Private foundations in the UAE

The UAE?is a well-known place for the set-up of business, it is a hub that connects all the world together.

In the UAE there are two special financial free zones where it is possible to register a private foundation. One is the?Dubai International Financial Centre (DIFC) and the second is the Abu Dhabi Global Market (ADGM).

DIFC’s and ADGM's independent authorities - the Registration Authority, the Financial Services Regulatory Authority and Courts - together ensure that its business-friendly environment operates in line with international best practices, recognized by major financial centres worldwide.

Why the UAE?

The UAE is a Tier 1 international financial centre, it has a robust governance structure. Its strategic location in the Middle East and towards emerging high growth markets makes it a preferred choice for the set-up. There is no corporate tax rate and no tax filing. The UAE has a broad tax treaty network. It is possible to transfer a private foundation to DIFC and ADGM from overseas. The UAE foundation is cost attractive, set-up and running costs are low. Foundations can be formed through the approved Corporate Service Provider (CSP) digitally.

Why would you need to set-up a foundation?

Both DIFC and ADGM Foundations can be used for a variety of purposes, including wealth management and preservation, family succession planning, tax planning, asset protection, corporate structuring, and for public interest purposes.

DIFC’s and ADGM’s legal system and courts are based on Common Law principles. A Foundation operates like a common law trust yet has features more similar to a company.

Distinct legal personality, unlike a Trust?– Having a legal personality provides Foundations with flexibility to enter into contracts and arrangements directly, as a company would be able to.

Separation of liability whilst maintaining control of assets?– The Foundation is a distinct legal entity which allows for separation of liability between Founder and the Foundation.

Perpetual existence after the lifetime of the Founder?– Like a company, a Foundation is a perpetual concept, allowing arrangements to continue and therefore providing certainty after the Founder’s death.

Asset protection?– Foundations Regulations include firewall provisions designed to assist in protecting the rights of beneficiaries and preserve the Foundation’s assets from bankruptcy claims and from the effect of forced heirship rules.

Legal framework

The Dubai International Financial Center (“DIFC”) - the Foundations Law DIFC Law No. 3 of 2018

The Abu Dhabi Global Market (“ADGM”) - the Foundations Regulations 2017

Foundation structure

DIFC and ADGM Foundations Regulations follow international best practice and set a legislative standard for the Foundation Council. This standard includes statutory duties, similar to common law and equitable duties imposed on company directors. A Guardian supervises the Foundation Council and ensures that it acts in accordance with the Foundation’s Charter and By-Laws. Appointment of the Guardian is optional during the Founder's lifetime and compulsory upon the Founder's death.

Founder:?1 (or more) individual or legal entity

Council:?At least 2 members (individuals or a legal entity); Founder may be appointed as one of the councillors

Guardian:?The Guardian (can be an individual or legal entity) is appointed by the Founder to supervise the Council and must take reasonable steps to ensure that the Council carries out its functions appropriately.

Beneficiary:?Individual or legal entity (including Founder)

Registered Agent:?A foundation will often have an appointed Registered Agent (CSP) who will need to be properly licensed by the regulatory body in the regime.

Registered Office Presence:?All Foundations must maintain a registered office presence, often this is the address of the Registered Agent, however the administration and location of the Council, Founder and Guardian can be elsewhere.

Authorised Person:?Foundation must have the UAE – resident Authorised Person

Governing Documents:?The constitutional documents of a Foundation consist of its Charter and By-Laws.

Fees:

1.???????DIFC - registration fee/annual renewal USD 200?

ADGM - registration fee/annual renewal USD 200?

2.???????CSP fees for Foundation set-up and drafting standard, be-spoke Charter and By-laws

3.???????CSP fees for RO/RA services

4.???????Legal fees for amending and drafting Charter and By-laws (applicable only in case if Founder would like to t do amendments to the standard Charter and By-laws)

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Timeframe:?2-4 weeks to set-up

Physical presence of the Founder for the set-up of the foundation is not required