Setting up a Financial Entity in the DIFC

This article outlines the proposed approach to establish a financial entity in the Dubai International Financial Centre (“DIFC”). It is based on the information provided in the DIFC checklist and the assumption that the client is seeking to establish a (type of financial entity, e.g., bank investment firm, fund management company). The entity will be subject to regulatory requirements of the Dubai Financial and Securities Authority (“DFSA”).?

Understanding the Objectives

Before proceeding, it is important to understand the specific goal & requirements. This includes:

• The nature of the financial services to be offered, and its business activities.
• The target market
• The desired legal structure
• Capital requirements
• Regulatory compliance expectations and risk tolerance
• Exit strategy

Legal Structure Selection

Based on the objectives, one should consider the following legal structures:

• Private Company: Suitable for most financial entities, offering limited liability and flexibility.
• Public Company: Applicable to entities seeking public listing and raising capital through equity shares.

The DIFC is a regulated financial center therefore compliance with the Dubai Financial Services Authority (DFSA) regulations is a requirement. Some of the key regulatory considerations include:

• Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF): Implementing robust AML and CTF measures.
• Data Protection: Complying with DIFC data protection laws.
• Financial Reporting: Maintaining accurate and transparent financial records by conducting regular audits.

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Entity Formation, Timeframes and Registration

The process of setting up a financial entity in the DIFC involves several steps as detailed below:

1.?????? Submitting Interest (1-2 week)

• Contact the DIFC to express interest in establishing an entity by scheduling a meeting with the DIFC authority either by way of email or call. (email: [email protected]; No, +97143622222).

2.?????? DFSA Authorization (2-3 months).

• Prepare and submit a regulatory business plan to the DFSA by adhering to good corporate governance practices.
• Obtaining DFSA approval for the proposed business plan.

3.?????? Registered Address (1-2 weeks)

• Securing a registered office address within the DIFC by choosing and registering a physical office space within the DIFC and completing the lease registration formalities of the commercial property.

4.?????? DIFC Registration (2-3 months)

• Complete all requirements to register the entity, including submitting all constitutional documents including but not limited to the Articles of Association, Memorandum of Association, Incorporation documents, Shareholders Agreement, etc and;
• Fulfilling Data Protection requirements to register the entity, including but not limited to Appointment of a Data Protection Officer, Implementing a Data Protection Policy, Data Processing Agreements, Registration with the DIFC Commissioner of Data Protection. ?

5.?????? DFSA Authorization: (2-3 months)

After fulfilling all requirements, coordinate with DFSA to receive the final DFSA license.

Needless to say, it is important for a robust financial entity to carefully evaluate the following corporate governance aspects:

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Due Diligence: Conducting thorough due diligence on key personnel, shareholders, and business partners.

Tax Planning: Understanding and planning ahead the entity's tax position. The individual can engage with tax advisors to develop a tax-efficient structure.

Employment and Labor Law: Hiring and managing employees in the DIFC is subject to specific employment laws. Creating a protective employment contract, issuing visa and work permits as required by law.

Contractual Matters: Drafting and negotiating various contracts, such as lease agreements, service agreements, and commercial contracts that would be essential for the entity's internal and external operations.

Risk Management: Developing and implementing risk management frameworks and practices with respect to AML and CTF risks, operational risks, credit risks, market risks, legal and compliance risks, cybersecurity risks etc. Maintaining compliance with the evolving legal and regulatory landscape is important.

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DIFC/DFSA estimated costs for setting up a Financial Entity

Below is an overview of the estimated costs involved in setting up a bank in DIFC:

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• DFSA Application Fees: USD 50,000 - USD 100,000 (varies based on services provided by the bank).
• DIFC Registration Fees: USD 8000 - 15000
• Office Leasing Costs: Approximately USD 20,000 - USD 50,000 annually (depending on size and location).
• Miscellaneous Costs: USD 10,000 - USD 20,000 (administration, document notarization, translations, etc.).
• Total Estimated Cost: [to be determined upon reviewing the business plan and shall be as per the discretion of DIFC and DFSA following the initial meeting.]

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Please note that this is a general outline and may require changes based on the specific needs of the individual intending to setting up a financial entity.

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Additional Considerations also include Insurance coverages and protection for the entity's intellectual property rights.

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Considering these factors and working closely with the authorities, one can develop a tailored legal plan to ensure the establishment and operation of the financial entity in the DIFC.

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Through a combination of visionary leadership, strategic eyes, and commitment to compliance, the entity can set goals to emerge as an establishment in the DIFC.

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The information provided herein is for general informational purposes only and does not constitute legal advice. It is based on our understanding of the DIFC checklist for setting up a financial entity as available on DIFC’s website. We disclaim any liability for losses or damages arising from reliance on this information. Please consult with a qualified lawyer in Dubai/DIFC for advice.