The definitive guide to Variable Capital Company Structures in the DIFC

Article Summary

1. What a DIFC VCC is

A Variable Capital Company (VCC) is a flexible asset-holding vehicle where share capital equals Net Asset Value (NAV). Investors can enter/exit easily through NAV-based subscriptions and redemptions, and distributions can be made from capital — unlike traditional fixed-capital companies. 

2. Segregation & structure options

A VCC can operate with either Segregated Cells (SCs) or Incorporated Cells (ICs). SCs are ring-fenced compartments within one legal entity; ICs are fully separate legal companies. Both isolate risk and assets, but ICs provide stronger legal independence and spin-out flexibility.

3. Non-regulated asset platform

A VCC cannot conduct regulated financial services itself. It acts as an asset-holding and structuring platform. Regulated activities (fund management, crowdfunding, advisory) must sit at the manager/platform level — not inside the VCC.

4. Use cases are extremely broad

VCCs are ideal for family offices, private investment pools, property portfolios, IP holding, aircraft/yachts, continuation vehicles for legacy PE/VC assets, crowdfunding deal compartments, and corporate collateral/securitisation structures — all with liability ring-fencing.

5. Operational design

VCCs cannot employ staff. All administration must be outsourced to a DIFC Corporate Service Provider. They are designed as pure holding vehicles with centralised governance, accounting, and NAV reporting across cells.

6. Capital flexibility vs traditional companies

Unlike fixed-capital companies that require formal legal procedures for share changes, a VCC behaves like an investment fund: capital expands/contracts automatically with asset value, redemptions occur at NAV, and multi-cell ring-fencing is built in.

7. Strong creditor and restructuring protections

Regulations strictly limit creditor claims to the relevant cell’s assets. Transfers or mergers between cells require notices, resolutions, and creditor safeguards. VCCs and ICs can convert, re-domicile, or restructure with legal protections for creditors and minority shareholders.

8. How 10 Leaves supports VCC structures

10 Leaves acts as DIFC Corporate Service Provider and legal structuring partner: VCC incorporation, cell architecture design, Articles drafting, share/NAV mechanics, ongoing corporate secretarial services, restructuring, tax/accounting coordination, and full legal documentation for asset transactions — tailored for family offices, investment vehicles, and complex cross-border structures.

DIFC Variable Capital Company (VCC) Structures

The Dubai International Financial Centre (DIFC) has recently introduced the Variable Capital Company (VCC) framework, designed for flexible investment vehicles. This adds to the large portfolio of Common Law structures that the DIFC currently offers, ranging from Investment companies, SPVs and Foundations, to Single Family Offices and Active Enterprises. 

What is a Variable Capital Company?

A Variable Capital Company (VCC) is a flexible corporate structure specifically designed for collective investments, especially in jurisdictions like Singapore and Mauritius. Unlike traditional companies with a fixed capital, a VCC has a variable capital structure that allows shares to be issued or redeemed easily, giving investors the option to enter or exit the structure without the usual capital reduction restrictions. This flexibility extends to paying dividends out of capital, which is typically not allowed in standard companies.

Key features of a VCC include:

The VCC structure is ideal for applicants managing proprietary investments/family offices due to following advantages:

1. Benefit from flexible share capital i.e. share capital is equal to net asset value, providing flexibility for issuing and redeeming shares and enabling efficient capital inflows and outflows.

2. Segregate assets/investment strategies - in the context of family offices, it enables different members of a family to engage in proprietary investment activity without losing the benefits of economies of scale which flow from collective investments, and provides additional flexibility and reduced procedural requirements for share issuance and redemptions. 

3. Benefit from collective oversight, management and other resources.

4. VCC with Segregated Cells receive consolidated tax treatment (one legal entity), each Incorporated Cell must file and account for tax separately. 

Can Variable Capital Companies in the DIFC be used to provide financial services, or to act as a Domestic Fund?

