New Venture Capital Framework in The DIFC
Introduction
The ‘Future of Finance’ strategy of Dubai International Financial Centre (DIFC) envisions venture capital funding as one of the key drivers of economic growth in Dubai and United Arab Emirates. Venture capital is an important source of financing available to start-ups and small businesses.
The Dubai Financial Services Authority (“DFSA”), the sole financial services regulator in the DIFC, has recently relaxed its regulatory regime to encourage and facilitate venture capital funding to technology driven start-ups and small businesses which are in early stage of development and growth. The new regulatory regime defines Venture Capital Fund as a specialist class Fund distinct from a Private Equity Fund. Under the new regime, a Venture Capital Fund is either an Exempt Fund or Qualified Investor Fund (QIF) with a investment objective to invest at least 90% of its committed capital in unlisted business ventures which have been incorporated for not more than 10 years at the time of the initial investment. The funding must be through equity investment i.e. shares, convertible debts or other such instruments.
The Regulatory Regime in the DIFC
In order to set-up a VC Fund in the DIFCA VC Fund Manager must have "Managing Venture Capital Fund" licence from the DFSA for setting-up and operating a VC Fund in the DIFC. The DFSA provides a proportionate, risk-based regulatory framework for VC Fund Managers allowing certain relaxations.
DIFC & DFSA Fees
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One-time Fee |
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DFSA authorization fees VC Fund Manager |
$ 2,000 |
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DIFC Incorporation fee for VC Fund Manager |
NIL |
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DFSA notification fee for VC Fund |
$ 1,000 |
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DIFC incorporation/registration fee for VC Fund |
Dependent on the legal structure |
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Annual Cost |
|
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DFSA annual supervision fees for VC Fund Manager |
$ 2,000 |
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DIFC renewal fee for commercial license for VC Fund Manager |
First renewal: NIL 2nd renewal: $4,000 3rd renewal: $8,000 Normal fees of $12,000 apply from 4th renewal |
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DFSA annual supervision fee for VC Fund |
$ 1,000 |
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DIFC renewal fee for VC Fund |
Dependent on the legal structure |
Benefit of the DIFC New Venture Capital Framework
The new regime opens a significant source of funding to start-ups and small business and provides stimulus in attracting foreign and domestic capital to the DIFC for VC investments.
How can we help?
We are a leading member firm of Crowe Global which is ranked as the top 8 global accounting network with more than 750 offices and over 41,000 partners and professionals. Crowe Mak Limited has been successfully operating in the DIFC since 15 years and has diversified professional experts providing audit, regulatory compliance, risk management, tax and business advisory services. We will provide assistance to you with the DFSA and DIFC licence applications process and hassle-free setting-up of business in the DIFC.
