Consultation Paper No. 5 of 2018;
2. the new DIFC Operating Law and Regulations and related legislation are the subject of Consultation Paper No. 6 of 2018;
3. the new Ultimate Beneficial Ownership Regulations are the subject of Consultation Paper No. 7 of 2018; and
4. the new Protected Cell Company Regulations and Investment Company Regulations are the subject of the Joint Consultation Paper No. 191 issued by the Dubai Financial Services Authority and DIFC Authority.

The intention of these legislative proposals is that the new Companies Law and Companies Regulations will be the legislative framework for matters affecting companies alone, while matters of a more general business regulatory nature, affecting all DIFC entities will be provided for within the framework of the new DIFC Operating Law and Regulations. Matters relating to specific subject matter (as is the case with the proposed Ultimate Beneficial Ownership Regulations) or particular types of companies (such as the proposed Investment Companies (“IC”) Regulations and the Protected Cell Companies (“PCC”) Regulations) will be contained in separate stand-alone Regulations.

The key features of each legislative proposal is summarised below:

1. Consultation Paper No. 5 of 2018 – Companies Regulations

The key aspects of the legislative proposal include:

(a) substitution of existing provisions relating to ICs and PCCs with stand-alone Regulations (the subject of the Joint Consultation Paper No. 191);

(b) substitution of existing provisions relating to the issue and renewal of Commercial Licences (including adoption of trading names) with new provisions in the DIFC Operating Law and Regulations;

(c) alignment of Company annual reporting with annual reporting by other DIFC registered or incorporated entities in the form of a Confirmation Statement, also to be effected in the DIFC Operating Law and Regulations (the subject of Consultation Paper No. 6);

(d) consequential changes to reflect changes in the Law (e.g. abolition of minimum capital requirements);

(e) adoption of a general requirement for companies to file accounts with the Registrar (unless exempted by the 2018 Proposed Companies Law or other stand-alone companies regulations); and

(f) substitution of new Standard Articles for the existing Standard Articles.

2. Consultation Paper No. 6 of 2018 - new DIFC Operating Law and Regulations and related legislation

The key aspects of the legislative proposal include:

(a) a framework for the exercise of all of the powers of the Registrar of Companies (“the Registrar”) under the Proposed Law in relation to the regulation of all DIFC registered entities and the grant of exemptions, temporary licences and commercial permissions thereunder;

(b) formalisation and standardisation of arrangements relating to names, trading names and registered offices;

(c) introduction of a requirement for an annual confirmation statement to be filed by all DIFC Registered Entities to update their registered details on the public register maintained by the Registrar (which in the case of companies replaces the Annual Return); and

(d) a framework for the issue of certificates and registrations to an entity or arrangement established under DIFC Law that requires it for the purposes of the laws of other jurisdictions.

3. Consultation Paper No. 7 of 2018 - Ultimate Beneficial Ownership Regulations

The key features of the legislative proposal include:

(a) formalising a requirement for production of ultimate beneficial ownership information on all DIFC entities at the point of incorporation or registration as the case may be;

(b) placing positive obligations on DIFC entities to obtain and maintain up-to-date information on their ultimate beneficial owners at all times;

(c) imposing a duty on each DIFC Reporting Entity to notify the Registrar of the fact that a change in ultimate beneficial ownership has occurred throughout its lifecycle (and, in the case of NPIOs, to confirm their entitlement to exempt status) as part of its annual reporting obligations (in the form of a Confirmation Statement to be effected in the proposed DIFC Operating Law and Regulations);

(d) incorporating appropriate privacy protection mechanisms for UBO information; and

(e) imposing appropriate sanctions for non-compliance.

4. Joint DFSA and DIFC Consultation Paper No. 191 - Protected Cell Company Regulations and Investment Company Regulations

The key features of the legislative proposal include:

(a) a more comprehensive ‘conflict of laws’ provision to ensure that the DFSA regime applicable to PCCs and ICs prevails over any inconsistent provisions in the Companies Law regime;

(b) changes to bring greater visibility to the DFSA’s due process procedures and the Financial Markets Tribunal’s role relating to DFSA decisions applicable to PCCs and ICs;

(c) application of the accounting and audit requirements under the DFSA regime to both Insurers and Funds using the PCC or IC structure;

(d) removing some ambiguities relating to dividend distribution requirements in the Companies Law to Funds; and

(e) removing a number of other ambiguities and inconsistencies.

The above legislative proposals have been posted for a 30-day public consultation period with the deadline for providing comments ending on 24 June 2018.

The consultation papers and legislative proposals can be accessed by visiting:  www.difc.ae/laws-regulations/consultation-papers