Key highlights of the FA regulations

The following points are critical to the professional advisory community.

1. The FA Regulations consolidate applications for Single-Family Offices (SFO) and multi-family offices within a single category known as the ‘Family Office’. The primary qualifying requirement is for shareholders of the Family Office to demonstrate a net global aggregate asset base of at least $50m (previously, the requirement for a SFO was to demonstrate $10m in investible/liquid assets).
2. Family Offices servicing a single family will be exempt from the complex, extensive and lengthy Designated Non-Financial Businesses and Professions registration process regulated by the Dubai Financial Services Authority (DFSA).
3. The FA Regulations also introduce the concept of a ‘Family Entity’ which has a separate legal existence, and which can be a body corporate, a partnership, a foundation, or any other legal entity or body (excluding not for profit organizations) provided that it is established for the sole purpose of: a) holding, investing, operating or utilizing the assets of a family, a Family Structure (such as a DIFC Foundation or a DIFC Trust) or the proceeds thereof; or b) the succession or legacy planning of family assets, or the benefits or proceeds derived therefrom. This entity, whether in its own right or in the capacity of trustee, should be controlled by a family. A Family Entity may, but need not, be a registered person but shall only have a presence or operate in or from the DIFC if it complies with the applicable laws of the DIFC. A Family Entity is controlled by a family, if the family members or the board acting alone or together, could exercise more than fifty percent of the voting rights of the Family Entity.
4. Managing the delicate balance between transparency and privacy is a key objective of the DIFC’s unique offering not identified in other financial centres in the GCC region. The DIFC has taken an unprecedented approach with the creation of the DIFC’s Private Register, which enables a Family Entity or a Family Office to effectively apply to be removed from the DIFC Public Registry and be solely registered in the DIFC Private Register, if so desired, thereby preserving the privacy of its founders, shareholders, directors, and ultimate beneficial owners.
5. Furthermore, a ‘Family Structure’ is now defined as one or more Family Entities or trusts, provided that for any trust or foundation, the trustee, council or governing body must be appointed by at least one family member or at least one Family Entity. The beneficiaries, qualified recipients or persons otherwise capable of benefiting from a Family Structure component (trust or a foundation) must be: (a) one or more family members of that family; (b) one or more Family Entities of that family; (c) one or more charities or recipients identified in line with specific charitable requirements; or (d) other Family Structure(s) the shareholders, partners, beneficiaries or qualified recipients of which are similarly restricted. Further conditions may apply.
6. A Family Entity or Family Office incorporated or registered in the DIFC as a company shall be considered a private company. Such Family Entities and Family Offices may now have more than 50 shareholders.
7.  SFOs which demonstrate a substantial presence in the UAE may be exempt from the requirement of leasing expansive and expensive office space in the DIFC as part of their licensing conditions and may instead use the office of a DIFC-registered corporate services provider to be their registered agent.
8. The DIFC proposes to establish a ’Family Business Register‘ which will accept registrations of family businesses, in compliance with the newly enacted UAE Federal law concerning Family Businesses.
9. It is envisaged that the DIFC shall curate a bespoke executive education program in conjunction with the DIFC Academy enabling members of DIFC Family Businesses and professional advisors to families, Family Businesses, Family Entities or Family Structures that complete such programs to be formally recognized and for such advisors to be formally categorized as Accredited Advisers on a separate, publicly available register. The DIFC Registrar will also create a certification (rating) structure for Family Businesses, Family Entities or Family Structures.
10. Administrative access will be granted to the DIFC Registry’s services portal in respect of a Family Business, a Family Entity, a Family Office, or a Family, allowing DFSA-regulated corporate service providers to communicate directly with the DIFC Registrar on behalf of their clients, and to submit information, forms and documents as well as pay annual service fees on behalf of their clients.
11. Alternative dispute resolution is encouraged and enshrined within the new FA Regulations, with particular reference to arbitration as the optimal dispute resolution solution.

Authored by: Sunita Singh-Dalal