Setting up a company in a Financial Free Zone in the UAE? Here's what you need to know from a legal perspective
Financial free zones were set up in the United Arab Emirates (UAE) by the Federal Law No. 8 of 2004, subsequently amended by the Cabinet Resolution No. 48 of 2007
The first law allows establishing a financial free zone in any Emirate of the UAE, by Federal Decree. Under this law, financial free zones and financial activities are exempted from all Federal civil and commercial laws in the UAE. However, the country’s criminal law still applies to them.
There are two (2) financial free zones in the UAE: Dubai Financial International Centre (DIFC) and Abu Dhabi Global Market (ADGM). Both free zones offer excellent infrastructure, a robust framework, and multiple options for setting up a financial services business.
A. DUBAI INTERNATIONAL FINANCIAL CENTRE (DIFC)
DIFC was established to oversee the strategic development, operational management, and administration of Dubai’s financial companies. The regulatory authority, i.e. Dubai Financial Services Authority (DFSA), is dedicated to adding value for its various stakeholders.
DIFC provides a secure and efficient platform for businesses and financial institutions to reach into and out of the emerging markets of the region.
There is also a third independent body within DIFC, namely the “DIFC Courts”, that operates on the common law framework to ensure the highest international standards of legal procedure and dispute resolution in the free zone. There are two main areas of business: financial and non-financial.
These entities make up most of DIFC’s client portfolio, and include the following activities:
- Fintech
- Banking
- Private Banking
- Investment Banking
- Brokerage
- Capital Markets
- Innovation
- Insurance, Reinsurance and Captives
- Fund Management
- Asset Management
- Wealth Management
- Private Equity
These include regulated companies operating in areas such as:
- Corporate Offices
- Professional Services Providers, such as law and accountancy firms
- Retail & Convenience
- Cafes & Restaurants
- Prescribed Companies
- Art Galleries
With regard to the legal structure of the entity to be set up in DIFC, several options are available within the free zone:
- Company Limited by Shares (Limited)
- General Partnership
- Foundation
- Limited Liability Company (LLC)
- Limited Liability Partnership (LLP), etc.
- Non Profit Incorporated Organisation (NPIO)
- Private Company (LTD)
- Public Company (PLC)
B. ABU DHABI GLOBAL MARKET (ADGM)
ADGM is an international financial centre located in Abu Dhabi, the capital of the UAE. It comprises three independent authorities: ADGM Courts, the Financial Services Regulatory Authority (FSRA), and the Registration Authority. It has gained global recognition since it opened its doors in October 2015.
ADGM also accepts applications from organizations that wish to conduct either financial or non-financial business activities. For those wishing to incorporate a financial service provider, FSRA approval will be required.
ADGM offers business setup in the following financial sub-sectors:
- Banking
- Capital Markets
- Fintech
- Wealth and Asset Management
ADGM is also home to many non-financial businesses, such as:
- Non-Financial Corporate Entities
- Family Businesses
- Professional Service Providers
- Tech Startups
- Associations
- Retail – permitted retail business activities on Al Maryah Island Abu Dhabi include but not limited to:
- Manufacturing, wholesale and retail trade
- Auto repair
- Transportation and storage
- Accommodation
- Food and Beverage
- Information and communication
- Professional, scientific, and technical activities
- Administrative and support service activities, arts, entertainment, and recreation, amongst others
ADGM offers a great variety of legal entities, including:
- Public Company Limited by Shares
- Private Company Limited by Shares
- Private Company Limited by Guarantee, etc.
Both jurisdictions also offer the possibility of setting up a Special Purpose Vehicle (SPV). An SPV is a type of company set up for a specific purpose. It can be used to hold assets such as shares of private companies or public companies, real estate property, among others. A sole shareholder (even an individual or a corporate) may incorporate an SPV.
*The article reflects the personal opinion of the law firm and does not constitute legal advice*
OH LLP has legal consultants in the UAE, offering a wide range of legal services to new and established companies within DIFC and ADGM. For further details, please contact us on: info@ohllp.com or +97124110619
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