While DIFC VCCs are not themselves regulated fund vehicles, the Regulations draw a clear distinction between operating financial services and holding assets. A VCC (or its Cells) may not be used by an Authorised Firm to carry on Financial Services or make public offers of securities with DFSA approval. However, the Regulations expressly permit VCCs to act as asset-holding vehicles for funds, crowdfunding structures and family offices, provided the regulated activity sits at the platform or manager level and not within the VCC itself.

What kind of commercial license will a DIFC VCC and its Incorporated Cells hold?

The licensed activity for VCCs will be Holding Company. 

How can DIFC VCC be used as family investment vehicles?

A large family office with several family members holding different investment preferences can use a VCC with Segregated Cells to structure its entire proprietary investment portfolio. For example, Cell A may hold a conservative portfolio of dividend-yielding blue-chip shares; Cell B can pursue a higher-risk venture capital strategy; Cell C can hold international real estate assets; and Cell D can be dedicated to private debt or sukuk investments. 

Each Cell has its own Net Asset Value, allowing the family to invest and redeem capital at the Cell level without affecting other investments. This structure prevents cross-contamination of liabilities and makes succession, inheritance, and governance far more efficient—especially where different branches of the family maintain their own wealth strategies while using a common shared platform for administration and reporting.

A private investor or family with several legacy private equity or startup investments can also create a Secondary or Continuation Structure using a VCC. They can transfer old or illiquid assets—such as early-stage startup shares, private equity fund interests, or partnership units—into separate Cells. For example, SC A may hold a legacy VC investment nearing exit; SC B may hold older PE fund LP interests; and SC C may contain pre-IPO shares. The VCC allows valuation, redemptions, and capital contributions at NAV, which helps rationalise portfolios that were previously illiquid or poorly structured. This makes it easy to admit new family members or co-investors into specific continuation pools without restructuring the entire vehicle.

Can DIFC VCC structures be used to hold property?

Yes, they can. 

A property-focused investor acquiring multiple UAE and GCC properties can use a VCC where each property (or project) is held through its own Cell. For example, a Dubai villa could sit in SC 1, a Sharjah warehouse in SC 2, an Abu Dhabi apartment block in SC 3, and a land parcel in Ras Al Khaimah in SC 4. Each property is ring-fenced for liability purposes—mortgages, tenant claims, or disputes tied to one property cannot spill over to others. NAV-based share capital allows the investor to bring in family members, co-investors, or international partners at the specific property-level without affecting ownership of the wider portfolio. Compared to traditional SPV stacks, the VCC offers a single, consolidated governance and accounting architecture, significantly reducing cost and administrative burden.

How can DIFC VCC be used for Intellectual Property protection?

The VCC can be structured for both IP licensing and royalty consolidation. 

A technology company or entrepreneur developing software, patents, or digital assets can use an Incorporated Cell VCC to separate different intellectual property lines. For example, IC A can hold patents related to artificial intelligence; IC B can hold trademarks and branding IP; IC C can hold licensing agreements for SaaS products; and IC D can own copyright-based assets such as training data or content. Each IC is a separate legal person, which makes it easier to enter licensing deals, hold contracts, and ring-fence liabilities from infringement claims or commercial disputes. At the same time, the VCC can centralise valuation, NAV calculations, compliance, and management reporting. This creates a clean, investor-ready structure, commonly used by scaleups and founder-led businesses preparing for international expansion or strategic acquisitions.

Can DIFC VCC be used to hold aircrafts and yachts?

Yes, they can. 

A private client purchasing an aircraft or yacht may use a VCC with Segregated Cells to isolate each high-value asset. Cell A could hold a Gulfstream jet, while Cell B holds a 40-meter yacht. Each Cell has separate financing, insurance, maintenance obligations, and operating agreements. If liabilities arise from an incident involving the yacht, they cannot affect the aircraft or the owner’s other assets in the VCC. This structure is often used when asset-holding and financing arrangements require transparent NAV-based reporting, simplified accounting, and clean separation of operational risks. It also allows co-owners to subscribe for Cell Shares reflecting their economic participation only in the aircraft or yacht they co-own.

