Top 10 new DIFC initiatives for entrepreneurs so far in 2019

The Dubai International Financial Centre is continually working on advancing itself as the region’s leading financial hub. In line with the 50-year charter set by His Highness Sheikh Mohammed bin Rashid Al Maktoum, envisioning the sustained success and prosperity of Dubai, DIFC is leading the way to cement its position as a global investment and financial hub.

Since the beginning of 2019, DIFC has undertaken a series of initiatives to address challenges and roadblocks that lie in the path of entrepreneurs and the 2000+ firms working out of the centre. Following are the top 10 initiatives that have made it easier for entrepreneurs to establish and work from DIFC so far in 2019.

DIFC has made structuring and financing faster, economical, and more flexible through the introduction of new regime and structures that now classify Intermediate Special Purpose Vehicles (ISPVs) and Special Purpose Companies (SPCs) as Prescribed Companies.

Essentially, FinTech firms, family offices, holding and investment companies, aviation firms, and many others involved in structured finance will fall under ‘Prescribed Companies’ and thereby be able to establish themselves in the financial centre with more flexible office requirements.

Furthermore, the annual licensing fee for Prescribed Companies has been reduced to US$1,000, with an incorporation fee of just US$100.

It has eased set-up of companies through reducing fees to make them for affordable, and introduction of four new categories of licenses:

1. Short-term Licences: Under this, retail businesses and other non-financial companies will be able to operate from DIFC. The shorter time frames allow for flexible rates, including competitively priced registration fee of USD 100 and licence fee ranging from USD 300 - 5,100 depending on the duration.

2. Restricted Licences: These are for firms “interested in developing or testing new or innovative products and services” in the DIFC. They will benefit from reduced fees of just USD 100 for registration and USD 1,000 - 4,000 for annual license.

3. Commercial Permissions: This is ideal for entities such as event companies, retail outlets, training or education providers, and others who were previously not able to set up in the centre. The fees for these Commercial Permissions range from USD 100 - 2,000 depending on the activity and duration needed.

4. Dual Licensing: This enables DED licensed non-financial and non-retail firms, such as law firms, audit firms, consultancy firms, family businesses, holding companies and such, who have an affiliate in the DIFC to operate from the centre. Annual fees for this is just USD 1,000.

Dubai International Financial Centre (DIFC) has partnered with The Indus Entrepreneurs (TiE), the world’s largest non-profit entrepreneurial organisation, to help Indian FinTechs scale their businesses across the region by expanding to set up in the financial centre.

DIFC met with 17 FinTech startups from Mumbai to understand their business models and provide tailored solutions to support their growth. The startups invited to set-up in DIFC will benefit from:

1. Fit-for-purpose regulation

2. Supportive accelerator programmes – DIFC FinTech Hive and Startupbootcamp

3. Subsidised licensing options

4. Access to a USD 100 million FinTech fund

5. Opportunities to meet a community of over 2,100 financial institutions (potential partners/investors)

His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, and Ruler of Dubai, enacted the new DIFC Insolvency Law, Law No. 1 of 2019, on 30 May this year, which came into effect on 13 June.

Following international standards and the best global practices, the new law is introduced to "balance the needs of all stakeholders in the context of distressed and bankruptcy related situations in DIFC, facilitating a more efficient and effective bankruptcy restructuring regime."

The law "introduces a new debtor in possession of the bankruptcy regime and provides for a new administration process where there is evidence of mismanagement or misconduct.

This is bound to boost the confidence of lenders, stakeholders and investors who play a huge role in helping startups gain ground and scale their operations through capital injection.

The new DIFC Employment Law, Law No. 2 of 2019, was also enacted on 30 May this year by Sheikh Mohammed bin Rashid Al Maktoum, and will take effect on August 28, 2019.

This new law has provisions that protect employees as well as employers in the financial centre.

Employer-focused provisions include "expansion of employee duties, reduction of the statutory sick pay, limiting the application of mandatory late penalty payments for end-of-service settlements and recognising settlement agreements between employers and employees."

While employee-focused provisions include "the introduction of five days of paternity leave and penalties for discrimination. Penalties have also been introduced to ensure adherence to basic conditions of employment, visa and residency sponsorship."

While this is focused towards employees, to protect their end-of-service benefits in case of unforeseen circumstances, it has benefits for the employers as well. Often, entrepreneurs are not aware of their liabilities when it comes to the final settlements when an employee exits the company.

The DIFC Employee Workplace Savings (DEWS) scheme will be managed not by employers themselves, but external service providers; namely that Equiom, a global trust services provider, who will “act as master trustee of the DEWS plan,” and Zurich Middle East that will be the “scheme administrator.”

It will offer an “investment platform for receiving and managing mandatory employer end-of-service contributions on behalf of their employees and any added voluntary savings by employees, including cash or cash equivalent options for those members that do not want to take investment risk with their contributions.”

Recently, the Middle East has seen a series of new blockchain initiatives. One of them was from the DIFC, whereby it partnered with Mashreq Bank and a leading KYC FinTech platform provider, norbloc, to launch the region's first production-ready blockchain KYC data sharing consortium.

The platform will go live in Q1 2020 and will help corporates in Dubai to have a single platform that facilitate faster, more secure onboarding and exchange of supporting documentation via advanced distributed technologies, including blockchain.

The platform will also allow other banks, government bodies, finance institutions and licensing authorities to participate in the consortium and benefit from the platform.

The Dubai Financial Market (DFM) and the Dubai International Financial Centre (DIFC) launched the Dubai Sustainable Finance Working Group to create "the most sustainable financial hub in the region" — particularly in the areas of environment, social and governance integration — as part of the UAE’s Sustainable Development Goals 2030.

The Group will focus on its four key pillars: responsible business operations, responsible investing, growing sustainable finance, and diversity and inclusion.

Its efforts will include having green financial instruments and encouraging responsible investment.

While this is not a new launch, the fund is still active and available; and there are now new ways to access it following the appointment of MEVP and Wamda Capital to manage part of USD 100 million FinTech fund.

The fund aims to accelerate the development of financial technology in the region by investing in start-ups from incubation through to growth stage. Considering the interest in FinTech is growing, it is a good time to plan raising capital from it.

Earlier in 2019, Dubai International Financial Centre (DIFC) signed a Memorandum of Understanding (MoU) with Innovate Finance, an independent membership association that is at the heart of the UK’s FinTech ecosystem.

The agreement aims to improve collaboration between the FinTech ecosystems in Dubai and the UK, through "sharing knowledge, hosting learning initiatives for startups such as financial technology programmes in The Academy at DIFC and fostering relationships between their regulatory and financial communities."

Prior to this, DIFC has signed 10 such agreements globally, with FinTech hubs in New York, London, Hong Kong, Kuala Lumpur, Singapore, Mumbai, Paris, Brussels, the Netherlands and Bahrain.