Introduction
Foundations serve as an efficient mechanism to consolidate family holdings of various assets into a single top-holding entity. Utilizing a Foundation to hold family assets, whether business interests, property, financial investments, or any other assets, allows for the legalization of clear instructions regarding the transfer of assets upon succession. The Abu Dhabi Global Market (ADGM) Foundations Regime provides an attractive alternative to trusts for financial planning and structuring, offering High Net Worth Individuals (HNWI), families, and the corporate community access to a highly sought-after product within a world-class international financial centre.
This blog is related to our UAE Business Setup Guide:Mainland and Freezone
The ADGM Foundations Regime: An Overview
ADGM Foundations are designed to be fast and simple to set up and manage, with straightforward ongoing reporting requirements. They can be employed for a variety of purposes, including wealth management and preservation, family succession planning, tax planning, asset protection, corporate structuring, and even for public interest purposes.
Benefits of Foundations
A Distinct Legal Entity
A Foundation operates similarly to a common law trust but possesses features more akin to a company. It provides robust governance mechanisms that follow international best practices, establishing a legislative standard for the Foundation Council. This includes statutory duties like common law and equitable duties imposed on company directors.
Robust Governance
A Guardian supervises the Foundation Council to ensure it acts following the Foundation’s Charter and By-Laws. The appointment of a Guardian is optional during the Founder’s lifetime but becomes compulsory upon the Founder’s death.
Legal Personality
Unlike a trust, a Foundation has its legal personality, allowing it to enter contracts and arrangements directly, much like a company. This distinct legal personality offers flexibility and ease in managing the Foundation’s affairs.
Separation of Ownership and Control
The Foundation, as a distinct legal entity, provides a separation of liability between the Founder and the Foundation. This separation allows the Founder to maintain control over the assets while legally distancing personal liability from those assets.
Perpetual Existence
Like a company, a Foundation is a perpetual entity, ensuring that arrangements continue beyond the Founder’s lifetime. This feature provides certainty and stability in succession planning.
Asset Protection
The ADGM Foundation Regulations include firewall provisions designed to protect the rights of beneficiaries and preserve the Foundation’s assets from bankruptcy claims, divorce claims, and the effects of forced heirship rules.
Highlights of the ADGM Foundations Regime
Re-domiciliation Flexibility
The regime allows for the re-domiciliation of Foundations into and out of ADGM, providing flexibility for Founders to relocate their Foundation if needed.
Amendable Governance Structure
Once established, the governance structure of a Foundation can be amended, offering adaptability to changing circumstances or objectives.
Cost-Efficiency
ADGM Foundations have a low set-up cost, and initial assets committed to the Foundation can be as little as USD 100.
Mandatory Company Services Provider
Appointment of a Company Services Provider, registered in ADGM, is mandatory for non-exempt Foundations. This ensures compliance with local regulations and provides professional management of the Foundation’s affairs.
No Physical Office Requirement
Foundations are required to maintain a registered office address in ADGM through an appointed ADGM registered Company Service Provider (for non-exempt Foundations) or through the registered office address of a parent or related entity (for exempt Foundations). This eliminates the need for a physical office presence, reducing overhead costs.
Flexible Roles
All Foundation roles can be performed by either individuals or body corporates, providing flexibility in the management and operation of the Foundation.
Limited Public Disclosure
There is minimal public disclosure, with no individuals’ names appearing on the public register. However, there is full disclosure to the Registrar, striking a balance between client confidentiality and the transparency required to meet reporting standards and international treaties to which the UAE is a party.
Setting Up in ADGM
Foundation applicants are divided into two categories: exempt and non-exempt. These categories determine how applicants can lodge their applications with the ADGM Registration Authority (RA).
Exempt Applicants
Exempt applicants are not required to appoint a Company Service Provider (CSP) for the application and management of the Foundation. This category typically includes applicants who meet specific criteria set by ADGM RA, allowing for a more streamlined and cost-effective setup process.
Non-Exempt Applicants
Non-exempt applicants must appoint an ADGM-registered Company Service Provider to submit the application and maintain the Foundation. This requirement ensures that non-exempt Foundations adhere to local regulatory standards and benefit from the professional management services offered by CSPs.
Conclusion
The ADGM Foundations Regime offers a robust and flexible solution for the consolidation and management of family assets. By providing a clear and legal framework for the transfer of assets upon succession, ADGM Foundations ensure stability and continuity for future generations. The regime’s adaptability, cost-efficiency, and strong governance mechanisms make it an attractive option for HNWIs, families, and corporate entities seeking a reliable and effective means of financial planning and asset protection. The perpetual existence and legal personality of ADGM Foundations further enhance their appeal, ensuring that family wealth is preserved and protected securely and efficiently. Setting up a Foundation in ADGM is a straightforward process, with options tailored to meet the needs of both exempt and non-exempt applicants. By understanding the requirements and benefits of each category, applicants can make informed decisions that best suit their financial planning and asset management goals.
