DIFC Proposes Variable Capital Company Regime to Enhance Structuring Flexibility for Investment and Asset Holding Vehicles

Client Alert  |  June 26, 2025

This update provides a summary of the key features of the regime as currently set out in the Draft Regulations.

The Dubai International Financial Centre Authority (DIFCA) has published a draft of the Variable Capital Company Regulations (the Draft Regulations) for public consultation, proposing a novel corporate structure aimed at enhancing the DIFC’s attractiveness as a jurisdiction for structuring investment platforms, including for family offices, asset holding, and private investment purposes.

The new regime introduces the Variable Capital Company (VCC), which offers a flexible framework for segregating assets and liabilities through the creation of “Cells” within a single legal entity.

The consultation process remains ongoing, and the final form of the regulations may change depending on feedback received. This update provides a summary of the key features of the regime as currently set out in the Draft Regulations.

Background and Context

The DIFC currently offers a limited cell regime under its existing Protected Cell Company framework, which is available only to certain types of investment companies. However, this framework does not include features such as segregated cells (described below). The proposed VCC regime introduces a more versatile and commercially attractive vehicle, offering structuring options that go beyond what is currently available under the DIFC’s existing framework.

Similar vehicles are available in only a few other jurisdictions, such as Singapore and Mauritius, which have implemented their own VCC regimes in recent years. By introducing a comparable structure, the DIFC aims to enhance its competitiveness and appeal to global investors, family offices, and asset managers seeking flexible and cost-effective structuring options.

Overview of the VCC Structure

A VCC is a private company that may be established in the DIFC either with one or more Segregated Cells or Incorporated Cells (each, a Cell) but not both, which may hold assets and liabilities separately from those of the VCC and other Cells. A VCC may have any number of Segregated Cells or Incorporated Cells, or none, in each case as provided for in its Articles of Association. This allows for ring-fencing of liabilities and targeted investment structuring.

Notably:

  • A Segregated Cell does not have separate legal personality but is treated as segregated for asset and liability purposes.
  • An Incorporated Cell is itself a private company with separate legal personality but cannot own shares in other Cells or the VCC.

The VCC structure is modelled to appeal to family offices, private funds, and other investment vehicles seeking to consolidate multiple investments within a single corporate structure, while maintaining legal separation between them.

Qualifying Criteria

Applicants must satisfy one of the following conditions:

  • The VCC will be controlled by GCC Persons, Registered Persons or Authorised Firms; or
  • It is established, or continued in the DIFC for purposes of holding legal title to, or controlling, one or more GCC Registrable Assets;
  • It is established for a Qualifying Purpose, defined to include Aviation Structures (persons having the sole purpose of facilitating the owning, financing, securing, leasing or operating an interest in aircrafts), Crowdfunding Structures (persons established for the purpose of holding the asset(s) invested through a crowdfunding platform), Intellectual Property Structures (persons established for the sole purpose of holding intellectual property for commercial purposes), Maritime Structures (persons having the sole purpose of facilitating the owning, financing, securing, chartering, managing or operating of an interest in maritime vessels or maritime units), Structured Financing (persons having the sole purpose of holding assets to leverage and/or manage risk in financial transactions), or  Secondaries Structures (vehicles facilitating the transfer of investment assets to secondary investors); or
  • It is established or continued in the DIFC has a Director that is an Employee of a Corporate Service Provider and that Corporate Service Provider has an arrangement with the DIFC Registrar pursuant to the relevant provisions in the Draft Regulations.

Key Features

1. Regulatory Oversight

  • VCCs are subject to the DIFC Companies Law and other Relevant Laws, unless otherwise provided.
  • The DFSA must authorise any VCC providing financial services.
  • The license of the VCC established for a Qualifying Purpose shall be restricted to the activities specific to the Qualifying Purpose stated in its application to incorporate or continue in the VCC in the DIFC, or any other permitted purpose shall be restricted to the activity of Holding Company. A VCC shall not be permitted to employ any employees.

2. Share Capital and Distributions

  • VCCs may issue and redeem shares based on the net asset of the company or individual Cells.
  • Cellular distributions must relate solely to the assets and liabilities of the relevant Cell, and must not impact other Cells or the VCC’s general assets.

3. Asset Segregation and Liability Protection

  • Officers may incur personal liability if they breach their duties regarding segregation and disclosure of cell identity in transactions.
  • The regulations include detailed provisions governing the consequences of unlawful inter-Cell transfers and creditor protections.
  • Each transaction with third parties must clearly specify the relevant Cell and limit recourse accordingly.

4. Conversions, Mergers, and Transfers

The framework allows for:

  • Conversion of existing DIFC companies into VCCs and vice-versa;
  • Transfer of incorporated cells between VCCs, subject to Registrar approval and creditor protection mechanisms;
  • Merger or consolidation of Segregated Cells, with prior written notice and creditor opt-out rights.

5. Licensing and Naming

  • VCCs must end their names with “VCC Limited” or “VCC Ltd.”
  • Segregated Cells and Incorporated Cells must have unique identifiers (e.g., “VCC SC” or “VCC IC”).
  • Licences are limited to the specific activities of the Qualifying Purpose, though VCCs controlled by Qualifying Applicants may be licensed for broader purposes.

6. Shareholder Transparency and AML Compliance

  • VCCs must maintain separate registers of shareholders for each Cell.
  • Ultimate beneficial ownership disclosure obligations apply in line with DIFC UBO Regulations.

7. Fees and Incorporation Process

The proposed incorporation and licensing fees are aligned with the DIFC’s broader cost-efficient regime:

  • USD 100 for incorporation;
  • USD 1,000 for an annual licence;
  • USD 300 for lodging a Confirmation Statement.

Key Topics

Some of the key topics included in the consultation paper include questions around:

  • the scope and breadth of the proposed qualifying-requirements test, including whether proprietary investment access is too wide or too narrow;
  • appropriateness of allowing both Segregated Cells and Incorporated Cells within a single regime, and the implications of prohibiting a VCC from having both types concurrently; and
  • adequacy of creditor-protection measures, notice, publication and court-application rights on conversion of a VCC into a standard DIFC company and vice versa.

Practical Implications

The proposed introduction of the VCC regime provides a robust framework for private clients and investment entities to achieve structural and operational flexibility within a regulated DIFC environment. Key advantages include:

  • Legal segregation of assets/liabilities for risk mitigation.
  • Simplified investment platform management.
  • Suitability for private wealth structuring, crowdfunding, and secondary market transactions.

The following Gibson Dunn lawyers prepared this update: Andrew Steele and Omar Morsy.

Gibson Dunn’s lawyers are available to assist in addressing any questions you may have regarding these issues. For additional information about how we may assist you, please contact the Gibson Dunn lawyer with whom you usually work, any leader or member of the firm’s Mergers & Acquisitions or Private Equity practice groups, or the authors:

Andrew Steele – Abu Dhabi (+971 2 234 2621, asteele@gibsondunn.com)

Omar Morsy – Dubai (+971 4 318 4608, omorsy@gibsondunn.com)

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