Updates to DMCC Rules and Regulations in Dubai

dmcc

The Dubai Multi Commodities Centre (DMCC) free zone registry has introduced significant changes to its rules and regulations, effective October 10, 2023. These updates aim to improve business flexibility and operational efficiency within the Dubai free zone, while simplifying legal frameworks for various types of companies and activities.

Limited by Guarantee Companies (CLG)

In 2023, the DMCC registry implemented a new set of rules for CLGs. These companies, which do not have share capital, limit members’ liabilities to a pre-defined amount payable only in the event of liquidation. CLGs are suited for entities such as trading and social enterprises, property management firms, clubs, associations, and professional organizations. The rules clarify members’ rights, liquidation procedures, and governance structures, offering a simplified legal framework for these entities. Additionally, CLGs domiciled outside DMCC can now redomicile into this free zone, facilitating the relocation of existing structures.

Special Purpose Vehicles (SPV)

SPVs can now register with the DMCC registry to hold assets or support projects without conducting operational activities. These companies are exempt from appointing a secretary or holding annual general meetings, simplifying their management under Dubai’s regulatory framework. An SPV is not required to lease premises within the DMCC free zone but must maintain a registered office address, which can be that of an approved corporate services provider.

Holding Companies in Dubai

DMCC-registered companies can now operate as holding companies, enabling more flexible structuring of corporate groups. A holding company does not engage in operational activities but may act as a headquarters and employ staff for this purpose, adhering to regulatory standards.

Freelance Activity in the Emirates

Individuals can now work independently within the jurisdiction of the DMCC registry without requiring an employment contract or commercial premises. An online list of approved freelance activities is available.

Company Regulation Updates

The DMCC registry has revised several aspects of its rules, including:

  • Share Capital, a crucial component of financial transactions in the UAE: Companies can now designate their share capital in currencies other than the UAE dirham, benefiting international businesses. They can also issue bonus shares from retained earnings or share premiums and reduce capital through various means.
  • Redeemable Shares, a key element for investors in the DMCC registry: Companies can now issue redeemable shares, providing greater flexibility in capital management.
  • Class Rights under Dubai’s regulations: Minority shareholder protections have been enhanced, particularly regarding class rights and share capital structures, in line with Dubai’s regulatory requirements. The 20% limit on non-ordinary shares has been removed.
  • Pre-Insolvency: Companies can now manage losses exceeding 75% of their share capital without immediately convening a general meeting for liquidation or recapitalization. They are no longer required to report losses exceeding 85% of capital but must inform shareholders if losses surpass 75%.
  • Audited Accounts and Financial Statements, essential for banking transparency: Holding companies must produce consolidated group accounts, while dormant companies are exempt from preparing and auditing individual accounts unless requested by shareholders representing at least 10% of the share capital.
  • Redomiciliation: The redomiciliation process has been clarified, ensuring alignment with other jurisdictions.
  • Branch Establishment: Any eligible entity, including those already registered with DMCC, can establish a branch within the free zone.
  • Company Articles: Companies adopting customized articles must provide a legal opinion confirming compliance with DMCC rules.
  • Directors and Corporate Governance: The minimum age for directors, secretaries, and managers has been lowered from 21 to 18 years.

These updates aim to enhance the flexibility and efficiency of business operations within the DMCC registry by providing clearer legal frameworks for various types of companies and activities.

Family Office Rules

The new Family Office rules:
(a) codify existing DMCC practices for the current Single Family Office (SFO) license, and
(b) introduce a new license category for entities seeking to offer Multi-Family Office (MFO) services within or from the DMCC registry.

These licenses establish a legal framework for family wealth management under the DMCC registry, in compliance with UAE regulations. Key elements include:

  • Investment Scope under Dubai’s rules: SFOs can only manage the wealth of a single family, while MFOs can manage wealth for multiple families, providing diversified options for investors. An entity can hold either an SFO or MFO license, depending on Dubai’s regulations.
  • Assets: SFO license applicants must have at least USD 1 million in investable assets. All shareholders and directors must belong to the same family, per UAE requirements. No minimum investable assets are required for MFO license applicants in the UAE.
  • Confidentiality: Information regarding SFO and MFO operations is kept confidential by the DMCC registry, with disclosure rights limited to family members or authorized representatives.

These reforms aim to strengthen the DMCC registry’s appeal as a prime destination for businesses and individuals. Through flexible corporate structures like CLGs and SPVs, as well as the introduction of licenses for freelancers and family offices, the DMCC registry positions itself as a competitive alternative to established free zones like ADGM and DIFC. These changes, including reduced capital requirements and expanded services, make the DMCC registry more attractive by offering greater operational flexibility and simplicity while meeting the needs of both local and international businesses.

If you wish to set up your company without utilizing this prestigious registry, we can support you from A to Z. Contact us for a free consultation at our offices in JLT: support@merritt.group.