DIFC Companies Law Update

Types of company

DIFC Law No. 5 of 2018 has abolished the concepts of a “limited liability company” (LLC) and a “company limited by shares”. As of 12 November 2018, all existing LLCs were automatically converted into “private companies”, and all existing companies limited by shares were converted into either a private company or, if admitted to trading on a regulated market or having more than 50 shareholders, a “public company”.

The concept of a recognised foreign company has been retained in DIFC Law No. 5 of 2018.

Company features

The table below provides an overview of the features of private companies and public companies under the new Legislation:

Key note: There is also a new category of “small private company”, being a private company that has fewer than 20 shareholders and an annual turnover not exceeding USD 5million. Small private companies are exempt from certain administrative obligations such as the requirement to prepare and file annual audited accounts with the Registrar.

Other updates to note

DIFC Law No. 5 of 2018:

• Article 40 - Statutory pre-emption rights on share issues (which can be disapplied in the articles)
• Articles 68-75 - Enhanced directors' duties (this is now reflective of the UK Companies Act 2006 provisions)
• Articles 105-119 - New merger regime (for public companies only; this follows the Jersey regime) and scheme of arrangement provisions (this follows the Jersey regime).

DIFC Law No. 7 of 2018:

• Article 64 - New whistleblower protections
• Introduction of a requirement for an annual confirmation statement to be filed by all DIFC registered entities to update their registered details on the public register, maintained by the Registrar.

Ultimate Beneficial Ownership Regulations:

• New ultimate beneficial ownership provisions requiring each DIFC entity to prepare and maintain a register of its ‘Ultimate Beneficial Owners’ being those owning 25% or more of the share capital (this is similar to the UK and ADGM regimes), albeit this register will not be made publicly available.

Implications

• all DIFC companies have 90 days from 12 November 2018 to prepare their register of ‘Ultimate Beneficial Owners’ (although the extent to which there are direct reporting requirements to the Registrar is not yet clear)
• all DIFC companies have 12 months from 12 November 2018 to update their articles to the extent they are inconsistent with the new Legislation, and
• DIFC companies may, in any case, wish to update their articles to take advantage of the new Legislation, for example newly conceived “private companies” not being required to hold an annual general meeting.

Should you have any questions or concerns as to DIFC Law No. 5 of 2018 (Companies Law), DIFC Law No. 7 of 2018 (Operating Law) or the Ultimate Beneficial Ownership Regulations, or generally as to conducting or proposing to conduct business in the DIFC, please feel free to contact us.