DIFC Active Enterprises - 10 Leaves

 

DIFC Active Enterprises

The Dubai International Financial Centre (DIFC) is a premier financial hub in the Middle East, Africa, and South Asia (MEASA) area and is one of the top 10 worldwide financial centers. With over 5,000 active registered firms and about 40,000 professionals operating within a thriving business ecosystem, the center offers a strong independent judicial system, a global financial exchange, creative architecture, and enabling support services.

With nearly 20 years of experience, DIFC has helped to facilitate investment and trade flows throughout MEASA, a region that has a combined population of almost three billion and a nominal GDP of roughly USD 8 trillion.

 

What are DIFC Active Enterprises?

The older DIFC Prescribed Regulations had provisions wherein Prescribed Companies could avail office space and hire employees. There were also some other offerings such as a technology holding company, that fell in between PCs and Commercial Holding companies.

The DIFC has now streamlined their offerings by issuing new Prescribed Companies Regulations, that make PCs pure passive vehicles.

Active Enterprises vs Prescribed Companies

 

The new DIFC Prescribed Company Regulations addresses a significant gap in the offerings from the center, where there was no product comparable to the Special Purpose Vehicle regimes that existed in many comparable jurisdictions. The earlier PC regime required a Qualifying Applicant or a Qualifying Purpose, both of which tied in the product to existing DIFC clients.

Under the new regime, Prescribed Companies can be established by qualifying applicants (GCC Persons, DIFC Persons etc.), for a qualifying purpose (aviation, maritime, IP, crowdfunding and structured finance), to hold GCC-registrable assets, or, in case none of these apply, through a DIFC Corporate Service Provider so as to provide the required substance.

In essence, this brings a new level of flexibility to the offering – for instance, you can now form a PC if you are from India, to hold an asset in Africa, by appointing a CSP at the DIFC. You can read all about DIFC Prescribed Companies in our detailed article here.

Since the Prescribed Company cannot have employees, the DIFC has spun off the Qualifying Applicant bit into a different product called Active Enterprises. One can set up Holding Companies, Proprietary Investment Companies and Managing Offices as an Active Enterprise, with visa options, provided that one has a tie-in to the center already.

Should I apply for an Active Enterprise or a Prescribed Company?

The choice depends on the nature of the applicant, and the intended activities.

Active Enterprises are meant to be active holding companies, proprietary investment vehicles and managing offices and can hire employees. PCs on the other hand, can be setup by various qualifying applicants, but are specifically used as special purpose vehicles, aviation and maritime structures, IP holding, crowdfunding and structured financing structures. Here is a simple chart to help you.

Active or Prescribed

 

Of course, we recommend that you get in touch with us for your specific requirements so that we can advise you better.

What are the activities allowed under a DIFC Active Enterprise?

The Active Enterprise can be used for three categories of activities – Holding Companies, Managing Offices and Proprietary Investment Companies.

 

Active Enterprises Permitted Activities

 

Holding companies - Includes firms engaged in holding the securities of (or other equity interests in) companies and enterprises for the purpose of owning a controlling interest or influencing the management decisions of these firms. The holding companies in this industry do not administer, oversee and manage other establishments of the company or enterprise whose securities they hold.

Managing Offices - Includes establishments (except government establishments) primarily engaged in administering, overseeing, and managing other establishments of the company or enterprise. These establishments normally undertake the strategic or organisational planning and decision making role of the company or enterprise. This activity is extended to allow providing services strictly to its group such as, but not limited to (Treasury services, IT Services, Administration services, Intra group, Corporate services and Advisory).

 

Active Enterprises Prop Investment Activities

 

Proprietary Investment Activities - Includes firms engaged in holding their own investment portfolio and forming, managing, and investing their funds in any business or firms which carry out various commercial activities, such as transport, contracting and financing activities. Besides other investments or shareholdings in commercial enterprises. This also includes the management of such subsidiary companies and the organization of their affairs.

