DIFC Authority releases "Exempt Companies Regulations"

The new regulations are designed to assist financial institutions to carry out, among other things, securitisation transactions using the existing DIFC legal and regulatory framework.

Commenting on the imminent adoption of these regulations, His Excellency Dr. Omar Bin Sulaiman, Governor of the DIFC, noted:

"With the increasing number and growing sophistication of transactions taking place in the Dubai International Financial Centre, the DIFC has again proved its commitment to international best practices - this time in the area of securitisation and other structured finance transactions. Through the adoption of these regulations, the DIFC demonstrates its willingness to support key players in their sectors of activity and respond to their requirements in a flexible manner while remaining faithful to its founding principles of integrity, transparency and efficiency. The simplicity of these new regulations also demonstrates the robustness of the existing legislative system, where it is now possible to introduce new areas of activity with relatively minor changes to our existing framework."

Nasser Al Shaali, CEO of the DIFC Authority said: "As the DIFC continues its emergence as a leading international financial centre we are committed to providing the most mature, sophisticated infrastructure and legal framework to promote the development of a highly prosperous financial industry. By proposing the new regulations we aim to encourage securitisation transactions at the centre and cater and encourage the expansion of the products and services available at the DIFC."

Both Islamic finance and conventional finance transactions in the region often require the use of special purpose vehicles (SPVs). These SPVs, otherwise known as transaction-specific companies, are usually incorporated with the intention of being restricted in their operations, with no employees other than special directors.

The use of SPVs in the DIFC under the new regulations is simply for the purpose of facilitating sophisticated financing activity. This is likely to have a favourable impact on the region's increasing demand for SPVs, in both conventional and Sharia-compliant products.

The deadline for providing comments on these proposals is March 27, 2008.