Licensed Director Adgm

[Fleur Francour]

Whatlegal form of vehicle is typically used for private equity funds formed in your jurisdiction? Does such a vehicle have a separate legal personality or existence under the law of your jurisdiction? In either case, what are the legal consequences for investors and the manager?

In the Dubai International Financial Centre (the DIFC), the financial regulator is the Dubai Financial Services Authority (DFSA) and in the Abu Dhabi Global Market (the ADGM) the financial regulator is the Financial Services Regulatory Authority (FSRA). In both the DIFC and ADGM, the following corporate structures can be used to establish domestic funds including private equity funds: investment company, investment partnership or investment trust. The investment partnership model is the most common structure used by private equity funds. The DFSA and FSRA require the general partner to be licensed to act as a fund manager.

Is a private equity fund vehicle formed in your jurisdiction required to maintain locally a custodian or administrator, a registered office, books and records, or a corporate secretary, and how is that requirement typically satisfied?

What access to information about a private equity fund formed in your jurisdiction is the public granted by law? How is it accessed? If applicable, what are the consequences of failing to make such information available?

The SCA publishes on its website a register of all entities that are listed, licensed and registered with the SCA in accordance with its regulations. The information available includes company details such as the address, the board of directors (if relevant) and information on the meetings of shareholders. (Note that it may be that not all the detail outlined above will be available for each fund.)

It should be noted that the constitutional documents of a fund, the partnership agreement and/or the fund management agreement can expand the duties of the fund manager, however the statutory duties specified in the relevant legislation cannot be revoked.

The UAE Federal Civil Transactions Law (the Civil Code) provides that an obligor remains liable for any gross negligence on its part in performing its obligation. Although gross negligence is not defined, such provision shall be applicable to the management of a private equity fund in the UAE.

Are there any other special issues or requirements particular to private equity fund vehicles formed in your jurisdiction? Is conversion or redomiciling to vehicles in your jurisdiction permitted? If so, in converting or redomiciling limited partnerships formed in other jurisdictions into limited partnerships in your jurisdiction, what are the most material terms that typically must be modified?

For funds domiciled in the DIFC, the principal regulatory body is the DFSA. For funds domiciled in the ADGM, the principal regulatory body is the FSRA. To provide unitholders of a fund with relevant and up-to-date information about the performance and management of a fund, the DFSA and FSRA require the preparation of annual financial reports and may also require interim reports. These reports must be open for inspection by the regulators at all reasonable times.

What are the governmental approval, licensing or registration requirements applicable to a private equity fund in your jurisdiction? Does it make a difference whether there are significant investment activities in your jurisdiction?

In the DIFC and ADGM, the fund manager must be an authorised firm registered with the DFSA or FSRA, as applicable, that has a licence to undertake the financial services of managing a fund. Additionally, authorised firms are required to appoint individuals for certain mandatory management positions; these individuals are required to be registered with and authorised by the relevant regulator to undertake the specific management roles.

For the DIFC, the fund manager must be licensed by the DFSA. The licence will be granted once the DFSA is satisfied that the fund manager will have adequate systems and controls to manage the type of fund that it proposes to establish. In addition, the senior management of the fund manager must be qualified to undertake the mandatory roles stipulated by the DFSA. In its assessment of the senior management, the DFSA will consider the educational qualifications and professional experience of the senior officers.

Describe any legal or regulatory developments emerging from the recent global financial crisis that specifically affect banks with respect to investing in or sponsoring private equity funds.

The UAE Central Bank is the authority governing and regulating investments by banks in the UAE. The UAE Central Bank requires banks to maintain specific capital adequacy requirements, risk profiles and exposure limits, but does not restrict banks from investing in or sponsoring private equity funds.

Would a private equity fund vehicle formed in your jurisdiction be subject to taxation there with respect to its income or gains? Would the fund be required to withhold taxes with respect to distributions to investors? Describe what conditions, if any, apply to a private equity fund to qualify for applicable tax exemptions.

The UAE has implemented the imposition of a value added tax (VAT). VAT is applicable on taxable activities undertaken by entities incorporated in the UAE mainland and in the free zones on supplies of goods or services.

At present, there are no specific taxation or return-filing requirements imposed on non-resident investors in private equity funds in the UAE. It should, however, be determined whether UAE VAT would be applicable.

Is it necessary or desirable to obtain a ruling from local tax authorities with respect to the tax treatment of a private equity fund vehicle formed in your jurisdiction? Are there any special tax rules relating to investors that are residents of your jurisdiction?

The UAE has entered into double taxation agreements (DTA) and bilateral investments treaties (BIT) with several countries. Lists of these DTAs and BITs are available on the website of the UAE Ministry of Finance.

Since, at present, there are no specific taxes imposed on private equity funds in the UAE, there are no significant tax issues relating to private equity funds organised in the UAE. It should, however, be determined whether UAE VAT would be applicable. In addition, the taxation regime in the UAE is subject to change by the competent authorities.

Describe the principal legal and regulatory restrictions on offers and sales of interests in private equity funds formed in your jurisdiction, including the type of investors to whom such funds (or private equity funds formed in other jurisdictions) may be offered without registration under applicable securities laws in your jurisdiction).

Describe any restrictions on the types of investors that may participate in private equity funds formed in your jurisdiction (other than those imposed by applicable securities laws described above).

Does your jurisdiction require any ongoing filings with, or notifications to, regulators regarding the identity of investors in private equity funds (including by virtue of transfers of fund interests) or regarding the change in the composition of ownership, management or control of the fund or the manager?

Describe any money laundering rules or other regulations applicable in your jurisdiction requiring due diligence, record keeping or disclosure of the identities of (or other related information about) the investors in a private equity fund or the individual members of the sponsor.

The relevant laws, rules and regulations of the UAE (and DIFC or ADGM, as applicable) and, specifically, the following laws, rules and regulations relating to anti-money laundering, terrorist financing, financing of illegal organisations and sanctions compliance would be applicable:

Are private equity funds able to list on a securities exchange in your jurisdiction and, if so, is this customary? What are the principal initial and ongoing requirements for listing? What are the advantages and disadvantages of a listing?

The SCA can specify any restrictions in respect of the transfer of interests of a listed fund. In addition, the transfer of interests of a listed fund shall be subject to the applicable listing rules and regulations and the constitutive documents of the fund.

Are funds formed in your jurisdiction subject to any legal or regulatory restrictions that affect their participation in private equity transactions or otherwise affect the structuring of private equity transactions completed inside or outside your jurisdiction?

What are the most significant recent trends and developments relating to private equity funds in your jurisdiction? What impact do you expect such trends and developments will have on global private equity fundraising and on private equity funds generally?

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