The Rise of DIFC SPCs
A Special Purpose Company (the SPC) is one type of legal entity that may be incorporated under DIFC law and is similar in some respects to the ordinary DIFC company limited by shares (an “Ltd.”). However, SPCs enjoy a number of features which differentiate them from Ltd. companies. The SPC is designed for structured finance transactions.
Establishing in the DIFC
The DIFC is a federal financial free zone with its own legal system, courts and financial services regulatory architecture distinct from that of the wider UAE.
An SPC offers a number of advantages shared by a DIFC Ltd. company. Including:
- No foreign ownership restrictions. Companies incorporated in the DIFC are not subject to foreign ownership restrictions imposed by UAE Commercial Companies Law.
- Tax neutral. There are no corporation, transfer, withholding, capital gains, inheritance or other taxes under DIFC corporate law and no stamp duty is payable on the transfer of shares in a DIFC company. Companies incorporated in the DIFC will not be subject to tax for at least 50 years from 2004. This guarantee is renewable.
- Compatibility with other offshore structures. DIFC companies are routinely and successfully used in complex structures involving entities incorporated in onshore jurisdictions, as well as in leading offshore jurisdictions such as Bermuda, the British Virgin Islands (“BVI”) and the Cayman Islands.
- GCC status. The DIFC may be attractive to parties looking to invest in other GCC’s jurisdictions outside of the UAE, who wish to use a jurisdiction that is flexible and operates a sophisticated and versatile body of corporate law
- UAE national status. A company (including an SPC) that is incorporated in the DIFC and is wholly-owned by UAE nationals is treated as a “national company” for onshore purposes within the UAE.
- Limited liability of shareholders. The liability of shareholders in an SPC is generally limited to the amount of their commitment to the SPC’s share capital.
- DIFC law and courts. An SPC enjoys being incorporated within the DIFC’s internationallyoriented and English speaking regulatory and legal system. DIFC corporate law is largely based on English common law and the DIFC Courts operate a system of binding precedent based on common law. An SPC is also able to avail itself of the DIFC’s advanced regime for the registration and enforcement of security interests.
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The Rise of DIFC SPCs
This article was first published in The Oath, Issue 52, May 2016