13 Mar 2023

New UAE Investment Funds Regime

Authored by: Bilal Snaineh

In Brief:

  1. New Securities and Commodities Authority (“SCA”) regulations aim to enhance the existing investment funds and legal framework, including the promotion and distribution of foreign funds in the UAE.  
  2. Under the new Investment Funds Regulations, new fund structuring options have been introduced.
  3. Relaxation of foreign ownership restrictions, with permission for full foreign ownership of companies carrying out fund management activities.

New UAE Investment Funds Regime

The Securities and Commodities Authority (“SCA”) issued new regulations for the purpose of enhancing the existing investment funds legal framework, including the promotion and distribution of foreign funds in the UAE. This follows the SCA’s recent announcement of an initiative to encourage global asset managers to establish onshore UAE domestic funds.

Accordingly, the SCA issued on 16 January 2023 the following set of regulations which came into effect on 1 February 2023 (“New Funds Regulations”):

  1. SCA Chairman of the Board of Directors Decision No. 1/RM, Concerning Investment Funds Regulations (“Investment Funds Regulations”);
  2. Decision No. 4/RM, Concerning the Procedures of Adjustment of Situation to Promote Units of Foreign Funds in the UAE (“Foreign Funds Regulations”); and
  3. Administrative Decision No. 08/RT of 2023 which introduces new categories of specialized funds.

The SCA also repealed certain investment funds regulations such as SCA Board of Directors’ Decision No. (9/R.M) of 2016 Concerning the Regulations of Investment Funds and all administrative decisions issued in implementation thereof, SCA Chairman Decision No. (10/R.M) of 2016 Concerning Investment Funds Fees, SCA Chairman Decision No. (32/R.M) of 2017 Concerning the Regulation for General and Limited Partnership Fund and SCA Chairman Decision No. (08/R) of 2019 Concerning the Mechanism of Functioning of Investment Funds.  

1.         Key Considerations of the New Funds Regulations

Introduction of new fund structuring options

Under the Investment Funds Regulations, it is now possible to establish the following fund types:

  1. Family Funds whereby the units can be solely held by one or more members of a family provided that the unit holders are the ultimate beneficial owners of such units; and
  2. Self-managed Funds which may be established by two or more individuals or legal persons.

Relaxation of foreign ownership restrictions

Consistent with the strategy of the UAE government to streamline the conduct of business to conform with  best international practices, as showcased by the relaxation of foreign ownership restrictions under the new UAE Companies Law, the New Funds Regulations also now permit full foreign ownership of companies carrying out fund management  activities.  

Reduction of share capital requirements

Share capital requirements for:

  1. fund management companies are reduced from AED 50 million to AED 1 million; and
  2. fund administration companies are reduced from AED 5 million to AED 1 million.

Expedited process

The SCA is now legally required to issue its decision in respect of public funds registration within ten (10) business days from the date of submission of an application, and within five (5) business days in respect of private funds.

Possibility of establishing funds with a new investment policy

The SCA also now permits applicants to submit a proposal to establish funds with a specific investment policy or type that is not necessarily regulated under the New Funds Regulations. The SCA must review such application and issue its decision within twenty (20) business days. Such decision is required to enable the concerned party to submit an application to have such fund licensed by the SCA. This new provision is intended to allow new types of funds to be introduced to the UAE market provided that such funds are reviewed and accepted by the SCA before submitting an application for licensing.

New categories of funds

As noted above, Administrative Decision No. 08/RT of 2023 introduces new categories of specialized funds such as real estate development funds, precious metal funds, direct financing funds, ESG funds, capital protection funds, protected-cell funds, charity investment funds and commodities investment funds.

Further exemptions

The SCA has further expanded the arrangements which are not subject to the New Funds Regulations, such as joint bank deposits/bank accounts, insurance or social security/pension contracts, intra group joint investments i.e. between the parent, holding, subsidiary and sister companies, timeshare and other property sharing arrangements, employees share options schemes managed by the issuer or a group company, investment funds established by either federal or local government bodies or a company wholly owned by such federal or local government bodies and any other arrangements that SCA may add in the future.  

2.         Promotion of Units of Foreign Funds in the UAE

It should be noted that under the Foreign Funds Regulations:

  1. the promotion of foreign funds in the UAE is now limited to private distribution to professional investors or market counterparties as defined in Resolution No. 13/RM of 2021 Concerning the Booklet of the Rules of Financial Activities and the Status Rectification Mechanism;
  2. promoters of foreign funds in the UAE must amend their contractual arrangements with managers of foreign funds to comply with the provisions of the New Foreign Funds Regulations; and
  3. the SCA may grant promoters of foreign funds a grace period not exceeding 6 months commencing from 1 January 2023 to continue fulfilling their obligations under existing contracts or until the expiry dates of such contracts, whichever comes earlier, provided that the registration of the foreign fund’s units is renewed within the transitional period and the prescribed fees are paid to the SCA.

The enactment of the New Funds Regulations significantly changes the investment funds legal landscape of the UAE, which will contribute to attracting and encouraging the establishment of UAE domiciled funds.

For more information, please contact  Bilal Snaineh, Senior Legal Consultant, Corporate b.snaineh@hadefpartners.com


This article, together with any commentary, does not constitute legal advice. It is provided solely for information purposes on a complimentary basis, without consideration of any specific objectives, circumstances or facts. It reflects then current views of the writer which may modify in time and based on differing objectives, circumstances or facts. A writer's view may differ from views of colleagues and/or the firm. You should seek legal advice on each specific matter. Access to this article does not form an attorney-client relationship.