Over the last 12 months, structured finance transactions in the Middle East (both Islamic and conventional) have seen increased use of a comparatively new and previously underutilized type of special purpose vehicle (SPV) – the DIFC special purpose company (SPC).

An SPC is a private company limited by shares incorporated under the laws of the Dubai International Financial Centre (the DIFC), a financial free zone located in the Emirate of Dubai with its own body of law and regulations and a separate court system.

On 29 February 2012, SPCs and their potential for use in international structured finance transactions were the focus of a public seminar held in the DIFC and chaired by Abdulla Al Awar, CEO of the DIFC Authority. Significant interest was expressed from advisers, regulators and principals alike in the benefits offered by SPCs.

Benefits of DIFC Incorporation

By virtue of being incorporated in the DIFC, an SPC offers a number of key benefits enjoyed by other types of DIFC entity, including:

  • No foreign ownership restrictions;
  • Zero tax;
  • Limited liability;
  • DIFC law, in particular the DIFC’s regime for registration and enforcement of security; and
  • DIFC infrastructure.

Benefits of Using an SPC

SPCs are principally governed by the DIFC Special Purpose Company Regulations of 2008, which contain a number of important dispensations from the residual requirements of the DIFC Companies Law No. 2 of 2009 and the DIFC Companies Regulations of 2009. Specific benefits enjoyed by an SPC include:

  • No requirement to lease office space. Unlike an ordinary DIFC company limited by shares, an SPC is not required to lease and maintain a physical office within the DIFC. Instead, an SPC is only required to maintain a registered office address in the DIFC. This exemption removes a significant cost otherwise associated with being incorporated in the DIFC;
  • No requirement to maintain, file or audit accounts. Part 9 of the Companies Law (which contains requirements to prepare, audit and file accounts) does not apply to an SPC; and
  • No AGM requirement. Article 62 of the Companies Law, which requires an annual shareholder meeting, does not apply to an SPC.


The SPC Regulations provide that the purpose of an SPC, as set out in its articles of association, must be limited to performing “Exempt Activities”, which effectively limits their use to structured financing transactions (whether Islamic or conventional). SPCs cannot be used as general corporate holding companies or to operate a trading business. They can also not serve as the general partner of an investment partnership. An SPC cannot conduct “financial services” in or from the DIFC unless it is appropriately authorised and regulated by the DIFC’s regulator, the Dubai Financial Services Authority. An SPC is also not an appropriate vehicle for situations where numerous shareholders are envisaged, since an SPC is not permitted to have more than three shareholders, and there are restrictions on who can be a shareholder in an SPC (effectively, only participants in a structured finance transaction). This is a factor that should be taken into consideration in situations where it is envisaged that shares in the SPC may ultimately be transferred to third parties.

Corporate Services Provider

One of the unique features of an SPC is the requirement to appoint a licensed Corporate Services Provider (a CSP). The role of the CSP is integral to the operation and management of an SPC. Among other things, the CSP will:

  • Provide the majority of the board of directors of the SPC;
  • Act as company secretary;
  • Provide administrative services (which will usually include the provision of a registered office address for the SPC within the DIFC); and
  • Handle filings and interaction between the SPC and the DIFC Registrar of Companies.

The Story So Far

Since the SPC Regulations were passed in 2008, a total of 10 SPCs have been incorporated to date. All of these have been incorporated in the past 12 months.

One of the more high profile and innovative uses of an SPC to date has been by the Government of Dubai, which in 2011 chose to establish an SPC – named Salik One SPC Limited – for use as the borrower vehicle in a US$800 million financing transaction that involved the monetisation of revenues generated by Dubai’s “Salik” toll road system. The transaction included both Islamic and conventional tranches. As part of the financing structure, revenues generated by Salik are collected in an account held in the name of the SPC.

The SPC as a corporate vehicle boasts a number of attractive features which give it the potential to become an increasingly common alternative to established SPV domiciles, particularly for structured finance transactions focused on the Middle East, Africa and Asia.

Click here to view a full Latham & Watkins Client Alert on SPCs in the DIFC.

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