Also, a single wealthy individual with a diverse portfolio—equities, crypto, real estate, private assets—can use different Cells to segment each strategy. SC 1 may hold public equities, SC 2 crypto assets, SC 3 private debt, SC 4 real estate investments, and SC 5 alternative assets such as art or collectibles. By having each asset class in a separate Cell, the investor can easily track NAV movements, rebalance, bring in joint investors to a specific Cell, or divest a single Cell entirely by transferring ownership of its Cell Shares. This creates a modern, flexible alternative to having multiple SPVs across jurisdictions.

Can DIFC VCC be used in crowdfunding structures?

Operating a crowdfunding platform requires DFSA approval, however, DIFC VCCs can be used as the underlying asset-holding vehicles used by investors. A crowdfunding platform or marketplace may use a VCC as a non-regulated asset-holding structure where each Cell holds one investment deal. For example, SC 1 could hold equity in a logistics company funded by participants; SC 2 could hold a revenue-sharing interest in a café; SC 3 could hold a debt note issued by a small business; and SC 4 might hold tokenised real estate shares (as long as the VCC itself does not issue financial products to the public). This structure allows clean separation of risks per deal and reduces legal complexity for co-investors, who can subscribe for Cell Shares corresponding to the specific investment.

Can Variable Capital Companies be used for corporate structuring?

Yes, they can. For instance, a UAE-based corporate group can use a VCC to organise various financing and collateral arrangements without entering regulated territory. For example, Cell A may hold a pool of receivables used as collateral for inter-company financing, Cell B may hold intellectual property pledged to lenders, and Cell C may hold inventory or equipment for secured lending purposes. The VCC allows ring-fenced assets, NAV reporting, and simplified securitisation-style structuring without the need for a full DFSA licence, as long as the VCC itself is not offering securities or managing investments for third parties.

What is the structure of a Variable Capital Company in the DIFC?

A VCC is a Private Company that is: 

1. Incorporated as a Variable Capital Company in the DIFC; 

2. Private Company previously incorporated in the DIFC, and converted into a Variable Capital Company; or 

3. Continued in the DIFC as a Variable Capital Company.

Flexible Share Capital: Share capital is equal to net asset value, providing flexibility for issuing and redeeming shares and enabling efficient capital inflows and outflows.

Traditional fixed-capital company restrictions on paying dividends, issuing shares, and redeeming or buying back shares are removed. Instead, any issuance, reduction, or distribution must be carried out in proportion to the Net Asset Value of the VCC or the specific Cell concerned.

How does this differ from the Protected Cell Companies (PCC) and Incorporated Cell Company (ICC) structures already available in the DIFC?

The DIFC VCC is designed for diverse investment and asset-holding, including family and proprietary investment portfolios. They complement existing PCC and ICC structures, providing more options for asset segregation and fund management. VCCs operate in a non-regulated environment, offering a streamlined solution accessible to a wider range of participants, including private and family offices, promoting financial inclusion and innovation.

No employees at VCC Level

Under the DIFC VCC Regulations, a Variable Capital Company is not permitted to employ staff. All operational, administrative and management functions must be outsourced to Corporate Service Providers, investment managers, advisers etc. This reinforces the VCC’s rule as a pure asset-holding and structuring vehicle rather than an operating entity.

Registered Office

Every VCC must maintain a registered office in the DIFC through its appointed Corporate Service Provider, unless it qualifies as an Exempt VCC. Notably, VCCs are expressly exempt from DIFC “operating presence” and principal place of business requirements, reinforcing their design as flexible, cross-border asset-holding vehicles.

Why should you setup in the DIFC?

The DIFC stands as a premier financial center in the region, hosting over 400 wealth and asset management firms that collectively manage more than $750 billion in assets. This strategic location provides unparalleled access to the extensive private and sovereign capital available in the region.

Furthermore, the DIFC offers an advanced regulatory framework for digital assets, encompassing investment and crypto tokens. It also features a dedicated Innovation Hub, supporting companies in the fintech, AI, and blockchain sectors.

