DIFC Opens Consultation on Variable Capital Company Rules

As part of its ongoing efforts to enhance the regulatory framework and attract investment, Dubai International Financial Centre (DIFC), the leading global financial hub in the Middle East, Africa, and South Asia region, has proposed the introduction of new Variable Capital Company Regulations “VCCRs”.

The proposed VCCRs aim to significantly enhance the DIFC’s legal and regulatory framework by introducing more flexible and efficient structures for investment and asset management, particularly for proprietary investments.
This initiative is designed to attract a broader range of investors and support the growth of sophisticated investment vehicles within the DIFC.

The proposed VCCRs will apply to all persons meeting the definition of a Variable Capital Company “VCC” (including each Segregated Cell and Incorporated Cell), to individuals applying for the incorporation or continuation of a VCC in the DIFC, and to the Registrar set out in DIFC Law No. 7 of 2018.

It is important to clarify that a VCC is a private company incorporated as a variable capital company in the DIFC; a private company originally incorporated in the DIFC and subsequently converted into a VCC; or a company continued in the DIFC as a VCC.

According to the DIFC announcement, the proposed VCCRs are intended to support proprietary investment activities and will not require the Dubai Financial Services Authority’s authorisation or the appointment of a regulated fund manager, unless the entity undertakes regulated financial services.

It is worth highlighting the key features of the proposed VCCRs. A VCC can be established either as an independent entity or as an umbrella structure comprising segregated or incorporated cells. One of the key features of a VCC is its flexible share capital, which is tied to the net asset value of the company. This enables seamless issuance and redemption of shares, supporting efficient capital inflows and outflows. Unlike traditional corporate structures, a VCC is not restricted to distributing dividends solely from profits, but it may make distributions from capital, based on the net asset value of the VCC or the relevant cell. Furthermore, the VCC structure allows for the segregation of assets and investment strategies through distinct cells; each with its own risk profile, while ensuring liabilities remain ringfenced. This model also facilitates cost efficiencies through centralised governance and management.

The proposed VCC model is expected to attract family-owned businesses, high-value multi-asset holdings, and complex proprietary investment portfolios, such as secondary structures that require sophisticated structuring solutions. By offering a flexible legal framework, the VCC allows for tailored governance, asset segregation, and efficient capital deployment. These features make it especially suitable for entities seeking consolidated management of diverse investments and maintaining operational and legal separation of assets and strategies within a single structure.

Stakeholders are encouraged to review the proposed VCCRs and provide their feedback within a 30-day public consultation period that will end on 24 July 2025.

Ahmed Ziad Galadari Director & Advocate, Dubai ahmed.ziad@galadarilaw.com