Foundations in the UAE

A Foundation is a legal entity historically useful in corporate structuring and legacy planning, as well as to further charitable purposes. A Foundation is established by a Founder, who transfers assets in the Foundation’s name to be held on behalf of the beneficiaries, for a specific purpose.

The advantage of a Foundation, similar to a Trust, is that the entity acquires a distinct legal personhood separate from the Founder, and as such, the Foundation holds the title of the assets in its own name. A Foundation, therefore, provides protection to assets from forced heirship rules governing inheritance, and creditor claims, as well as providing long-term asset-holding mechanism options.

The purpose, which may not consist of commercial activity, is set out in the Charter and By-laws of the Foundation, which is then registered with the relevant authority and managed by the Foundation Council. A Foundation, therefore, confers control over assets from the Founder to the Council so, while the Founder may retain significant control per the By-laws for their lifetime should they wish, as a Council Member or as a named beneficiary, the Foundation exists perpetually even after the death of the Founder.

The common law oases of the Abu Dhabi Global Market (ADGM) and the Dubai International Financial Centre (DIFC) have introduced Foundations Law per the ADGM Foundations Regulations 2017 and DIFC Law 3 of 2018 respectively, affording individuals and entities previously unavailable access to structuring alternatives in the UAE.

The UAE has historically not recognized the use of fiduciaries and trusts, forcing individuals to make use of foreign offshore tools and making legacy planning an unenviable task. However, Foundations may now be established in both centers with relative ease, providing advantages in corporate structuring, asset protection and control, as well as enhanced legacy planning options.

The legislation is forward-thinking, and although the ADGM and the DIFC each offer unique features, overall, the legislation builds on the existing foundation regimes of both common law and civil law backgrounds, providing a sophisticated regulatory framework within which assets may be safeguarded.

A Foundation may now be registered with either authority, with both regimes providing for domiciliation and migration into and out of the ADGM and DIFC. The Foundation may hold initial assets of as little as USD 100 and requires no physical office space other than a registered address in the relevant jurisdiction, which may be provided by a registered agent. The ADGM and DIFC also require very limited public disclosure thereby ensuring that confidentiality is maintained.

We are currently promoting ADGM and DIFC Foundations as a means of succession planning for Muslims and non-Muslims alike to ensure that family wealth may be protected, assets safeguarded, and inter-generational legacy ensured.

Emma Cronin
Legal Consultant