The Government of Dubai has announced the creation of a Regulator for Dubai Multi Commodities Centre (DMCC) via the issuance of Law No. (3) of 2020 on the DMCC (the “Law”).
The DMCC Authority will be entrusted with the supervision of the operations and activities of the DMCC. The Law clarifies the extent of its role as well as its organizational structure.
Key take away:
Governance move
The announcement appears primarily aimed at reinforcing oversight over the current pool of DMCC member companies, and ensuring the zone’s infrastructure can support future growth.
The zone has grown fast over the years and is now the largest free zone in the UAE. It enjoys the highest credibility amongst non-financial free zones within the banking sector, with a number of institutions placing reliance on DMCC’s compliance processes when risk-rating applications for account openings.
Close monitoring
The Law reiterates that companies in free zones are not allowed to deploy activity in UAE mainland, except within strict parameters (e.g. B-to-B transactions).
It equally confirms that companies are only allowed to deploy activities in line with those reflected on their operating licenses or those deemed “ancillary” to their licensed activity/ies; this is obviously subject to interpretation and to the authorities’ discretion which reserves the right to apply fines for non-compliance.
Considering DMCC’s USPs (i.e. reliance on a tested infrastructure, broad spectrum of licensable activities and high credibility towards banks), this announcement is unlikely to impact the zone’s current growth rate.
Companies having not recently reassessed the suitability of their license against their operations or operating on the borderline of their licensed activity may nonetheless want to take proactive steps and submit their structure to a corporate health check (which we are happy to prepare on a complimentary basis as part of Step 1 of our
New Year’s Resolutions “Is your corporate structure (still) fit-for-purpose?”)