Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has enacted changes to the Dubai International Financial Centre authority’s legal and regulatory framework (New DIFC Law).
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 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 the 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 the DIFC.”
The new law replaced the former Companies Law and its operating regulations. We will glance through the key changes under the Companies Law and Regulations and Operating Law and Regulations.
Key Changes to the Former Companies Regime
What are the objectives of the legislative changes?
The legislative changes are aimed at providing flexibility to the companies operating in the DIFC. The law further aims to enhance the business environment and reduce entry barriers in the DIFC. Moreover, it will increase the cost-efficiency and flexibility of small businesses, which constitutes a major portion operating within the DIFC.
As per the law, the Free Zone companies should appoint an auditor from those approved by the Free Zone Authority. In practice, the auditing services should only be delivered by audit firms that hold a valid professional license under the Economic Department. Eligibility of a firm is a key factor to consider when hiring an Auditor. Otherwise, you face the full force of the law.
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