Updates to DMCC Rules and Regulations

The Dubai Multi Commodities Centre («DMCC») has introduced significant updates to its rules and regulations, which came into effect on 10 October 2024.

The changes aim to enhance the flexibility and efficiency of business operations within the «DMCC» free zone, while providing clearer legal frameworks for various company types and activities. These changes include updates to the «DMCC» Company Regulations, «DMCC» Companies Limited by Guarantee Regulations, Licensing Rules, and Family Office Rules.

For companies established in the «DMCC» and for investors wishing to find a free zone that is gaining more and more growth, here is an overview of the most significant/key updates that have just come into force:

Company Limited by Guarantee (“CLG”)

A new set of regulations were introduced to govern CLGs in «DMCC». CLGs do not have a share capital, and members’ liability is limited to an agreed amount, payable only in the event of liquidation. CLGs are suitable for organizations like commercial and social enterprises, property management companies, clubs, societies, and trade associations. The regulations specify membership rights, winding up procedures, and governance structures, offering a streamlined legal framework for these types of entities. Further, the regulations envisage re-domiciliation/continuance of non-«DMCC» CLGs into «DMCC», making it easier for organisations already set up outside the UAE to move their current structures to the UAE by moving their domicile to «DMCC» free zone.

Special Purpose Vehicle (“SPV”)

SPVs are now permitted to register in «DMCC» to hold assets or facilitate projects without engaging in operational business. They are exempt from having a secretary or holding annual meetings. They are passive holding companies used for specific objectives and are exempt from having a secretary and holding annual general meetings.

An SPV is not required to lease premises in the «DMCC» Free Zone, but it must maintain a registered office address. This may be the address of a corporate services provider registered with the «DMCC».

Holding Companies

«DMCC» companies can now have the activity of a holding company, allowing them to structure their corporate group with more flexibility. A holding company does not conduct operational business but may act as a head office and can also hire employees for this purpose. This allows entities to structure corporate groups more effectively without engaging in active business operations but with the flexibility to employ staff.

Freelancer Activity

Individuals are now allowed to operate independently under the «DMCC»’s jurisdiction without formal employment contracts or commercial premises. The list of approved freelance activities is available online at freelanceuae.com.

Updates to Company Regulations

The «DMCC» has updated several aspects of its company regulations, including:

Share Capital

Companies now have the flexibility to denominate share capital in currencies other than UAE Dirhams, which is beneficial for international businesses. Additionally, companies can issue bonus shares from retained earnings and share premiums, and reduce capital through a variety of methods.

Redeemable Shares

Companies are now allowed to issue redeemable shares, offering greater flexibility for capital management, such as reducing equity or avoiding shareholder dilution.

Class Rights

Protections for minority shareholders have been enhanced, particularly concerning the variation of class rights and share capital structures. Most importantly, the restriction limiting the proportion of non-ordinary shares to 20% has been removed.

Pre-Insolvency

Companies now have more discretion when dealing with losses exceeding 75% of share capital, without immediate obligations to call a general meeting at which a resolution for voluntary wind up or a recapitalisation of the company. Companies are no longer required to report losses exceeding 85% of share capital to the Registrar, instead, they must notify shareholders if losses reach 75% or more.

Accounts and Audited Financial Statements

Holding companies must prepare consolidated group accounts, while Dormant companies are exempt from preparing individual accounts and audits unless requested by shareholders representing at least 10% of its share capital.

Re-domiciliation

The process of re-domiciliation has been clarified, ensuring alignment with other jurisdictions.

Establishment of a Branch

Any eligible entity, including «DMCC» entities, can establish a branch in the «DMCC» Free Zone.

Articles of a Company

Companies adopting bespoke articles can now provide either a legal opinion or a declaration confirming compliance with the Company Regulations, as opposed to the previous regulations where it was required to provide the Registrar with a legal opinion.

Directors and Corporate Governance

The minimum age for directors, secretaries, and managers has been reduced from 21 to 18 years.

Family Office Rules

The new Family Office Rules (a) codify existing «DMCCA» practices and guidelines in respect of the existing «DMCC» license to carry out single family office (“SFO”) services, and (b) expand on this by introducing a new license category for an entity that wishes to carry out multi-family office (“MFO”) services in or from the «DMCC».

These licenses regulate the legal framework for family wealth management in «DMCC». Key considerations include:

Scope

SFOs can only manage the wealth of a single family, while MFOs can manage multiple families’ wealth. For the avoidance of doubt, an entity can only hold an SFO or MFO license in the «DMCC».

Assets

The applicant for an SFO must hold at least USD 1 million in liquid or investible assets, and all shareholders and directors must belong to the same family. There is no corresponding minimum investible assets requirement for the applicant for an MFO license.

Confidentiality

Filings and information regarding SFO and MFO operations are kept confidential by «DMCC», with limited disclosure rights to family members or authorized representatives.

Conclusion

The recent changes to the «DMCC» regulations, including updates to company structures, licensing rules, and the introduction of family office regulations, are aimed at making «DMCC» a more attractive jurisdiction for businesses and individuals. By offering flexible corporate structures, such as companies limited by guarantee and SPVs, as well as introducing freelancer and family office licenses, «DMCC» is positioning itself as a competitive alternative to other prominent free zones like ADGM and DIFC. These updates, including streamlined capital requirements and expanded service offerings, enhance «DMCC»’s appeal by providing greater flexibility and ease of business operations, catering to both local and international businesses.