Recently, there has been a notable and continuous influx of High-Net-Worth Individuals (HNIs) into the UAE. Dubai alone is home to over 72,500 HNWIs and Ultra-High-Net-Worth Individuals (UHNWIs), whose combined wealth exceeds $500 billion. The broader Middle Eastern region boasts over $3.5 trillion in HNWIs wealth and more than $4.8 trillion in financial capital managed by 40 state-owned investors.

The DIFC is also witnessing high growth in the alternatives segment. It currently includes 70+ hedge funds, with over 45 of these managing over a billion dollars worldwide. As a result, the DIFC has emerged as one of the world's top ten locations for hedge funds, with ambitions to enter the top five in the near future.

The DIFC has been consistent in attracting family businesses as well, with over 850 family-owned businesses located in the centre, a growth of over 30% in 2024.

By the end of 2024, DIFC reported that the top 120 families and wealthy individuals in the community were managing over USD 1.2 trillion in wealth. The use of Foundations and associated structures also saw a 50+ percentage jump, reaching nearly 700 foundations by the end of 2024.

The Centre in the UAE is a cultural hub, featuring fine dining, retailers, and art galleries. Events like DIFC Art Nights and the Sculpture Park attract artists and enthusiasts. Art Dubai, backed by DIFC, remains the foremost global art event in the Middle East.   

Specific Advantages

Here are some specific advantages of establishing in the Dubai International Financial Centre.

LEGAL AND REGULATORY FRAMEWORK

• Legal framework supports cross-border activities
• 100% foreign ownership permitted
• No restriction on foreign talent or employees
• No restrictions on capital repatriation

TAX BENEFITS

• 0 percent corporate tax subject to certain qualifications
• Zero tax on employee income

COUNTERPARTY CONFIDENCE

• Highly regarded, independent regulator
• Independent, English-speaking, common law judicial system
• Distinct from the UAE legal system
• Risk-based regulatory approach

DIVERSE ECOSYSTEM

• Central to regional deal making
• High concentration of international firms, investment funds, wealth management firms, banks, and financial institutions
• World-class regional and international law and auditing firms, and other professional services
• The largest fund domicile in the region

GEOGRAPHIC EPICENTRE

• Management offices, holding companies and family offices are located closer to the assets they own or manage
• The Middle East, Africa and South Asia (MEASA) is increasingly the centre of gravity for the global economy
• Dubai plays a central role in the growing South-South trade, principally between Asia and Africa
• Well-positioned to harness the potential of emerging markets

What are the key features of a VCC in the DIFC?

A “Segregated Cell” of a Variable Capital Company is a legally distinct cell within that Variable Capital Company, for the purpose of holding and managing assets and incurring liabilities that are separate and distinct from those of the VCC’s other Segregated Cells and from the VCC as a whole. A Variable Capital Company with Segregated Cells is a single legal person and the creation of a Segregated Cell does not create, in respect of that Cell, a separate legal person. 

An “Incorporated Cell” of a VCC is a legally distinct entity created for the purpose of holding and managing assets and incurring liabilities that are separate and distinct from those of the Variable Capital Company and any other Incorporated Cells. An Incorporated Cell of a Variable Capital Company is deemed a separate Private Company incorporated.

A VCC cannot hold any Cell Shares in respect of its Cells. 

Separate Incorporated Cells in a VCC do not have a subsidiary or parent relationship with the Variable Capital Company itself or to other Incorporated Cells of that VCC. 

A VCC cannot be established with both Incorporated and Segregated Cells. 

Requirement for Share Register 

1. A VCC, or any of its Incorporated Cells (ICs), is mandated to maintain a share register.

2. The records and accounts of a VCC shall ensure that the assets and liabilities relating to the VCC, or that of a Cell, are segregated from other Cells and that the Net Asset Value is reflected proportionally to the interests held by each Shareholder or debenture holder of the Variable Capital Company or the relevant Cell A "Register Keeper," who must be a Corporate Service Provider (CSP) or an entity approved by the Registrar, can be appointed by the VCC. This Register Keeper can act as a nominee owner for the VCC shares or Cell Shares.

3. The Register Keeper is responsible for maintaining a sub-register detailing the "true" beneficial shareholders, as stipulated in the VCC/IC's Articles.

