A foundation is an independent legal entity that holds assets separately from the personal property of the founder.
Unlike a trust, which is a concept derived from common law, the foundation originally comes from civil law jurisdictions.
It is similar to a corperation in that it has its own legal personality. However, a foundation does not issue shares or any other legal title – it is an “orphan” structure. A foundation must have one or more business activity, which can be for the benefit of one or more beneficiaries (named or not).
A foundation is governed by its charter and by-laws, which together reflect the wishes of its Founder. It is managed by Council Members and can be supervised by a Guardian who ensures that its Council Members manage the foundation as desired by its founder. The assets of a foundation belong to the foundation in its own name.
Foundations are used mainly for the following reasons:
– Asset structuring, succession, and estate planning;
– Protection of assets against rules of forced inheritance, hostile creditors and takeover bids;
– Long-term holding structure;
– For charitable and/ or philanthropic purposes.
Overview of a Foundation
|Founder||The founder established the Foundation and is the initial source of its assets. It can be a natural person or legal entity.|
|Council||The foundation’s governing body, analogous to a Board of Directors. There must be at least 2 council members which can be either natural persons or legal entities.|
|Guardian||The protector of the foundation. They control the actions of the Council and verify that the wishes of the founder are being respected. The Guardian can be a natural or legal person. The founder can be Guardian, but the Guardian cannot be a member of the Council.|
|Designee||If there is no longer a beneficiary, the assets of a foundation will revert to the designee. If none is appointed, the assets will revert to the authorities in the jurisdiction of the Foundation.|
|Qualified Recipient||This is the beneficiary or beneficiaries of the foundation’s income. It can be a natural person (born or unborn) or legal entity, a category of people, etc.|
|Registered Agent||The foundation is required to be hosted by its agent. We of course provide this service as a registered agent.|
|Court||The choice of court and the law applicable to the Foundation: DIFC or ADGM.|
|Lifespan||Limited (date or number of years) or unlimited (perpetual) or linked to an event.|
|Minimum Initial Capital||Minimum of USD 100.|
|Accounting and Audits||It is mandatory to maintain accounts. An annual audit of the accounts is not compulsory, but is recommended.|
|Timeline for Registering a Foundation||3 working days.|
How a Foundation Works
Required Documents to Set Up a Foundation
Here are the documents to provide for each natural person actor of the foundation:
- Passport: copy of passport.
- Proof of address: copy of a utility bill (water, electricity, gas, telephone bill, etc.) dated less than 3 months or a Certificate of residence issued by City Hall, Consulate, etc.
Here are the documents to be provided for each legal entity actor of the foundation:
- Company documents: copy of the company’s articles of association, list of its directors and partners. A translation / certification of these documents can be requested by the Registry.
- For all managers and associates: copy of passport.
- For all managers and associates: copy of a utility bill (water, electricity, gas, telephone bill, etc.) dated less than 3 months or a Residence Certificate issued by City Hall, Consulate, etc.
The costs of a foundation are as follows: