Category Archives: Insight article

Introduction

On 12 November 2018, the Dubai International Financial Centre (‘DIFC’) enacted the following new laws and regulations (‘New Companies Laws Regime’):

1. Companies Law, DIFC Law No. 5 of 2018 (‘Companies Law’);
2. Companies Regulations;
3. Operating Law, DIFC Law No. 7 of 2018 (‘Operating Law’);
4. Operating Regulations; and
5. Ultimate Beneficial Ownership Regulations (‘UBO Regulations’).

The New Companies Laws Regime aims to reduce compliance requirements in order to create commercial flexibility for businesses, and seeks to clarify previously uncertain matters to ensure closer alignment with international best practice.

Under the New Companies Laws Regime, the DIFC Registrar of Companies shall monitor compliance with DIFC laws by relying on companies to individually establish appropriate systems for internal checks and balances. The Registrar of Companies’ supervisory role will be facilitated by the new comprehensive penalties regime and the certainty provided in respect of directors’ duties.

Key Changes under the New Companies Laws Regime

The New Companies Laws Regime repeals and replaces the former Companies Law, DIFC Law No, 2 of 2009 and its Regulations. Some of the key changes introduced by the new legislation include:

1. The introduction of two types of companies that can be incorporated in the DIFC: a private limited company and a public limited company.
2. The maximum number of shareholders that a private limited company can have is limited to 50 shareholders.
3. In terms of the company officers of a private limited company, the new Companies Law stipulates that only one director is required and there is no longer a mandatory requirement to appoint a company secretary.
4. In addition, there is no minimum capital requirement for private limited companies.
5. The new Companies Law does not recognise a limited liability company; all private companies are companies limited by shares.
6. The duties of the directors of a company have been expanded. The duties now include the following
   • – Duty to act within powers;
   • – Duty to promote the success of the company;
   • – Duty to exercise independent judgment;
   • – Duty to exercise reasonable care, skill and diligence;
   • – Duty to avoid conflicts of interest;
   • – Duty not to accept benefits from third parties;
   • – Duty to declare interest in a proposed transaction or arrangement; and
   • – Duty to declare interest in an existing transaction or arrangement.
7. New standard articles of association have been introduced.
8. The requirements in respect of amendment of the articles of association of a company have been modified.
9. The new Companies Law introduces pre-emption rights and sets out the exceptions to the same.
10. An annual general meeting is not mandatory for a private limited company unless it is required to do so under its articles of association.

The Operating Law and Regulations

The main aspects of the Operating Law and Regulations include:

1. The detailed provisions relating to conducting a business in the DIFC, specifically in relation to the license requirements;
2. The role and powers of the DIFC Registrar of Companies;
3. The list of possible contraventions by companies that are subject to fines; and
4. The requirement of filing an ‘Annual Return’ being replaced with the requirement to file a ‘Confirmation Statement’ at the time of license renewal.

The Ultimate Beneficial Ownership Regulations

The UBO Regulations introduce the entirely new requirement to maintain information about ‘Ultimate Beneficial Owners’ of DIFC companies.

Under the UBO Regulations, all entities operating in the DIFC must establish a register of ‘Ultimate Beneficial Owners’ within 90 days of the enactment date of the said Regulations. This information must also be filed with the DIFC Registrar of Companies.

In addition, all entities are required to create and maintain similar registers for ‘Nominee Directors’ within 90 days of the enactment date of the UBO Regulations. The details of the ‘Nominee Directors’ will also have to be files with the DIFC Registrar of Companies.

How we can help

We, at RIAA Barker Gillette (Middle East) LLP, can assist you with:

1. Incorporation of any type of companies and other entities in the DIFC;
2. Ensuring on-going compliance with the DIFC’s laws and regulations;
3. Advising on the recent changes enacted through the DIFC’s New Companies Law Regime;
4. Advising on the amendments of existing articles of association to ensure compliance with the DIFC’s New Companies Law Regime;
5. Advising on any other changes required in the management/structure/board of existing companies, etc.

For more information on how we can help, please contact Mr. Hasan Rizvi, Managing Partner.

The information mentioned in this article is current at the date of publication of this article and available from public sources. Nothing in this article constitutes legal advice and should not be construed as any form of advice.

INTRODUCTION

In an on-going effort to increase the economic competitiveness of the United Arab Emirates (“UAE”), the government and various free zones have adopted initiatives to draw both talent and businesses to the country. 2018 has already seen the introduction of the ‘Instant Licensing Service’ by the Dubai Department of Economic Development (“Dubai DED”), the Dubai DED’s Business Incubator License for small and medium sized enterprises and, the announcement of the 10 year visa for investors, leading professionals and outstanding students. In line with the initiatives mentioned above, the UAE free zones’ most recent developments include the creation of a freelancer permit, the introduction of a new type of commercial licence by the Dubai International Financial Centre (“DIFC”) and, the launch of a new commercial license for tech start-ups by the Abu Dhabi Global Market (“ADGM”).

THE FREELANCE PERMIT

Dubai’s Tecom Group, in partnership with the Dubai Creative Clusters Authority, has launched ‘Gofreelance’, an initiative that allows individuals to obtain freelancer permits for AED 7,500 per annum. The initiative by the Dubai based technology and media free zone aims to further the global recognition of Dubai as the innovation and talent hub of the Middle East.

