DIFC Proposes Framework for Variable Capital Companies

The Dubai International Financial Centre (DIFC) has concluded its public consultation on the proposed Variable Capital Company (VCC) Regulations, a new corporate framework designed to provide investors with greater flexibility in structuring proprietary investment activities. The consultation ran from 25 June to 24 July 2025, and the DIFC Authority is now reviewing stakeholder feedback ahead of finalizing the regulations later this year.

The proposed VCC regime is intended to offer a versatile and efficient vehicle for managing investment holdings, complementing existing DIFC structures such as Protected Cell Companies (PCC) and Incorporated Cell Companies (ICC).

Purpose and Objectives

The VCC framework aims to:

- Provide a flexible structure for proprietary investment activities.
- Enable segregated investment strategies under one umbrella while maintaining ring-fencing of assets and liabilities.
- Offer legal clarity, operational efficiency, and scalability for investors.
- Strengthen DIFC’s position as a regional and global hub for investment and asset management.

Key Features of the Proposed VCC Regulations

Structure: A VCC is a private limited company that can be established as either a standalone entity, or an umbrella structure with multiple cells, which can either be segregated cells (not separate legal entities), or incorporated cells (each a separate legal entity). However, both types of cell companies cannot coexist within the same VCC.

Flexible Share Capital: The share capital equals Net Asset Value (NAV) of the company, and shares and cell shares can be issued, redeemed, or repurchased at NAV, allowing efficient capital movements.

Distributions: VCCs can make distributions from profits or capital, based on NAV, removing the traditional restriction of paying dividends only from profits.

Asset Segregation: Cellular assets are ring-fenced from other cells and from the VCC’s non-cellular assets, ensuring creditor protection. Creditors of a particular cell may only have recourse to that cell’s assets, and not to the non-cellular assets of the VCC or other cells. Likewise, non-cellular creditors cannot pursue cellular assets. These protections are embedded as implied terms in every transaction entered into by or on behalf of a VCC or its cells.

Regulatory Scope: No DFSA authorization or regulated fund manager is required, unless the VCC engages in regulated financial services activities.

Qualifying Criteria: A VCC (and its cells) must meet at least one of the following:
- Controlled by GCC Persons, authorized firms, or DIFC registered persons;
- Established for a specific qualifying purpose, including holding GCC registrable assets, aviation, maritime, intellectual property structures, crowdfunding structures, structured financing, or secondaries structures.

Corporate Actions: Segregated cells can merge, consolidate, or transfer assets between them, subject to regulatory requirements with creditor objection rights. Incorporated Cells can be transferred between VCCs under a Transfer Agreement approved by both VCCs and the Registrar. VCCs can also convert between segregated and incorporated cell structures, convert into or from a DIFC company, or redomicile to or from a foreign jurisdiction. Incorporated cells may become independent companies with continuity of rights and liabilities, with creditor protections applying throughout.

Governance: Officers must maintain asset segregation and disclose the nature of transactions. They may be indemnified from the VCC’s non-cellular assets, but remain personally liable where breaches involve negligence, recklessness, fraud, or bad faith.

Employment Restrictions: VCCs are not permitted to employ any employees.

Winding Up and Insolvency: A VCC cannot be wound up until all cells are resolved.

Target Audience

The VCC model is expected to appeal to:

- Family offices and high-net-worth families seeking ring-fenced structures for diverse assets.
- Private equity and investment managers requiring multi-strategy platforms.
- DIFC Registered Persons and Authorized Firms for proprietary investment or structured financing.
- Legal and corporate service providers offering formation and management services.

Next Steps

The DIFC Authority is reviewing consultation feedback, with final VCC Regulations expected to be enacted later in 2025. Once implemented, the regime will provide investors with a flexible, legally secure, and operationally efficient framework for structuring and managing proprietary investments.