Formation Requirements and Procedures in the DIFC
This Insight will focus on the formation requirements of a domestic exempt Islamic fund (“IEF”) in the Dubai International Financial Centre (“DIFC”) – a recognised free zone in Dubai, United Arab Emirates with its independent regulator named the Dubai Financial Services Authority (“DFSA”).
EIF Formation Requirements and Procedures
An exempt fund requires maximum of hundred (100) or fewer subscribers with a minimum subscription of USD 50,000. Its subscribers should fulfil the requirements of a Professional Client as defined in the DFSA rulebook.
The formation is a three-stage process whereby:
- The fund manager (“Manager”) has to first register as a DFSA authorized firm in order to manage a collective investment Islamic fund. Mandatory appointments (listed below),directors and other individuals should also be registered as DFSA authorized individuals.
- Second; the authorized firm must also attain a DFSA Islamic endorsement.
- Third; while the above two applications are being submitted to the DFSA the process of the Registrar of Companies with the DIFC can be initiated alongside.
- The Manager needs to ensure that a Sharia Supervisory Board (“SSB”) is appointed at the firm level. The Manager is not subject to the requirement for the appointment of a SSB for an IEF; however it would need to ensure that the IEF is being managed in accordance with Sharia. A member of the SSB at the firm level may be appointed at the Manager’s discretion to ensure Sharia compliance.
- The Manager would also need to ensure that the IEF continues to meet Sharia requirements, particularly for the purposes of their annual and interim reports, which are required to be prepared.
- The Manager must ensure that preparation and maintenance of financial accounts and statements are in accordance with the accounting standards of the Accounting & Auditing Organization for Islamic Financial Institutions FAS 14.
- The systems and controls established and maintained by the Manager should ensure that the management of the fund and fund property is Sharia compliant.
- A Sharia compliant Islamic financial business policy and procedures manual for the IEF must also be maintained by the Manager.
DFSA Required Documentation
- Fund constitution and prospectus. The Manager should ensure that these are and remain approved by the Manager’s SSB;
- Compliance manual and monitoring program;
- Anti-money laundering procedures;
- Risk management policies;
- Information and due diligence documents of all entities and individuals involved and employed;
- Quarterly cash flow, profit and loss, forecast of capital requirements and capital resources and balance sheet;
- Source of funds (start up evidence);
- Draft delegation agreements with service providers;
Registrar of Companies Required Documentation
For the Registrar of Companies requirements please contact lecocqassociate (DIFC) ltd
Mandatory Appointments and Service Providers
Mandatory Appointments: Senior Executive Officer (UAE resident), Finance Officer, Compliance Officer (UAE resident) and Money Laundering Reporting Officer (UAE resident).
Service Providers: The investment manager, administrator, custodian etc. can be a firm registered outside the DIFC in a recognized jurisdiction. However an auditor should be registered with the DFSA in order to be appointed.
Capital Requirements and Application Fee
The capital requirement for managing a collective investment fund is USD 500,000 (or any other amount determined by DFSA).
Application and Annual Fee
The application and annual fee of conducting the financial service of managing a collective investment fund is USD 10,000 (or any other amount determined by DFSA).
The application fee of getting an individual authorised by DFSA is USD 1,000 (or any other amount determined by DFSA).
lecocqassociate provides professional company incorporation and corporate administration services in Malta, Switzerland and the UAE.
This newsletter is for information purposes only. It does not constitute professional advice or an opinion. Please contact Mr. Dominique Lecocq on firstname.lastname@example.org for any questions.