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15 December 2008
On November 7 2008 the Special Purpose Company Regulations were enacted, allowing special purpose companies (SPCs) to be formed in the Dubai International Financial Centre (DIFC).
The apparent intention of the regulations is to provide for a company format which will enable the DIFC to compete with key offshore jurisdictions which allow the formation of SPCs. SPCs can be formed in a relatively short period of time (approximately three days) and relatively inexpensively (the DIFC charges a one-off incorporation fee of $1,000 and an annual fee of $1,000 is payable thereafter (Appendix 1 to the regulations)). The minimum share capital required is $100 (Regulation 3.1.2).
With regard to office space, which is at a premium in the DIFC and represents a considerable expense for companies incorporated in the DIFC, the regulations require that SPCs have a registered office in the DIFC (Regulation 3.4.2). However, each SPC is required to receive corporate administration services from a corporate service provider which is either registered in the DIFC or licensed in a jurisdiction recognized by the Dubai Financial Services Authority or approved by the DIFC registrar of companies (Regulation 3.4.1). As long as such corporate service provider can provide the SPC with a registered address in the DIFC (by the corporate service provider being located in the DIFC), the SPC can fulfil the requirement of having a registered office in the DIFC without having to rent its own office space.
Applications for incorporation of an SPC may be filed electronically (Regulation 7.1) and documents originating from foreign jurisdictions need not be legalized.
SPCs may be formed for the following purposes and are prohibited from undertaking any other activities (Regulation 1.1.6 and Regulation 2.1):
As far as financial services are concerned, SPCs may:
An SPC may have no more than three shareholders (Regulation 4.1) and must have a minimum of two directors (Regulation 6.1). Although the directors are not required to be resident in Dubai (Regulation 6.1), the majority must be employees of the SPC's corporate service provider (Regulation 6.2). The corporate service provider must also act as the SPC's secretary (Regulation 6.3).
An SPC is required to file the following documents with the registrar of companies:
An SPC is required to make no other filings, including annual returns or accounts (or audited accounts) (Regulations 8 and 9). There is also no requirement for SPCs to hold annual shareholders' meetings (Regulation 5.1).
The DIFC has previously stated its intention of supporting the increasing number and growing sophistication of transactions taking place in the financial centre by, among other things, committing to international best practices in the area of securitization and other structured finance transactions. By adopting these regulations, the DIFC appears to have given effect to these commitments and to its aim of wanting to support key players in their sectors of activity, while remaining faithful to its founding principles of integrity, transparency and efficiency. Time will tell whether the introduction of SPCs will have a positive impact on securitization transactions in the fields of both Islamic and conventional finance in the DIFC.
For further information on this topic please contact Pier Terblanche at Taylor Wessing (Middle East) LLP by telephone (+97 14 332 3324) or by fax (+97 14 332 3325) or by email (email@example.com).
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