4. The VCC or IC bears the ultimate responsibility for ensuring the Register Keeper's adherence to accurate record-keeping and compliance with Ultimate Beneficial Ownership (UBO) Regulations concerning beneficial ownership identity.

What is a VCC with Segregated Cells?

A Segregated Cell is like a separate “compartment” inside a DIFC Variable Capital Company.

Each cell holds its own assets, has its own liabilities, and is kept completely separate from the other cells and from the main VCC.
This means that if something goes wrong in one cell (for example, it incurs a liability), only the assets of that specific cell are affected. The assets of the VCC and the other cells remain protected.

However, a Segregated Cell is not a separate legal company. The VCC remains one single legal entity. The cells are legally “part of” the VCC, not independent companies.

What is a VCC with Incorporated Cells?

An Incorporated Cell (IC) is a separate legal company that sits under a Variable Capital Company. This means that it owns its own assets, has its own liabilities, and is legally independent from the VCC itself, and all other Incorporated Cells within the same VCC.

In law, an Incorporated Cell is treated as a standalone Private Company, even though it sits inside the VCC structure.

Does an Incorporated Cell operate completely on its own?

No, it doesn’t have to. Even though each IC is legally separate, it can still use centralised services provided by the VCC. These can include issuing and redeeming Cell Shares, valuing assets within the Cell, maintaining accounts and financial statements, filing reports, and performing management, compliance, and oversight functions

In effect, the IC gets the legal independence of its own company, but also the operational efficiency of shared support from the VCC.

What are the key differences between a VCC with Segregated Cells and a VCC with Incorporated Cells in the DIFC?

Who can set up a DIFC VCC?

The consultation paper that was circulated earlier, on the VCC regime, had a number of qualifying requirements for applicants - these have now been fully removed from the final regulations. 

Do all VCCs require the appointment of a DIFC-registered Corporate Service Provider?

Yes. Unless it is an Exempt VCC, all Variable Capital Companies must appoint a DIFC-registered Corporate Service Provider to represent and act on it’s behalf, and any of it’s incorporated cells. 

What is an Exempt VCC in the DIFC?

An Exempt VCC is a VCC that has a controller that is:

1. DIFC-registered entity (excluding a Prescribed Company/SPV, a non-profit organisation, a Foundation or another VCC), 

2. Regulated Firm in the DIFC or 

3. recognised financial services regulator, a Government entity or a listed entity. 

What are the key differences between VCC vs. Fixed Capital Company?

The core distinction between a VCC and a fixed capital company lies in their capital structure and how they manage capital fluidity.

Share Capital and Net Asset Value (NAV)

1. Variable Capital Company (VCC): The share capital of a VCC is directly linked to its Net Asset Value (NAV). It expands and contracts dynamically with changes in NAV. The valuation of shares is based on real-time NAV providing flexibility for efficient capital inflows and outflows

2. Fixed Capital Company: Share capital is static, determined by the nominal (par) value per share multiplied by the number of issued shares. Any alterations to this capital require formal legal action. Share value is determined by its nominal value and standard accounting methodologies.

Redemptions

1. VCC: Redemptions are facilitated based on the VCC's NAV.

2. Fixed Capital Company: Redemptions are restricted and can only be made from distributable profits, existing capital reserves, or through a court-approved reduction in capital.

Distributions

1. VCC: Distributions are made based on the current NAV.

2. Fixed Capital Company: Distributions are limited to realized profits only.

In essence, a VCC functions much like an investment fund, offering a capital structure that can readily adapt to the inflow and outflow of shareholders and fluctuations in asset values. Conversely, a fixed capital company maintains a stable capital base, with capital adjustments requiring more formal and often complex legal and accounting processes.

Are there creditor protection mechanisms available for DIFC VCC structures?

Yes, the DIFC VCC regime includes strong protections for creditors. Directors of a VCC and its individual Cells must follow strict duties: they must clearly tell anyone they transact with that they are dealing with a VCC, specify exactly which Cell is entering the transaction, and make it clear that only the assets of that particular Cell can be used to meet the obligations arising from that deal. If directors fail to provide this information, they may be held personally liable.