Why should you set up an Active Enterprise in the DIFC?

Cost-effective

Setting up an Active Enterprise is relatively inexpensive. DIFC charges US$ 100 as an application fee (one-time) and an annual commercial license fee of US$ 1,000. Other charges may include Corporate Service Provider (CSP) fees for registered address and other related services.

Flexible Address Options

An Active Enterprise can have its own DIFC office space, a co-working desk, share office space with its DIFC affiliate, or use an appointed DIFC corporate service provider such as 10 Leaves to provide a registered address.

Ability to hire employees

You can hire employees under an Active Enterprise. In this case, you would have to avail office space and visa allocations are usually calculated as 80 sq.ft. per visa.

Common Law jurisdiction

The DIFC is a financial free zone with it’s own civil and commercial laws with access to DIFC Courts where proceedings are carried out in the English language under the familiarity of Common Law.

DIFC Advantages

 

Quick Registration

In-Principal Approvals may be granted within three business days from the application submission. Setting up the legal structure of an Active Enterprise with the DIFC Registrar of Companies may take 3-5 working days.

Globally competitive and attracted tax regime

An Active Enterprise may be subject to zero tax, based on certain qualifications. The maximum tax liability of an Active Enterprise will be 9%.

Transfer of Domicile

The DIFC allows for domicile of incorporated companies to and from the DIFC.

Other advantages

No attestations are required for corporate documents, zero currency restrictions, 100% foreign ownership and zero restrictions on capital repatriation.

What are the possible use cases for a DIFC Active Enterprise?

 

AE USE CASES

 

DIFC Active Enterprises can be used in a variety of structures. Here are a couple of use-cases. In the first, The Active Enterprise is used as a proprietary investment company to invest in manufacturing units around the world, and also centrally manage the financing and operational activities of these units. The shareholders can use their existing DIFC Entity (other than a Prescribed Company, Foundation or NPIO) to hold shares in the Active Enterprise, or also hold these shares directly, given that they are controllers of the existing DIFC Entity.

In the second use case, an Active Enterprise is used as a Managing Office to centrally manage the affairs of the group companies in different parts of the world.

Can I hold property in the name of a DIFC Active Enterprise?

Yes, you can.

Within the United Arab Emirates

A DIFC Active Enterprise is allowed to hold property in the Emirate of Dubai (both Muslims and non-Muslims) in designated areas for foreign ownership. The DIFC has an existing MOU with the Dubai Land Department to this effect.

An application can be made for the transfer fee to be reduced from 4% to 0.125%, in instances where it can be demonstrated that the beneficial owner of a Dubai property being legally transferred to the Active Enterprise is the same.

Designated areas include:

1. Business Bay.

2. Dubai Sports City.

3. Dubai Marina.

4. Dubai Motor City.

5. Emirates Hills.

6. Dubai South.

7. International City.

8. Jumeirah Lakes Towers.

9. Jumeirah Islands.

10. The Palm Jumeirah.

11. Arabian Ranches.

12. The World Islands.

13. Mirdif (specified plots).

14. Downtown Dubai.

15. Dubai Investment Park.

16. Old Town.

17. Discovery Gardens.

18. Burj Khalifa.

19. Meydan.

20. Jumeirah Beach Residence.

21. Falcon City.

22. Jumeirah Village.

Outside the United Arab Emirates

The Active Enterprise can be used to hold properties in the wider GCC region and worldwide as well.

 

Features of Active Enterprises

 

Can a DIFC Active Enterprise be a shareholder in other companies?

Yes, Active Enterprises can be the direct shareholders of companies established in the UAE, GCC and anywhere else in the world.

Who can establish an Active Enterprise in the DIFC?

