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Dubai International Financial Centre has evolved into the Gulf’s pre-eminent fund-domicile, marrying English common law with first-class infrastructure and half a century of guaranteed zero tax on fund income and gains. Yet enthusiasm alone will not carry a manager through the Dubai Financial Services Authority’s gate. The regulator expects a meticulous dossier that shows investors, service providers and courts exactly how the vehicle will operate, distribute risk and protect capital. This article explains, in plain language, every core document required for starting funds in the DIFC, so promoters know precisely which files to assemble before the first capital call.
Why managers choose DIFC for their funds, and what documents are required
A DIFC fund enjoys one hundred per cent foreign ownership, unrestricted capital repatriation and recognised common-law courts, placing it on par with London or Hong Kong while charging no corporate tax until at least 2054. The centre sits four hours ahead of Europe and four behind Singapore. So, trading desks can monitor global markets from a single location. Wealthy Gulf investors already hold private banking accounts ten minutes away inside Gate Avenue. That means roadshows convert faster than in rival hubs. For firms that also operate offshore cells, the emirate’s wide treaty network minimises withholding tax on dividends and interest. All these factors explain why the volume of new DIFC funds authorised each quarter continues to rise.
Picking the right legal wrapper before drafting begins
DIFC funds fall into two broad legal families. Investment companies issue participating shares and can be either open-ended, allowing redemptions, or closed-ended for strategies like private equity. Limited partnerships strip out corporate formalities and instead divide interests between a general partner and limited partners, mirroring Cayman or Delaware structures familiar to institutional LPs. The legal form decides which constitutional documents you need and how regulators evaluate governance. So, the choice should be in mind before the first page of a memorandum is ready.
Overview of the core documentation stack
Regardless of wrapper, the DFSA expects four headline documents:
- A private placement memorandum, the marketing spine that discloses everything material.
- A subscription agreement that formalises each investor’s entry.
- An investment management agreement setting out authority, fees and fiduciary duties.
- A constitutional document, either a fund constitution for companies or a limited-partnership agreement for partnerships.
Supporting schedules include service-provider contracts, valuation policies, leverage caps, conflicts logs and, where relevant, Sharia certificates. The regulator will cross-reference each schedule to confirm consistency, so drafting teams must think of the dossier as one interlocking whole, not as independent stand-alones.
Investment-company pack: What goes inside and why
For an investment-company structure the fund constitution operates like articles of association. It defines share classes, voting thresholds, redemption gates and dividend policy, and it empowers directors to issue further shares, suspend dealing or borrow within specified limits. Every clause must align with the Companies Law DIFC 2020 and the Collective Investment Law; copying overseas precedents without adjustment usually triggers DFSA comments.
The board will also minute a formal valuation policy referencing IOSCO principles, stating pricing hierarchies for listed equities, OTC derivatives and hard-to-value Level 3 assets. Independent valuation committees or external pricing agents bolster credibility, especially for strategies dealing in private debt or structured notes.
Finally, a custody and administration agreement binds the DIFC investment fund to its outsourced administrator. It spells out daily NAV calculation, shareholder-register maintenance and anti-money-laundering checks. Managers must file the fully executed version, not a draft, before permission is granted.
Limited-partnership pack: Duties of general partner and LP rights
A limited-partnership agreement must allocate profits, losses and carried interest in plain language that mirrors the waterfall description in the private placement memorandum. It sets the advisory-committee mandate, voting majorities for early termination and remedies if the key-person clause is breached. Because the general partner holds unlimited liability, LPs typically insist on a subscription line-of-credit clause restricting lender security to uncalled capital, thereby preventing encumbrance of LP assets beyond commitment.
Where a feeder fund joins the structure, a side-letter register documents bespoke terms, ensuring that information on fee rebates or most-favoured-nation status is accessible to auditors and, where applicable, other investors.
