Company Formation in DIFC: A Guide for Indian Fund Managers and AIF

Introduction to DIFC for Alternative Investment Funds

The Dubai International Financial Centre (DIFC) is a top financial hub in Dubai, known for business, fintech, and lifestyle. Established in 2004, it ranks among the top 10 global financial centers. DIFC is unique because it operates under a Common Law framework with its independent regulator, the DFSA, and a separate judiciary, DIFC Courts. Besides business, DIFC is also a lifestyle destination, offering shops, cafes, restaurants, art galleries, apartments, parks, and hotels.

Strong India-UAE Ties

India and the UAE share a close relationship that goes back centuries. High-level visits by leaders from both countries highlight this strong bond. In 2015, the Indian Prime Minister and the UAE's leader announced a $75 billion fund to boost ties further. With 3.2 million Indians living in the UAE, they form the largest expat community in the country. The trade between India and the UAE has grown significantly, with bilateral trade crossing $52 billion in 2016-17. India is the third-largest foreign direct investor in the UAE, with $6.5 billion invested, and Indians are the largest foreign buyers of Dubai real estate.

Why Choose DIFC for Business Setup in Dubai?

DIFC is one of the only two financial free zones in the UAE, offering 100% foreign ownership, unlike the Dubai mainland, where full foreign ownership is restricted. For Indian investors, DIFC is a gateway to markets in the Middle East, Africa, South Asia (MEASA), Europe, Asia, and the Americas—a region with an estimated $7.4 trillion in annual trade.

Indian Companies and DIFC

DIFC has a strong track record of attracting Indian companies, especially in wealth management, banking, and legal services. Indian companies are a key part of DIFC's strategy, with plans to triple its operations by 2025. Major Indian banks like SBI, ICICI, and Axis Bank have set up in DIFC, benefiting from its robust business infrastructure and access to a large non-resident Indian community of 3.3 million.

Advantages of Setting Up in DIFC

1. Legal and Regulatory Benefits
• 100% foreign ownership allowed
• No restrictions on hiring foreign employees
• Free capital repatriation
  
  
2. Tax Advantages
• Zero tax on profits, capital, or assets for 50 years
• No tax on employee income
  
  
3. Trust and Confidence
• Independent regulator (DFSA)
• Common law judicial system, distinct from UAE's legal system
  
  
4. Thriving Ecosystem
• Hub for international firms, investment funds, banks, and financial institutions
• Home to top law and auditing firms
  
  
5. Strategic Location
• Positioned to benefit from the growing South-South trade between Asia and Africa
• Central to the global economy with a focus on emerging markets
  
  

Category 3C – Asset Management and Fund Management

• Base Capital Requirement: USD 500,000
• Base Capital for Exempt and Qualified Investment Fund Managers: USD 70,000
• Main Activities: Managing assets, providing custody, issuing stored value for money services.

Category 3C licenses are for companies involved in managing assets, funds, or providing other financial services like trust services or custody. Asset managers under this category can apply for a modification of the rules depending on their activities.

How Can Indian Fund Managers Set Up in DIFC?

Indian Fund Managers have two primary options:

1. External Fund Manager
• Recognized by DIFC if regulated by SEBI, India's financial regulator
• Can manage domestic funds like DIFC Exempt Funds and Qualified Investor Funds
  
  
2. Domestic Fund Manager
• Fast-track option available for setting up under a Category 3C license
  
  

Types of Funds in DIFC

1. Exempt Funds
• Minimum subscription of $50,000
• Limited to 100 unit-holders
• Offered via Private Placement
  
  
2. Qualified Investor Funds
• Minimum subscription of $500,000
• Limited to 50 unit-holders
• Offered via Private Placement

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Office spaces

Every entity registered in the DIFC is required to lease a physical office. You can choose from the Gate and surrounding buildings, or other buildings within the DIFC, such as Emirates Financial Towers, Central Park, Park Avenue, Burj Daman, and Currency House.

Prices vary, depending on the space availed and the building. Here is an indication of the prevailing rates:

DIFC Business Centre – from a two-desk office at US$ 35,000.

DIFC Fitted Offices – from US$ 55 per square foot.

Other buildings – from US$ 32,000 per annum

Required appointments (In Detail)

As with other category firms, the DFSA expects that the firm be adequately staffed depending on the scale, scope and nature of the product portfolio that is proposed to be offered from the DIFC. At a minimum, the DFSA would like to see the following appointments:

Board of Directors – a well-organized, diverse Board with Independent Directors and robust governance policies. The Chair would have to be a non-executive Director.

Senior Executive Officer (SEO) – Senior banking professional with over 10-15 years of experience, ordinarily resident in the UAE.

Finance Officer (FO) – Senior and suitably-qualified finance professional. In case of a group, the FO can be from the parent company and does not have to be resident in the UAE. This role can be outsourced to us.

Risk Officer – Senior risk professional, can be from the parent entity in case of a group.

Compliance Officer (CO) - Senior compliance professional with over 10 years of experience, ordinarily resident in the UAE. This role can be outsourced to us.

Money-Laundering Reporting Officer – Senior AML professional with over 10 years of experience, ordinarily resident in the UAE. This function can be combined with Compliance and one individual can carry out both responsibilities.

Internal Auditor - Senior and suitably qualified internal audit professional. Usually outsourced to a professional firm.

External Auditor - Senior and suitably qualified external audit firm. The DFSA maintains a list of recognised auditors, and there are 15 such firms at present.


Total cost Bifercation = Annual License Fees + One Time Registration / Application Fees + Hiring of Required Appointments + Annual Office Lease + Annual Visa Cost + One Time T&T Consultancy & Service Fees

Conclusion

DIFC is an ideal location for Indian Fund Managers looking to expand into the MENASA region. With a strong regulatory framework, tax advantages, and a vibrant ecosystem, DIFC offers a solid base in Dubai for financial companies to grow and serve the large Indian community in the UAE.

Frequently Asked Questions

1. What are the benefits of setting up a company in DIFC?
• 100% foreign ownership, zero taxes, and a supportive legal framework.
  
  
2. Can Indian Fund Managers operate in DIFC?
• Yes, they can set up as External or Domestic Fund Managers, with DIFC recognizing SEBI as a comparable authority.
  
  
3. What types of funds can be established in DIFC?
• DIFC offers Exempt Funds and Qualified Investor Funds, catering to Professional Clients.
  
  
4. Why is DIFC a preferred location for Indian companies?
• DIFC provides access to the MENASA markets, a strong regulatory environment, and a large Indian expatriate community.

Our Services

Talreja & Talreja LLC assists with:

• Reviewing fund structures and advising on regulatory frameworks
• Preparing Regulatory Business Plans and financial projections
• Providing outsourced compliance and finance officer services
• Setting up legal structures and fund documentation
• Assisting with bank account opening and obtaining necessary permissions
  

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For more information or assistance with your business setup, contact us on WhatsApp at +971 50 475 7239 or email us at info@talrejaandtalreja.com