The new Incorporated Cell Company (ICC) Regulations came into force on 1 May 2019 following a decision of the Board of Directors of the Dubai International Financial Centre (DIFC) Authority. Following the enactment, Kathryn Miller, Manager - Fund Services details how fund managers will be able to use the new structure to conduct their funds business once the Collective Investment Law (DIFC Law No. 2 of 2010) has been amended.
The ICC, although a new product to the DIFC, is a proven vehicle of choice for many fund managers in leading financial centres such as Jersey and the Isle of Man. Adding diversity to the range of collective investment structures that can be used in the DIFC, the ICC structure is yet another step towards strengthening the position of the UAE as a modern, flexible and competitive fund jurisdiction.
What is an Incorporate Cell Company?
An ICC creates Incorporated Cells: these cells are separate entities with their own legal identity. Each cell has its own Articles of Association, its own shareholders and directors. They may hold assets, sue and can be sued in their own name, and do anything that an ordinary company could do. ICCs enable assets and liabilities within each Incorporated Cell to be segregated from the assets and liabilities of other cells and separated from the Incorporated Cell Company itself. The key principle is that the assets of a cell should only be available to the creditors and shareholders of that cell, which is advantageous when utilising the ICC in collective investment projects.
Under the DIFC ICC Regulations, an ICC shall be formed as a company and Incorporated Cells, for the use of funds business, can be constituted as an Open-Ended Fund, a Closed-Ended Fund, or a Private Company as defined in the Collective Investment Law DIFC Law No. 2 of 2010.
Advantages of the ICC structure for the fund manager:
- ICCs can be used as a DIFC Fund Platform
A Fund Platform creates a gateway for fund managers outside of the DIFC to conduct business in the region. It allows them to partner with a DFSA Regulated fund manager in order to launch their collective investment product in the DIFC. This structure will allow the DFSA Regulated Fund Manager to establish an Incorporated Cell Company and Incorporated Cells as DIFC Domestic Funds.
The DFSA Regulated fund manager would act as the appointed fund manager whilst the Incorporated Cell (DIFC Fund) would be sponsored by an external asset manager who may also act as delegated investment advisor or investment manager in relation to the underlying assets of the Incorporated Cell. The new ICC Regulations make it attainable for fund managers from other jurisdictions to launch products and conduct their funds business in the DIFC, whether it be Fund Managers with a focus on Qualified Investor Funds or larger firms with a specific regional investment or investor base. The ICC, as a Fund Platform, creates opportunities for a wide range of asset management strategies.
- ICCs allow segregation of assets and liabilities
Similar to a Protected Cell Company (PCC), the main characteristic of the ICC is that assets and liabilities can be segregated according to share class and risk. PCCs, although a good mechanism for umbrella fund structures, do not have the advantages of an ICC in being able to establish stand-alone funds. This is particularly beneficial to investors in collective investment schemes, where each cell can constitute a separate fund with separate investment strategies and asset classes.
- ICCs are economically beneficial
Operational savings can be made by using a common framework and a central administrative service provider. This is especially relevant for asset managers launching their collective investment products in a new region and where minimising administrative costs is imperative.
Kathryn Miller, Manager of Alternative Investments at Ocorian UAE reports:
"The ICC is a welcome addition to the range of structures available in the DIFC and one that will make the jurisdiction even more attractive to Fund Managers and investors.
The amendments made to the DFSA Collective Investment Law in the past year have increased the robustness of the DIFC Funds Regime and present a clear message from the authorities that the DIFC should be regarded as the leading funds jurisdiction in the GCC. The long-standing experience we have as fund administrators across many jurisdictions and our familiarity with ICC regulations and structures in leading European fund centres such as Jersey, will certainly be an asset that will help us capitalise on the new opportunities offered by the ICC Regulations in the DIFC."
Our UAE office in the financial hub of Dubai, the DIFC, is a licensed and regulated DFSA Fund Administrator and can provide full administration services in relation to ICCs and other collective investment structures. We also have a global offering of fund expertise spanning across multiple jurisdictions that we can leverage on for the setting up and administration of ICCs and other fund structures in and from the DIFC. Learn more about our services from UAE here.
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