1. A DIFC Registered Entity other than a Prescribed Company, Foundation and a Non-Profit Incorporated Organisation.

Active Enterprise Qualifications

 

  1.  Controlling shareholder or UBO of a DIFC Registered Entity, other than a Prescribed Company, Foundation and a Non-Profit Incorporated Organisation.
  2.  A Government Entity – which means any of the following:

      (a) the Federal Government, the government of Dubai or the government of any Emirate;

      (b) a person in which a government entity listed in (a) above owns (directly or indirectly) an interest of at least twenty five percent (25%) (or such other percentage approved by the Board of Directors of DIFCA);

      (c) or is otherwise Controlled by a government entity listed in (a) above.

  1. A Family Operated Business.

What does the DIFC consider as a qualifying family operated business?

As per the DIFC, this means a business that meets the definition of a Family under the Family Arrangement Regulations and has a large presence in the UAE, that meets at least 2 of the following criteria:

1. total asset value of at least USD10 million;

2. at least 100 employees;

3. at least 30,000 sq. ft. of space in the UAE (including offices, retail, schools, manufacturing, etc.); or

4. all the shareholders are UAE nationals or the common ancestor for the business is a UAE national.

What is the process to set up an Active Enterprise in the DIFC?

DIFC Active Enterprise Setup

Setting up an Active Enterprise in the DIFC involves the following steps:

  1. Collation of documents – This includes detailed KYC on the shareholders and Directors of the AC.
  2. Finalisation of Registered Address – this can be a physical address at the DIFC or can be provided by 10 Leaves as the CSP and Registered Agent. Do note that the Active Enterprise will not be able to apply for visas, if it uses a registered address provided by a CSP.

AE REGISTERED ADDRESS

  1. Initial submission to the DIFC Registrar of Companies.
  2. DIFC Review/clarifications and responses.
  3. Preparation of the legal documents – Resolutions and Articles.
  4. Final Approvals – the Active Enterprise is now formed.

What is the legal system that is followed in the DIFC?

The DIFC Courts are an independent English language common law judiciary, based in the DIFC with jurisdiction governing civil and commercial disputes nationally, regionally and worldwide. The Courts began operations in 2006.

Originally, the jurisdiction of the DIFC Courts was limited to the geographical area of the DIFC. The signing of Dubai Law No 16 in 2011 allowed the DIFC Courts to hear any local or international cases and to resolve commercial disputes with the consent of all parties.

Does a DIFC Active Enterprise require a Registered Agent?

An Active Enterprise in the DIFC is required to have a registered office in the centre, where all relevant communications and notices can be delivered. This can be accomplished by:

1. Leasing office space in the DIFC;

2. sharing office space with an affiliate established in the DIFC; or

3. appointing a Registered Agent.

What is a Registered Agent for a DIFC Active Enterprise?

A Registered Agent is a “Qualified Person” (such as 10 Leaves) licensed by the DIFC and registered with the DFSA as a Company Service Provider. The registered agent provides the following services:

1. Assistance in setup of the AE.

2. Preparation and filing of the Articles of the AE.

3. Providing the Registered Address for the AE.

4. Administration of the AE and secretarial services.

5. Accounting and bookkeeping services.

6. Compliance and AML services.

Are there any naming requirements?

The name of a DIFC Active Enterprise must end with the word ‘Limited’ or ‘Ltd’. It should also comply with the naming rules that are in force at the DIFC.

Does the Active Enterprise have to maintain annual accounts?

Yes. Accounts would have to be prepared and maintained as per DIFC Companies Law.

Does the DIFC have a time limit for Active Enterprises, like they do for Prescribed Companies?

No. Active Enterprises can continue until perpetuity.

In the case of Prescribed Companies, where the PC has been established to hold or control GCC Registrable Assets, or for a Qualifying Purpose, it has six months (from the license issuance date) to confirm to the Registrar that it holds or controls one or more GCC Registrable Assets or has begun to carry out it’s Qualifying Purpose.

Can the ownership of existing operational business be transferred into the DIFC Active Enterprise, without any disruptions?

