Sheikh Mohammed enacts changes to the DIFC’s legal and regulatory framework
In his capacity as Ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, has enacted changes to the Dubai International Financial Centre (DIFC) Authority’s legal and regulatory framework.
The newly enacted laws, which update the DIFC’s companies and property regimes, as well as the overall operating environment for entities based in the Centre, aim to ensure that the DIFC remains the most sophisticated and business-friendly Common Law jurisdiction in the region.
The new DIFC Companies Law will now follow a public and private company regime after substantial research, consultation and global benchmarking to allow maximum flexibility, especially for small private companies. In addition, it will provide appropriate levels of oversight for complex corporate arrangements, such as those associated with listed entities, mergers, schemes of arrangement and debt restructurings.
The changes to the Companies Law are accompanied by a complete revamp of the Centre’s companies and operating regulations to facilitate ease of doing business, whilst complying with the latest requirements of the Financial Action Task Force and the Organisation for Economic Co-operation and Development on transparency of beneficial ownership and anti-money laundering requirements.
The changes to the Real Property Law and Strata Title Law implement an updated property regime that ensures better protection for owners and mortgage holders of DIFC properties, and also introduces an off-plan register and escrow requirements for developers.
Essa Kazim, Chairman of DIFC Authority Board of Directors and Governor of DIFC, said: "A robust and comprehensive legal framework is one of the foundations of a major financial hub, such as the DIFC, as it ensures businesses and investors can operate easily and with confidence. We continue to develop and adapt our legislative system, in line with international best practices, reinforcing our position as one of the world’s top financial centres."
He added: "In addition to elevating transparency standards and protecting purchasers and investors, the changes will continue to enhance our business environment and reduce barriers to entry, while increasing the cost-efficiency and flexibility of small businesses, which constitute an increasing number of companies operating within DIFC."
The drafts of the new legislation were subject to two rounds of public consultation and the Centre organised outreach sessions that attracted around 300 participants, resulting in valuable feedback from the community, which has helped to shape the amendments.
Companies Law, DIFC Law No. 5 of 2018, abolishes limited liability companies and introduces new classifications of public and private companies. It will also include the expansion of directors’ duties of DIFC companies and the introduction of restructuring and merger schemes to accommodate growing market consolidation activity.
Meanwhile, the New Operating Law, DIFC Law No. 7 of 2018 standardises the general requirements and the conduct of businesses operating within DIFC, as well as providing a framework for the role of the Registrar of Companies. The new law also introduced enhancements to the licensing regime, which will enable entities to conduct more business within, or from, the Centre, while ensuring whistle-blower protection provisions are in place.
The DIFC Real Property, DIFC Law No. 10 of 2018, has also been amended to ensure that purchasers get full disclosure on the developments and units being bought. Additionally, developers are now required to set up escrow accounts for the purposes of pooling sums paid by purchasers in an off-plan development.
The Strata Title Law Amendment Law, DIFC Law No. 11 2018, will expand the powers and functions of the Registrar of Real Property (RORP) to govern parties that are in breach of their obligations. The amendment will also allow DIFC Courts to hear directly from interested parties, allowing for disputes to be dealt with efficiently and impartially.
In addition, the DIFC has introduced Ultimate Beneficial Ownership Regulations (UBO), which require the production of ultimate beneficial ownership information on all DIFC entities, maintaining their accuracy and incorporating appropriate privacy protection mechanisms.
The changes come just weeks after the enactment of DIFC Regulatory Amendment Law, No. 6 of 2018, which aims to enhance the Centre’s Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) regime, ahead of the upcoming UAE Financial Action.