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Crafting a persuasive private placement memorandum
The DFSA reviews PPMs less for marketing flair than for balanced risk disclosure. A compliant document opens with an executive summary followed by clear risk statements: market volatility, liquidity constraints, counterparty default and operational failure. Background sections must name each promoter, outline track record in basis points of alpha or internal rate of return and confirm that principals meet fit-and-proper criteria.
Strategy chapters describe investment universe, portfolio concentration limits and hedging tools. The section on leverage should quantify maximum gross and net exposures, set asset-coverage ratios and name any prime brokers. Regulatory pages must reference DIFC Conduct of Business rules, DFSA prudential modules and, if marketing outside the centre, host-country securities laws. Finally, a project timetable lists first close, subsequent closes and targeted termination date, giving professional clients enough milestones to test feasibility.
Subscription agreement: from KYC to capital-call mechanics
While much of the subscription agreement looks boilerplate, the DFSA checks two items carefully: professional-client confirmation and anti-money-laundering warranties. Investors must self-certify assets of at least one million US dollars or discretionary-mandate size above the regulatory threshold. The agreement captures these attestations and includes representations about lawful source of funds, adherence to sanctions lists and agreement to provide enhanced due-diligence data when requested.
Economically, the contract sets the settlement timeline, three business days after acceptance in most cases, and allows the manager to reject or scale back allocations to maintain diversification. For closed-ended partnerships, capital draws occur in tranches, typically ten business days after a draw notice.
"The subscription form incorporates bank instructions to speed settlement."
Investment-management agreement: authority, fees and termination
This bilateral contract grants the manager power of attorney, authorises trade execution and defines remuneration. Management fees can be flat or step down once assets breach agreed tiers, a design popular with institutional LPs. Performance fees must spell out high-water marks, hurdle rates and crystallisation timetable.
Conflict-of-interest clauses bind the manager to allocate trades fairly between parallel vehicles and to disclose side-letter benefits promptly. Termination triggers include regulatory censure, breach of duty or insolvency. A tail clause allowing the manager to collect performance fees on investments still held post-termination is permissible if disclosed in the PPM.
Service-provider contracts and ancillary documents
DFSA guidance requires executed agreements with custodians, prime brokers, administrators, auditors and, where relevant, Sharia supervisory boards. Each contract must identify governing law, dispute forum and liability caps. Audit engagement letters confirm that the auditor is on the DFSA’s recognised list and detail reporting deadlines. Custody statements clarify segregation levels, rehypothecation rights and daily reconciliation duties. These attachments provide the operational backbone and give investors transparency on who will handle their cash and securities.
Additional requirements for Sharia-compliant funds
Managers establishing Islamic funds in the DIFC or a fully Sharia-compliant vehicle must shuttle an extra file through the regulator: the Sharia supervisory-board charter. The DFSA looks for at least three scholars recognised by reputable Sharia bodies, each independent of the investment manager and unconnected with the custodian. The charter outlines voting thresholds, frequency of fatwa reviews and dispute-escalation steps if scholars disagree on a screening outcome. A parallel Sharia compliance manual explains purification mechanisms, late-payment charity and periodic asset screening.
Scholars must issue a pre-launch fatwa approving the PPM and investment guidelines, then publish annual compliance reports addressed both to investors and to the DFSA. The fund administrator records impure-income calculations and transfers any tainted sums to approved charities under written instructions from the supervisory board. Because scholars sometimes require Arabic summaries of English documents, founders should allocate two extra weeks in the drafting calendar for translation and sign-off.
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The regulatory business plan and three-year projections
Although it sits outside the fund’s legal suite, the regulatory business plan accompanies every application and can accelerate or derail approval. The plan distils the strategy, target investors, leverage policy, key-person bios, outsourcing map and capital projections into thirty to forty pages. Financial schedules must reconcile top-line AUM growth, fee income, operating expenses and capital-adequacy buffers across thirty-six months.