In addition, the Regulations contain built-in protections that limit a creditor’s recourse strictly to the assets of the VCC or the specific Cell they contracted with. Every agreement with a VCC or a Cell automatically includes an implied term that only the relevant pool of assets may be used to satisfy that creditor’s claim. If assets belonging to one Cell are wrongly used to settle a liability of another Cell, the creditor is treated as holding those assets on trust and must return them.

Finally, if a liability does not belong to any specific Cell, it must be settled only from the VCC’s non-cellular assets. Creditors of such liabilities have no claim over any Cell’s assets. Together, these rules ensure clear separation of liabilities, proper creditor protection, and strong internal ring-fencing across the VCC structure.

Are there provisions to merge or consolidate cells, and transfer cellular assets?

Yes, the VCC Regulations have such provisions. 

When a VCC wants to transfer assets between its Segregated Cells—for example, moving assets from Cell A to Cell B—or when it wants to merge one Cell into another, it must follow a structured and transparent process designed to protect creditors. The VCC must first give 30 days’ written notice to all creditors and anyone with an outstanding contract, informing them of the intended transfer, merger, or consolidation. It must also publish a notice in an appointed publication within a specific window: no earlier than 30 days and no later than 45 days before submitting the application to the Registrar.

For the transaction to proceed, the relevant Cells must pass Special Resolutions approving the transfer or merger, and the Directors must sign a formal declaration confirming that all regulatory requirements have been met and that no objections were received. If a creditor does raise an objection within the allowed timeframe, the VCC cannot move forward unless the objection is withdrawn or the creditor fails to initiate court proceedings within the permitted period. This process ensures full transparency and safeguards creditor rights throughout any restructuring involving Segregated Cells.

Are there provisions for conversions, continuations or transfer of VCC or an Incorporated Cell?

The VCC Regulations offer significant flexibility for restructuring, allowing VCCs and their Incorporated Cells to adapt as their needs evolve. A VCC with Segregated Cells can convert into a VCC with Incorporated Cells—and vice versa—giving it the option to shift between internal compartments and fully separate legal entities. A VCC can also convert into a standard DIFC Private Company, and a DIFC Company can convert into a VCC. Similarly, a Foreign Company may convert into a VCC, and a VCC may re-domicile abroad if the foreign jurisdiction permits it.

In addition, an Incorporated Cell (IC) can be re-registered as an independent DIFC company, breaking away entirely from its parent VCC. An IC may also transfer from one VCC to another if approved. These conversion and continuation processes include safeguards for creditors and minority shareholders. When a DIFC company converts into a VCC or a VCC converts into a DIFC company, affected creditors and contracting parties must receive written notice, and the VCC must publish a public notice. Creditors or contracting parties who believe they may be unfairly prejudiced can apply to the Court.

Likewise, when an IC converts into a standalone company or transfers to another VCC, shareholder protections apply. The transaction must be approved by Special Resolution, and any dissenting shareholder has the right to apply to the Court if they believe the conversion or transfer unfairly impacts their interests.

Segregated vs. Incorporated Cells: Key Considerations

The choice between Segregated and Incorporated Cells often depends on the specific objectives of the structure.

1. Tax Treatment: For a VCC operating with Segregated Cells, and for each Incorporated Cell, separate tax filing and accounting are typically required.

2. Licensing: If a VCC has multiple Incorporated Cells (e.g., two ICs), it necessitates a separate license for each. Segregated cells do not receive separate licence

3. Articles of Association: The VCC's Articles of Association must explicitly state whether it is operating with Segregated Cells or Incorporated Cells. Furthermore, an Incorporated Cell must have its own articles and clearly state that it does not own shares in the overarching VCC.

4. Naming convention - VCC must end with “VCC Limited” or “VCC Ltd.” Segregated Cells must end with “VCC Segregated Cell” or “VCC SC” and Incorporated Cell must end with “VCC Incorporated Cell” or “VCC IC”

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