The foundation in the Emirates
General presentation
A foundation is an independent legal entity that holds assets separately from the personal property of its founder.
Historically, foundations were primarily established in civil law jurisdictions as an alternative to a common law trust. It is similar to a company in that it has its own legal personality. However, a foundation does not issue shares or any other legal ownership interest - it is an “orphan” structure. A foundation must have one or more purposes, which may benefit one or more beneficiaries (named or unnamed).
A foundation is governed by its "charter" and "by-laws", which together reflect the wishes of its founder. It is managed by a board of directors and may be overseen by a guardian. The assets of a foundation belong to the foundation in its own name.
Main uses of a foundation
Wealth structuring
Wealth structuring, inheritance, and estate planning.
Asset protection
Asset protection: forced heirship rules, creditors, and hostile takeovers.
Long-term detention
Long-term holding structure.
Asset consolidation
Global asset consolidation.
Company control
Maintaining control of the company.
Privacy
Privacy protection.
Centralized reporting
Centralized reporting.
Philanthropy
For charitable and/or philanthropic purposes.
Why choose a foundation in Dubai?
A foundation in Dubai is a legal entity that has much in common with limited liability companies and trusts, but has its own unique characteristics. It is considered one of the most robust vehicles for holding private, commercial, and charitable assets and directing them toward a specific destination.
Establishing a foundation in Dubai is a strategic option for protecting your assets and planning your succession. Based on a strong and modern legal framework, it offers numerous benefits for individuals and businesses seeking a reliable and sustainable solution.
Strengths and weaknesses
Strengths of a foundation in Dubai
- Applicable law: DIFC/ADGM — an internationally recognized legal framework.
- Simplified registered office — registered office services available through an authorized agent.
- Cost and speed — competitive costs and fast registration times.
- Simple documents — limited documentation requirements.
Weaknesses to consider
- Operational complexity — several actors must be designated.
- Requires several actors — council members, guardian, etc.
- Opening a bank account — may pose a challenge due to compliance requirements.
Opportunities and threats
Opportunities for founders
- Asset protection — effective long-term protection.
- Estate planning — structuring the transfer of assets.
- Wealth management — a wealth management tool to safeguard assets and plan for the financial future.
Potential threats
- Appropriate structure — poor structuring can limit its effectiveness.
- Banking and regulatory acceptance — strict KYC requirements can pose obstacles.
The stakeholders of a foundation
Founder
This is the founder. It may be an individual or a legal entity.
Council
This is the foundation's Board of Directors. It must have at least 2 members, who may be natural persons and/or legal entities.
Guardian
They are the protector of the Foundation. They oversee the Council's actions and ensure that the founder's wishes are properly respected. The Guardian may be an individual or a legal entity. The founder may be the Guardian, but the Guardian cannot be a member of the Council.
Designee
If there is no longer a beneficiary, the foundation's assets will revert to the designee. If no designee has been appointed, the assets will revert to the authorities at the foundation's registered office.
Qualified Recipient
These are the beneficiary or beneficiaries of the foundation's income. This may be a natural person (born or unborn), a legal entity, a category of persons, etc.
Registered Agent
The foundation is required to be hosted with its agent. We of course provide this service as an agent.
Legal framework and operation
Short
It is possible to choose the court and applicable law for the Foundation: DIFC or ADGM.
Lifespan
Limited (date or number of years), unlimited (perpetual), or linked to an event.
Minimum initial capital
It is min. USD 100.
Accounting and registration
Accounting and annual audit
Maintaining accounting records is mandatory. An annual audit of the accounts is not mandatory (but recommended).
Time required to register the foundation
3 business days.
How the foundation works
Here are all the stakeholders to consider when establishing a foundation in the Emirates.
Documents required to establish a foundation
For each individual actor
- Passport: copy of the passport.
- Proof of address: copy of a “Utility bill” dated within the last 3 months or a Certificate of residence issued by the Town Hall, Consulate, etc.
For each corporate actor
- Company documents: copy of the articles of association, list of directors and partners. A translation/certification may be requested.
- For all directors and partners: copy of the passport.
- For all directors and partners: copy of a “Utility bill” dated within the last 3 months or a Certificate of residence.