In October 2024, DMCC, one of the oldest and most popular free zones in Dubai (UAE), significantly updated its Company Regulations. The revised rules expand the opportunities for company formation in DMCC and facilitate incorporation procedures, further enhancing the competitiveness of this UAE Free Zone. The most notable changes and innovations are as follows:
- It is now possible to deposit the share capital to a company account on the DMCC portal during the incorporation (rather than to a bank account);
- It is now possible to nominate share capital in a foreign currency (other than UAE dirhams);
- DMCC has added new types of licenses – special purpose vehicles (SPV), holdings, family offices and freelance;
- DMCC has introduced a new company form – Companies Limited by Guarantee;
- The minimum age of company directors, secretaries and managers has been reduced to 18 years;
- The Free Zone has clarified re-domiciliation procedures and other corporate issues.
The revised DMCC Company Regulations, Licensing Rules, and the new Companies Limited by Guarantee Regulations and Family Office Rules came into force on 10 October 2024.
New provisions in DMCC Company Regulations
- In DMCC, it is no longer necessary to confirm payment of share capital by depositing the amount into a bank account, except where the amount of share capital exceeds AED 50,000 (or equivalent in another currency).
- Where the share capital is AED 50,000 or less, the share capital amount may be deposited in the company’s DMCC portal account during the incorporation. Companies can use the amount deposited in such accounts to pay for the services they need (such as licensing, leasing, visas, etc.). A company that deposits its capital in the DMCC portal account may obtain a Certificate of Share Capital Deposit from the Free Zone Authority.
This mechanism will be especially convenient for those company founders who, for various reasons, face a lengthy procedure for opening bank accounts.
| Currency |
A company can now denominate its share capital in a foreign (non-UAE) currency approved by the Registrar. Previously, it could only be expressed in UAE dirhams (AED). |
|---|---|
| Bonus Shares |
As part of the alteration of share capital, companies can issue bonus shares out of both retained earnings and share premium (the excess of the issue price of shares over the par value). |
| Redeemable Shares |
A company may, if authorised by its articles, allot and issue redeemable shares either in accordance with their terms or at the option of the company or the shareholder. The company must state the terms of redemption before the shares are allotted. |
| Classes of Shares |
The restriction on the proportion of shares of different classes has been removed, allowing companies to choose the desired capital structure. Previously, 80% of a company’s total number of shares had to be ordinary shares, and only the remaining 20% could belong to other classes. |
Transfer of incorporation (re-domiciliation)
- The certificate of continuation will be issued to the company redomiciling in the DMCC Free Zone before the certificate of discontinuation is issued by the relevant authority of the jurisdiction from which the company is transferring.
- Upon receipt of the certificate of continuation from the DMCC Authority, the company must, within 90 days from its date of issue, obtain a certificate of discontinuation from the competent authority of its former jurisdiction.
This rule now reflects the usual sequence of steps: first, the new jurisdiction (DMCC) confirms the transfer of incorporation, and then the previous jurisdiction records the discontinuation of the legal entity.
Bespoke articles of association
If a company adopts its own articles of association different from the DMCC standard articles, it may provide (at the discretion of the Registrar) either –
- a legal opinion or
- a declaration from the shareholders or directors (in a form satisfactory to the Registrar)
confirming that the proposed articles are not contrary to the Company Regulations. Previously, only a legal opinion was allowed for this purpose.
If the Registrar finds that the articles of association do not comply with the Companies Regulations, the Registrar may require the company to amend the articles within 20 business days.
The age of directors and other officers
The minimum age required for a person to be appointed a director, secretary, or manager has been reduced from 21 to 18. This rule provides greater flexibility when appointing senior positions in the company.
Pre-insolvency procedures
The following requirements have been removed:
- To send a report to the Registrar summarizing the issue and the action the company proposed to take if the company’s losses exceeded 85% of its share capital;
- To convene a general meeting proposing a resolution to voluntarily wind up or recapitalize the company if its losses reached 75% or more of its share capital. Instead, the company must now only notify shareholders within 21 days of the extent of its losses.
New types of licenses
The updated Licensing Rules in DMCC provide for the new types of commercial licenses:
- SPV License;
- Holding Company License;
- SFO (Single Family Office) License;
- MFO (Multi-Family Office) License;
- Freelance License.
Special purpose vehicles (SPV) in DMCC
The new version of Company Regulations allows the incorporation of special purpose vehicles (SPVs) operating under the relevant license.
An SPV is a passive company used to achieve specific objectives (such as holding an immovable property or intangible assets, project financing, the establishment of a securitization or a structured investment vehicle, etc.).
An SPV cannot carry on operational business or hire employees. It can be incorporated as a private company limited by shares or by guarantee.
SPVs are exempt from the requirements:
- to have a secretary;
- to hold annual general meetings;
- to lease an office within the DMCC Free Zone (but the company must have a registered office address that can be an address of its corporate service provider in DMCC).
Holding companies in DMCC
A company may now apply for a Holding Company Licence. Companies with holding company licenses may not conduct operational activities but may exercise functions of a head office and hire employees.
This license category provides greater flexibility to structure entities in DMCC to suit the needs of groups of companies.
Family offices in DMCC
The new DMCC Family Office Rules provide for two categories of license that a legal entity carrying out family office services may obtain:
- Single Family Office (SFO) and
- Multi Family Office (MFO).
SFO services are non-financial services carried out by an entity in or from the DMCC for the wealth management of a single family. MFO provides the same services for more than one family. Family offices may not offer financial services regulated by the UAE Securities and Commodities Authority.
A company applying for an SFO licence must ensure that its directors, shareholders and ultimate beneficial owners are all members of the same family to which the company intends to provide services.
To obtain an MFO licence, a company must obtain prior approval from the DMCC Authority regarding each family for whom it intends to provide the services.
Freelance license in DMCC
An individual may apply for a freelance licence to conduct business as a freelancer. A freelance licence must relate to one or more approved freelance activities, which include the activities of designers, authors, web developers, translators, coaches, and others.
This license allows natural persons to conduct business from the DMCC independently without the need for an employment contract, sponsorship by an employer, or incorporation of a company.
Companies Limited by Guarantee
The definition
The DMCC has introduced regulations regarding a new form of company: a Company Limited by Guarantee. This is a private company without share capital. Its members can be individuals and/or legal entities.
The liability of members in such a company is limited to the amount that the members undertake to contribute to the company’s assets in the event of its liquidation. Therefore, members of the company do not need to contribute to the company’s capital as long as the company continues its normal operations.
A company limited by guarantee must have at least one director, a secretary (unless the company is an SPV) and a manager.
This form of company is suitable for organizations in both commercial and non-profit sectors, property management companies, clubs, societies, research or business associations, and other activities.
Members’ guarantees
Upon formation of a company limited by guarantee, each member must provide a statement of guarantee specifying that, in the event of liquidation, they will contribute to the assets of the company such amount as may be necessary for the:
- repayment of the debts and liabilities of the company assumed before it ceased to be a member;
- payment of the costs, charges and expenses of liquidation;
- adjustment of the rights of the contributors among themselves.
The statement may provide for an obligation to contribute such amount either while the person remains a member of the company or within a year after the cessation of the membership.
The guarantee amount is not an asset of the company but a contingent liability in the event of the company’s liquidation. It cannot be mortgaged or charged by the company.
- Stable jurisdiction;
- Freezones available;
- 100% foreign ownership.
