DIFC Introduces Variable Capital Company (VCC) Regime

Dubai International Financial Centre (DIFC) is taking a significant step forward with the introduction of Variable Capital Company (VCC) Regulations, aimed at enhancing investment structuring and asset management in the region. This new corporate vehicle provides flexibility, efficiency, and risk segregation for proprietary investments, making it particularly attractive for family offices, high-value asset holders, and complex investment portfolios.

What is a VCC?

A VCC is a private limited company that can operate either as a standalone entity or as an umbrella structure with multiple cells. These cells can be either Segregated Cells (SCs) or Incorporated Cells (ICs), but not both within the same VCC.

Key attributes of a VCC include:

• Asset Segregation: Each cell’s assets and liabilities are ring-fenced, enabling different risk profiles while allowing centralized management.
• Flexible Share Capital: Share capital is tied to the net asset value (NAV) of the company or cell, enabling efficient issuance, redemption, and distribution of shares.
• Distributions: Dividends can be paid from capital, not just profits, providing liquidity flexibility for investors.

VCC Structures

Segregated vs. Incorporated Cells

Example Use Cases:

• Family offices managing multi-asset portfolios
• Companies holding high-value assets like aviation or maritime structures
• Proprietary investment portfolios, including secondary structures

Example 1

Example 2

Flexible Share Capital and Corporate Actions

Unlike traditional fixed capital companies, VCCs behave more like a fund:

Licensing and Compliance

License types: Qualifying Purpose or Holding Company. SCs do not receive separate licenses; ICs do.

• Articles:

• The VCC must specify in its articles whether it is incorporating SCs or ICs
• ICs require their own articles, which must explicitly state that the IC cannot own shares in the VCC or any other of the VCC’s cells.

• Naming Conventions:

• VCC: “VCC Limited” / “VCC Ltd.”
• SC: “VCC Segregated Cell” / “VCC SC”
• IC: “VCC Incorporated Cell” / “VCC IC”

• Qualifying Requirements:

• Consistent with the DIFC Prescribed Company regime and
• The VCC or its cells must satisfy at least one of the following criteria:

• Controlled by GCC persons, Authorised Firms, or DIFC Registered Persons
• Established to hold/control GCC registrable assets
• Established for a Qualifying Purpose
• Has a director that is an Employee of a Corporate Service Provider and that Corporate Service Provider has an arrangement with the Registrar.

Important: VCCs cannot carry out regulated financial services unless approved by DFSA or a Recognised Jurisdiction.

Creditor Protections and Director Responsibilities

• Asset Ring-Fencing: Creditors can only access the assets of the relevant VCC or cell with which they transact. Misapplied assets must be returned, ensuring fiduciary protection.

• Director Duties: Directors must clearly inform counterparties of the VCC/cell structure and the limited scope of liability. Non-compliance may lead to personal liability.

Conversions, Continuations, and Redomiciliation

The VCC regime is highly adaptable:

• SC ↔ IC conversions
• VCC ↔ DIFC Private Company conversions
• Foreign companies ↔ VCCs
• ICs can transfer to other VCCs or re-register as standalone entities

Protections for stakeholders: creditors and minority shareholders are given notice and court recourse to protect their interests during conversions or transfers.

Why VCCs Matter and How Crowe Can Help

The DIFC VCC offers a modern, fund-like structure that combines flexible capital management with segregated and centralized oversight, making it an efficient and cost-effective solution for sophisticated investors.

For family offices, high-value asset holders, and complex proprietary portfolios, the VCC provides a versatile and efficient investment vehicle. Crowe can assist you in structuring, licensing, and compliance, ensuring they maximize the benefits of this versatile investment vehicle.

Should you have any further questions or wish to discuss any matter to help you decide on setting up in UAE, please do not hesitate to get in touch with Ilhaam Maniar.