Yes, the transfer of the shareholding of existing companies within the UAE and the GCC is a simple process. In essence, it is a share transfer in the operational entity.

Does the DIFC Active Enterprise require any kind of local representation at the DIFC?

The DIFC PC can use the address of a registered agent – it does not have to lease an office separately, although it has an option to do so.

Does the DIFC have special courts for DIFC Active Enterprises?

The DIFC Courts have jurisdiction over DIFC Active Enterprises, and the Regulations specify a pro-active role for DIFC Courts.

Can the DIFC Active Enterprise be Sharia'-compliant?

The DIFC AE can apply Sharia' principles to it's governance and consolidation of underlying assets. 

Do DIFC Active Enterprises have to file ESR reports every year?

The UAE Economic Substance Regulations were introduced in April 2019 and implemented as part of the UAE’s commitment as a member of the OECD Inclusive Framework, and in response to an assessment of the UAE’s tax framework by the European Union Code of Conduct Group on Business Taxation. DIFC Active Enterprises may fall in the scope of these regulations.

Can an Active Enterprise apply for residence visas and work permits?

Yes it can, provided that it has office space leased in the centre, and is not using the services of a Registered Agent to fulfil this requirement.  

The Government Services Office in the DIFC is dedicated to providing a wide range of administrative services, and one of these is the issue and renewal of employment visas. The DIFC offers visas based on the amount of office space availed, with roughly 80 sq.ft. per visa allocation.

What is an Establishment Card?

The establishment card is a card issued by the General Directorate of Residency and Foreigners Affairs in Dubai to allow an entity to submit employment visa applications. It is for the entity who requires visas under DIFC and will not be required for those who are not in need of any visa. You can apply for visas under DIFC once the Active Enterprise is incorporated.  

What is a Personal Sponsorship Deposit (PSA)?

The Personnel Sponsorship Agreement (PSA) is an agreement that must be signed with DIFC Authority if the Active Enterprise wishes to sponsor employees.

DIFC DEWS

The DIFC has implemented a path-breaking Employee Workplace Savings Plan, called DEWS, to restructure the previously defined employee benefit plan into a funded and professionally-managed, defined contribution plan. The DEWS initiative also offers a voluntary savings plan, allowing employees working in the DIFC to secure their financial future in an easy-to-manage fashion. DEWS has found significant traction within the centre, and together with the DIFC Employment Law, provides employees and employers with a world-class Human Resources framework.

Gratuity calculation is 5.83% of employee’s current basic salary up to five years of service and 8.33% for the period in excess of five years.

Do I need to be physically present to apply for the Active Enterprise?

No, the DIFC client on-boarding system is fully digital and the process is done online. 10 Leaves is a DIFC-registered CSP and will assist you throughout this process.

How much does it cost to setup an Active Enterprise in the DIFC?

AEs are pretty cost-effective, with DIFC fees as low as US$ 100 as a one-time fee for applications and US$ 1,000 as license fees on an annual basis. Additional fees would include annual filing of the Confirmation Statement (US$ 300) and CSP professional fees.

We can structure your Active Enterprise, including drafting of all required documents through 10 Leaves Legability. Do contact us for a customised quote!

How Can 10 Leaves help you?

10 Leaves is a Corporate Service Provider at the DIFC. 

We offer the following services related to DIFC Active Enterprises:

  • Structuring and customization of the Articles of Association – in partnership with Legability, our legal platform, we are able to customize the Foundation to suit your requirements. We are able to factor in Common Law, UAE Law, European laws, Kuwaiti and Saudi Law, to deliver a highly personalized document for your requirements.
  • Setup of the AE.
  • Registered Address.
  • Nominee Directorship and Authorised Signatory Services.
  • Additional consultations on DIFC and International Foundations in Luxembourg.

 Are you looking to set up an Active Enterprise in the DIFC? Contact us today!

 

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