Consolidation and management of assets is one of the key points of concern for investors worldwide, and even more so in the GCC. A growing investor ecosystem, coupled with the high density of family wealth in the region, call for robust structures that can help high net worth individuals manage their investments. One such structure is a DIFC holding company.
What is a holding company?
Wikipedia defines a holding company as “a company that owns other companies' outstanding stock.”
In short, a holding company consolidates investments, be it shares in other companies or property, under a common umbrella, for ease of management and reporting. Such companies do not usually carry out a trade or service – they merely manage existing investments. The management team of the holding company also seeks to make new investments, based on certain pre-determined criteria, to expand their existing portfolios.
The Dubai International Financial Centre, or DIFC, provides an excellent corporate structure to facilitate such activities - a DIFC holding company.
Why setup a holding company in the DIFC?
The DIFC is a leading financial hub in the region for business, fintech, and lifestyle. DIFC holding companies can be used to hold assets within the UAE, the GCC, or anywhere else in the world. These include real property and shares in other companies in the UAE and worldwide. Here are some reasons why setting up a holding company in the DIFC makes sense.
Codified English Common Law
The DIFC offers a modified version of the English Common Law, which gives foreign investors an additional sense of security and stability. In partnership with the common law framework, the Dubai Financial Services Authority (DFSA) functions as the DIFC’s regulatory body and plays a crucial role in providing as well as enforcing the international regulatory standards that make the financial hub a popular destination for business people. While a DIFC holding company is not regulated by the DFSA, the robust regulatory structure of the Authority gives comfort to investors.
The DIFC is well regarded in the international community, being voted among the top 10 onshore financial centers worldwide. It’s emphasis on regulation, and visibility in the investor community also helps to attract further investments down the road. Proprietary Investment activities. In addition to the activity of a ‘holding company’, the DIFC also provides the following activities (where the investments have not yet been acquired):
- Investment in Agricultural Enterprises & Management
- Investment in Commercial Enterprises & Management
- Investment in Educational Enterprises & Management
- Investment in Healthcare Enterprises & Development
- Investment in Industrial Enterprises & Management
- Investment in Retail Trade Enterprises & Management
- Investment in Oil & Natural Gas Projects
These activities are suitable for direct investments, acquisitions, joint ventures or partnerships, or for investments in private equity, other alternative investment funds or assets.
The DIFC Courts initiative was the first of its kind in the region, and the laws establishing the DIFC Courts were designed to ensure the highest international standards.
The DIFC Wills & Probate Registry allows eligible individuals the ability to register their wills under Common Law, and hence providing the ability for legacy planning within the center.
Unlike offshore companies, a holding company in the DIFC is meant to be an operational entity. Companies can apply for visas for their staff and their families.
The Government Services Office in the DIFC is dedicated to providing a wide range of administrative services, and one of these is the issue and renewal of employment visas. The maximum number of visas you can apply for will depend on both the type of business you plan on setting up as well as the size of the premises you lease in the DIFC.
The DIFC is set to undergo significant expansion and plans to use the additional space to construct more office and creative spaces, residences, retail spaces, and entertainment. That’s 13 million square feet of space dedicated to the pursuit of fintech and innovation and designed to accommodate the needs of professionals from around the world.
Such an environment helps attract good talent from the world over. Over 22,000 professionals already live and work in the DIFC. Holding companies in the DIFC are able to source better managers and analysts, and access a pool of premium service providers within the center, thus making it a self-containing ecosystem.
Here are some specific advantages of establishing in the Dubai International Financial Centre.
LEGAL AND REGULATORY FRAMEWORK
- The legal framework supports cross-border activities
- 100% foreign ownership permitted
- No restriction on foreign talent or employees
- No restrictions on capital repatriation
- Zero tax for 50 years on profits, capital or assets from 2004 • Zero tax on employee income
- Highly regarded, independent regulator
- Independent, English-speaking, common law judicial system
- Distinct from the UAE legal system
- Risk-based regulatory approach
- 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
- 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 center 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
The DIFC provides an ideal environment to setup your holding company and manages it effectively. The application process is detailed and involves thorough due diligence and background checks. This ensures that only serious members are able to establish a presence, thus maintaining the sanctity and reputation of the center. Once set up, a whole new world of opportunities arise, where investors can effectively manage their existing portfolios, and dip into the growing MENA investment ecosystem.