The DIFC Special Purpose Company

The DIFC Special Purpose Company

The DIFC special purpose company (SPC) over the past year has become an increasingly popular vehicle for structured finance transactions in the Middle East. Any private organisation bound by shares that fall under the independent laws of the Dubai financial free zone DIFC are known as an SPC. Many have addressed the interests and potential benefits of SPC’s for international structured finance transactions when Abdulla Al Awar the CEO of the DIFC Authority held an open seminar in 2012.
March 16, 2016
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The benefits of being integrated with the DIFC allow there to be zero tax, no foreign ownership restrictions and limited liability. Moreover the DIFC laws also help with registration and enforcement of security as well as the use of DIFC infrastructure. In addition when using an SPC, organisations could reduce extreme costs by not having to lease office space instead just hold a workplace address within the DIFC. As well as being exempted from any laws that require carrying out yearly shareholder conferences, audits or filing accounts.

Although there may be a number of benefits of an SPC, there are some limitations as well.

  • It cannot be applied as general corporate holding companies or be used for trading business operations.
  • They are prohibited to act as the general partner of an investment partnership.
  • Unless a DIFC regulator does not authorise it, an SPC cannot conduct any financial services in the DIFC or from them.
  • SPC is not allowed to have more than three shareholders, and there are limitations on who can be a shareholder in a SPC (only members in a structured finance transaction)

 

The last point is the most important factor to take in account during circumstances where it is imagined that the shares in the SPC may eventually be transferred to third parties

In order to manage an SPC a vital requirement is to obtain a licensed Corporate Services Provider (CSP). The CSP would operate as a company secretary and deal with any paperwork or communication between the SPC and the DIFC. CSP also provides most of the board of directors of the SPC as well as supply administrative services.

A major use of an SPC is by the Government of Dubai called Salik One SPC Limited. It exchanges takings from the “Salik” toll gates and produces profits that are accumulated in an account under the SPC. At present there have been a total of 10 SPC’s within the past 12 months.

The SPC’s offer numerous advantages to organisations and that is the reason it is seen on a rise in conducting structured finance transactions focal to the Middle East, Africa and Asia.

 

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