At present, permits are only available for the education and media sectors with five licensed activities in the education sector and over forty activities in the media sector.  Additional sectors and activities are expected to be added over time.

The education freelancer permit will be registered with Dubai Knowledge Park (“DKP”) and allows for the inclusion of only one permitted activity, whereas the media permit, which will be registered with Dubai Media City (“DMC”), can have a maximum of three activities. Some of the education activities include roles of a Trainer, Researcher and Education Advisor, while the media activities range from Actor, Animator, and Illustrator to Lighting Specialist, Translator, and Wardrobe Stylist.

The application process is a simple three step procedure, which essentially involves submitting an online application; following the approval of the application, visiting the DMC or DKP (as applicable) to sign the requisite documents and pay the fee; and finally, receiving the freelance permit via e-mail. The annual fee for the freelance permit also includes access to the Tecom Business Centre.

A UAE resident who is sponsored by their spouse or parent or has a visa sponsored by their employer will need to obtain a No Objection Certificate from their sponsor in order to apply for the freelancer permit. Conversely, it is also possible for a candidate to apply for a visa under the freelancer permit for an additional fee; the visa will also allow the freelancer to sponsor his/her family.

The ‘Gofreelance’ initiative is an example of Dubai’s commitment to attracting talent and creating a competitive business environment. The initiative recognises that freelancers can provide businesses with flexibility and affordable services, and that novel professions such as content creators and social media managers that are created by the constantly developing media sector can be efficiently fulfilled by freelancers. Ultimately, the initiative also provides freelancers with more independence and the resources to explore opportunities.

It is also possible to obtain a freelancer permit from TwoFour54, the media and entertainment free zone in Abu Dhabi. An individual can obtain a 6 months license for a fee of AED 2,250 or a 12 months license for AED 4,500. There is an additional visa sponsorship fee of AED 3,300. TwoFour54 has also introduced a Freelance Relations Team which helps connect freelancers to local and international partners, and government entities. The Team also organises events to source and promote talent, and manages bills and contracting. The freelance license can have up to 3 activities and will also allow individuals to access the hot-desks at the free zone’s Business Centre.

Similarly, freelancer permits can also be obtained at the Fujairah’s Creative City.

NEW DIFC COMMERCIAL LICENSE

With the DIFC FinTech Hive considered the number one FinTech hub in the Middle East and South Asia region and ranked as one of the top ten FinTech hubs in the world, the DIFC has recently introduced a new commercial license for FinTech, RegTech and InsurTech firms. These firms which focus on developing technologies that benefit the financial industry, provide solutions relating to regulation, and assist insurance companies respectively, will be able to operate from within the DIFC free zone. The new initiative will also allow the firms to be part of the DIFC financial community comprising of over 22,000 professionals working in over 1,800 DIFC registered firms.

The new commercial license does not have any incorporation or registration fees, and allows firms to access the co-working space at the DIFC Work Hub which is located in FinTech Hive at DIFC. In addition, the DIFC has made the application a simple and straightforward process involving meeting with the DIFC Business Development team, submitting application documents, and receiving approvals for the license, visas and consent notifications.

It should also be noted that the DIFC’s independent regulator, the Dubai Financial Services Authority (the DFSA), already introduced the DFSA’s Innovation Testing License in May 2017. The Innovation Testing License allows qualifying FinTech firms to develop and test their concepts from within the DIFC without being subject to the regulatory requirements that would otherwise apply to firms conducting financial services.

NEW ADGM COMMERCIAL LICENSE

The ADGM’s commitment to facilitating economic diversification and innovation, and creating new opportunities for growth as set out in the UAE National Innovation Strategy and the Abu Dhabi 2030 Economic Vision, is evident in the launch of its new Tech Start-up License. Under the new initiative, a start-up firm can obtain a full operating license, apply for four residential visas, and meet the requirement of a registered address at a nominal cost of USD 700.

The ADGM’s aim is to support start-ups in their journey as they grow and expand their business by allowing them to take advantage of the financial free zone’s common law based legal framework, robust regulatory regime, flexibility provided in respect of structuring options, and access to its growing community of funds, banks, family offices and advisers.

In addition to the start-up license, the ADGM has also established the “Professional Services Support Programme”. The purpose of this unique facility is to help entrepreneurs build necessary business skills. The ADGM has partnered with various advisers to offer support to the start-up entities registered at ADGM in respect of legal, compliance, finance, accounting and VAT related concerns.

CONCLUSION

As a result of these various initiatives, the UAE was ranked as the most competitive economy in the Middle East and North Africa region for 2018 by the IMD World Competitiveness Centre. Overall, it was ranked as the 7th most competitive economy after being ranked 10th last year. The UAE is determined to outdo itself and reach the highest ranks; consequently, it is now waiting for the impact of the long term visa and the new foreign investment law which is expected to make restrictions on foreign ownership of onshore businesses less stringent, to unfold.

The information mentioned in this article is current at the date of publication of this article and available from public sources. Nothing in this article constitutes legal advice and should not be construed as any form of advice.