Fund Structures In UAE: A Unified Legal Overview

The UAE has rapidly emerged as one of the leading financial hubs in the Middle East for the collective investment funds (CIF) industry. The country offers fund managers a unique blend of options: two international financial free zones that operate on common-law frameworks – the Dubai International Financial Centre (DIFC), the Abu Dhabi Global Market (ADGM) and the domestic onshore regime under the Federal Securities and Commodities Authority (SCA). Together, these three regimes offer a broad spectrum of fund structuring opportunities that combine international credibility with local investor accessibility in the UAE, supported by passporting mechanisms available for eligible funds.

For fund managers, the selection of fund vehicles and jurisdictions is a critical early decision. This choice shapes regulatory obligations a manager must comply with but also influences investor appetite, governance standards and ultimately a fund's capacity to scale seamlessly across borders including its ability to raise cross-jurisdictional capital. This article focuses on professional and private fund structures and does not address the specific requirements applicable to public/ retail funds.

A. Overview of the Regulatory and Legal Framework

The UAE operates a multi-jurisdictional regulatory structure for investment funds, anchored in three regimes. The Dubai Financial Services Authority (DFSA) of DIFC, Financial Services Regulatory Authority (FSRA) of ADGM and SCA in onshore UAE, each of which administer tailored CIF regimes, with licensing requirements hinging on fund types and investor profile.

Under the DFSA's General Module, a fund manager must obtain the relevant authorizations to operate in and from the DIFC, adhering to strict governance and disclosure standards. The FSRA's Financial Services and Markets Regulations 2015 (FSMR) similarly mandate a Financial Services Permission (FSP) for ADGM-domiciled fund managers. In onshore UAE, the funds regime is regulated by the SCA and the entities are required to obtain the fund manager license pursuant to Board Decision No. (01/RM) of 2023 concerning the Regulation of Investment Funds (SCA Regulations).

B. Fund categories and investor classes

The SCA monitors and regulates the securities and investment sector in onshore UAE. The SCA recognises 2 major categories of funds, i.e., local funds and foreign funds.

The SCA recognises certain categories of local funds such as Standalone Funds, Master Funds, Umbrella Funds and Protected Cell Funds.

Fund Categories in DIFC and ADGM

The primary classification of funds in the UAE begins with determining whether the fund is a Domestic Fund or a Foreign Fund. A Domestic Fund refers to a collective investment fund that is established or domiciled within the DIFC (regulated by the DFSA) or the ADGM (regulated by the FSRA). In contrast, a Foreign Fund refers to any collective investment fund that is constituted or domiciled in a jurisdiction other than the DIFC, in the context of the DFSA regime or the ADGM, in the context of the FSRA regime.

The DFSA and the FSRA recognise a range of investment vehicles. Some of the common fund structures under Domestic Funds include:

Domestic funds across the DIFC and ADGM can broadly be divided into three basic categories, namely 'Public Funds', 'Exempt Funds' and 'Qualified Investor Funds' (QIF).

Exempt Fund: A fund is considered an exempt fund (a) if units are offered by such fund through private placement, (b) all its unitholders meet the criteria to be classified as 'professional clients', and (c) the initial subscription is not less than US$ 50,000, and (d) such fund does not qualify to be a QIF.

Qualified investor fund: A Fund is considered a QIF if it meets each of criteria (a) and (b) for Exempt Funds, in addition to the requirement that the initial subscription not be less than US$ 500,000.

It is important to highlight for the readers that under the UAE financial free-zone(s) legal framework, a Private Placement refers to an offer of fund units made to a person who is likely to be interested in the offer, having regard to:

1. any previous contact between the offeror and the prospective investor;
2. any professional or other connection between the offeror and that investor; or
3. any statements or actions by that investor indicating an interest in such offers.

The UAE recognises a range of fund vehicle types, however, the permissibility to establish and operate such structures differs under each regulatory regime. The principal fund vehicles are discussed below.

Investment Companies

An investment company is a fund vehicle limited by shares that pools investor capital and issues shares (or units). It may be structured as either open-ended, allowing subscriptions and redemptions at NAV or closed-ended, where investors have no redemption rights. Both the ADGM and DIFC regimes distinguish between Open-Ended Investment Companies (OEICs) and Closed-Ended Investment Companies (CEICs).

The DFSA and the FSRA also recognise an investment company as a core vehicle for the establishment of collective investment funds across both retail and professional/exempt fund categories. Within both jurisdictions, exempt funds or QIF structures benefit from the lighter-touch regulatory obligations, designed to accommodate sophisticated and institutional investors.

An investment company serves as the core legal vehicle for establishing onshore funds in the UAE under the supervision of the SCA. It may be structured as open-ended, allowing continuous subscriptions and redemptions or as closed-ended, where investors do not possess redemption rights and typically realise returns through secondary sales or liquidation events.