Stress-test tables demonstrate how management fees sustain minimum capital even if redemptions trigger a fifty-percent fall in net assets. Case officers cross-check these figures against the management-fee percentages disclosed in the PPM and the staffing assumptions in the HR section of the AML manual. A robust plan that ties all numbers together signals operational maturity, often shortening the regulator’s query list from two rounds to one.
Living documents: amendments, supplements and version control
Fund documents seldom remain static. A new share class, an updated hurdle rate or a change in auditor all demand timely notice to investors and, in many cases, a formal filing with the registrar. Managers should institute version-control protocols: each document carries a header stating version number, approval date and board-minute reference. Material changes, such as an increase in performance fee, trigger a supplementary memorandum that investors must acknowledge in writing. Minor edits, for instance, a change of registered office, may go through a simple addendum. The compliance officer keeps a master register mapping every amendment to the corresponding DFSA notification form, ensuring no modification slips through unreported.
Director due-diligence files and fitness attestations
Independent directors strengthen governance yet must file their own documentation kit: passport, updated CV, police-clearance certificate, individual questionnaire and a self-attestation of ongoing fitness and propriety. Annual board-effectiveness reviews assess attendance, conflict declarations and continuing-education hours, then feed into the fund’s governance report lodged with the DFSA.
"Maintaining these director files in the same secure dataroom as fund documents gives auditors and regulators a single source of truth and reduces last-minute chasing during inspections."
Assembly timeline and regulator expectations
Drafting typically consumes six to eight weeks, followed by two weeks of iterative review once the DFSA allocates a case officer. Expect at least one round of written questions probing fee alignment, redemption gating and valuation independence. Compiling proof that the board or general partner has formally approved each document accelerates clearance. Use secure datarooms so the regulator can cross-reference files without email chains, a practice that earns procedural goodwill.
Common drafting pitfalls and how to avoid them
Mismatch between documents
If the PPM quotes a twenty-percent carry but the partnership agreement says twenty-five, expect immediate delay.
Over-reliance on overseas boilerplate
Clauses that cite US Investment Company Act provisions confuse local counsel and annoy regulators.
Insufficient risk disclosure
Downplaying illiquidity or concentration risk erodes credibility.
Missing executed service contracts
The DFSA rarely accepts term-sheet placeholders.
Key-person definition too narrow
Exclude crucial quantitative team members and investors may balk.
A thorough pre-submission legal audit catches these points and keeps the timeline intact.
Internal systems you must document alongside the legal pack
Beyond legal texts, managers file four core manuals: compliance, anti-money-laundering, valuation and operational risk. Each manual integrates with the fund documents. For example, the valuation manual should refer explicitly to the hierarchy listed in the PPM, while the AML policy must dovetail with the investor-due-diligence obligations in the subscription agreement. Embedding cross-references shows the DFSA that the governance architecture hangs together.
Preparing for life after authorisation
Once the DFSA issues the fund approval notice, managers must publish an initial NAV within four weeks of closing and file a prudential return within thirty days. Annual audited financials land ninety days after fiscal year-end. Boards should schedule quarterly meetings, recording investment-performance reports, risk-metrics dashboards and compliance updates.
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Executed contracts with service providers like administrators, custodians, auditors, and Shariah boards (if applicable) are mandatory and must align with DFSA guidelines.
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Managers must maintain manuals for compliance, AML, valuation, and operational risk that cross-reference fund documents, and all directors file individual due diligence packs.
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The DFSA expects document consistency, version control, and prompt updates to reflect any fund changes post-approval, with a full legal and operational review recommended before submission.
How Aston VIP can help prepare and maintain your DIFC documentation
Drafting, aligning and updating several hundred pages of legal and compliance text is daunting, especially while courting seed investors. Our team crafts bespoke PPMs, aligns subscription kits with DFSA professional-client tests, negotiates service-provider contracts and assembles the final application bundle. Post-launch we maintain document registers, monitor regulatory updates and refresh manuals at audit time. Engage us via our contact page for a document-readiness audit within two business days.
