A Special Purpose Company (SPC) is a company incorporated in Dubai International Financial Centre (DIFC) only for exempt activities. DIFC being a free zone provides several benefits to an SPC like zero tax, no foreign ownership restrictions, limited liability, and access to world-class infrastructure.
Nature of SPC
An SPC cannot have more than three shareholders, i.e., the nominee holding the shares in SPC on trust, the initiator or another participant in the transaction, or another SPC.
An SPC can only be used by the following to hold the property of the relevant fund:
(i) Trustee of an Investment Trust,
(ii) An Investment Company,
(iii) An Investment Partnership
An SPC itself cannot act as a Trustee of an investment trust or general partner of an investment partnership, or as an investment company.
Exempt Activities
An SPC can only function for performing one of the following exempt activities:
(i) acquiring, holding, or disposing of any asset for the purpose of a transaction,
(ii) financing another SPC,
(iii) acting as a trustee or agent for any participant in the transaction,
(iv) obtaining finances through banking or capital market
(v) granting security interest over its assets
(vi) providing indemnity for benefit of its shareholder or its subsidiaries,
(vii) the entering into any type of hedging arrangements, in connection with a transaction.
If an SPC is found in indulging activities other than those termed exempted activities, it could be fined up to USD 5,000. Failure to fulfill reporting requirements can be fined up to USD 2,000. In addition to these penalties, an SPC shall be liable to pay penalties as per Schedule 2 of the Companies Law 2006.
The status of an SPC can also be revoked upon its conducting activities outside the scope of exempt activities. Upon such revocation, it shall not be protected by the SPC regulations and can be subject to the general law surrounding companies.
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