Investment Partnership

An investment partnership is a limited partnership structure formed for a collective investment fund. The General Partner (GP) manages the fund and bears the ultimate management responsibility, while Limited Partners (LPs) contribute capital with liability limited towards their commitments. The relationship is governed by a negotiated Limited Partnership Agreement (LPA) that sets out commitments/capital calls, fee and carry mechanics, distributions/waterfalls, key-person/removal rights, term/extension, transfer and conflict provisions. In the UAE's financial free zones, the DIFC recognises LPs under the Limited Partnership Law DIFC Law No. 4 of 2006. The ADGM recognises LPs under its Limited Partnerships framework, with the partnership agreement functioning as the core constitutional document governing the relationship.

In both the DIFC and ADGM, LP structures are utilised most commonly for professional-only funds i.e., Exempt Funds and QIFs because they suit closed-ended strategies such as private equity and venture capital.

Both DIFC and ADGM recognise LPs under their partnership laws. They are most commonly used by Exempt Funds and QIF targeting professional investors, specifically in private equity and venture capital players.

Under SCA, the limited partnership funds are governed by the Securities and Commodities Authority Decision No. 32/R.M/2017 concerning the Regulation for General and Limited Partnership Fund.

Cell Companies (PCC/ICC)

Cell companies are umbrella vehicles that house multiple ring-fenced sub-funds. Protected Cell Companies (PCCs) are single legal entities with multiple cells containing internal segregation. Each cell's assets and liabilities are legally segregated from those of other cells, but the cells do not have separate legal personalities. A PCC has core assets (non-cellular) that may be used to meet liabilities which cannot be attributed to a single cell.

An ICC is a corporate structure in which each Incorporated Cell (IC) constitutes a separate legal entity with its own legal personality, distinct from the core ICC and other cells. Unlike a PCC, where individual cells are segregated but not legally distinct entities, each IC can own assets, incur liabilities and enter into contracts in its own name. This structure provides enhanced legal segregation, greater operational flexibility and stronger creditor protection, making it particularly suitable for multi-strategy fund platforms or umbrella structures with differentiated investor groups or asset classes.

In a PCC, a single board of directors manages and oversees both the core and all its individual cells, with asset and liability segregation maintained through internal accounting and statutory provisions.

In contrast, an Incorporated Cell Company (ICC) has separate boards of directors for the umbrella entity and for each incorporated cell, reflecting their distinct legal personalities. Each sub-fund or cell should typically provide a clear disclosure of the segregation framework utilised.

Investment Trusts

An investment trust is an express trust created for the primary purpose of collective investment under a trust deed. A licensed trustee holds assets for the benefit of unitholders, while a manager carries out management. The appointed trustee provides fiduciary oversight, ensuring compliance with investment policies. Custody of the trust's assets is usually arranged through the trustee.

Investment trusts offer structural advantages that make them compelling for long-term investors. Their permanent capital base provides regulatory and operational stability, while trustee oversight embeds fiduciary safeguards and strong investor protection.

C. Practical Considerations

When structuring and launching a fund in the UAE, fund managers should carefully evaluate several key factors:

• Jurisdiction choice – Selection between DIFC, ADGM or onshore (SCA-regulated) regimes depends on the target investor base and strategic objectives. DIFC and ADGM offer globally recognised, common law-based frameworks suitable for professional and institutional investors, while the SCA regime provides better access to domestic retail markets and public distribution.
• Licensing – Fund managers operating within DIFC or ADGM must obtain authorisation from the DFSA or FSRA, respectively, under defined categories such as managing a collective investment fund. Onshore, the SCA license for Managing the investment of investment funds will be required.
• Fund Platform – New market players in the region may also consider utilising fund platform services available in the ADGM and DIFC to expedite their fund launch process without obtaining a separate fund management license. Under this model, a licensed fund platform acts as the fund manager, overseeing the fund's regulatory, administrative and operational requirements, thereby enabling a faster launch and smoother operationalisation of the vehicle.
• Service providers – The appointment of local, regulator-approved service providers, including custodians, fund administrators, trustees and auditors, is mandatory where applicable. These players play a crucial role in maintaining operational integrity and investor protection across the various fund regimes in the UAE.

D. Conclusion

The UAE's multi-jurisdictional fund ecosystem now rivals established global hubs.
For sponsors, it offers a unique ability to match fund structure to investor strategy – DIFC and ADGM for international investors seeking common-law certainty and the SCA regime for domestic retail distribution. With continued progress on fund passporting, governance alignment and cross-border recognition, the UAE is positioned to become a launchpad for regional and global capital deployment.

For fund managers, the most effective approach is not "one size fits all" but a tailored structuring strategy aligned to investor profile, liquidity and growth ambitions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.