Foundation Incorporation in the UAE — Exploring Jurisdictional Options and Practical Insights

In the dynamic landscape of the UAE’s business environment, choosing the right structure for incorporation can have a lasting impact on a venture’s regulatory flexibility, strategic positioning, and governance. Among various incorporation options, foundations are increasingly gaining prominence for asset protection, legacy planning, and governance structuring, especially among high-net-worth individuals (HNWIs), family offices, and cross-border ventures. 

This article delves into the regulatory framework and comparative feasibility of incorporating a foundation in different UAE jurisdictions, such as JAFZA, RAKICC, and ADGM, while also addressing common concerns like share class availability, management control, and the Joint Stock Company (JSC) structure. 

Understanding Foundation Structures 

A foundation incorporation in the UAE is a distinct legal entity without shareholders that is created to manage assets for a specific purpose. Unlike trusts, which are contractual arrangements, foundations are established under statutory regimes and offer more transparency and structure. 

In the UAE, foundations are primarily used for: 

• • Wealth and succession planning 

• • Asset protection 

• • Holding shares in operating companies 

• • Charitable purposes 

The legal framework for foundations is established in Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC), though we focus more on ADGM in this analysis. 

 This blog is a part of our General Corporate and Commercial Advisory Services.

Jurisdictional Review: JAFZA, RAKICC, and ADGM 

JAFZA (Jebel Ali Free Zone Authority)

JAFZA offers three main incorporation structures: 

• • • Free Zone Establishment (FZE) 

• • • Free Zone Company (FZCO) 

• • • Public Listed Company (PLC) 

JAFZA does not currently support the incorporation of Joint Stock Companies (JSCs). Its regulatory framework primarily provides for Free Zone Companies and Public Listed Companies.  

RAKICC (Ras Al Khaimah International Corporate Centre)

RAKICC focuses on specialized entities such as: 

• • • Special Purpose Vehicles (SPVs) 

• • • Foundations 

• • • International Holding Companies 

ADGM (Abu Dhabi Global Market)

ADGM has become a preferred jurisdiction for setting up foundations due to its: 

• • • Robust legal infrastructure based on English common law 

• • • Clear legislation through the ADGM Foundations Regulations 2017 

• • • High standards of corporate governance 

• • • International recognition 

In addition to foundations, ADGM supports the formation of Private Companies Limited by Shares (Ltd) and Special Purpose Vehicles (SPVs). ADGM allows flexibility in company constitution, and while it doesn’t support traditional JSCs, it provides comparable governance structures through tailored share classes, board roles, and voting arrangements. 

Mainland UAE: An Option for JSCs? 

The UAE Commercial Companies Law (Federal Decree-Law No. 32 of 2021) permits the formation of Joint Stock Companies (both public and private) in the mainland. Moreover, forming a JSC requires: 

• • A minimum of AED 5 million capital for a Private JSC 

• • At least two founders 

• • Compliance with strict governance protocols, board composition, and audits 

Why ADGM Is a Preferred Option 

Taking all the above into consideration, ADGM emerges as the most viable option for entities that: 

• • Require customized shareholding structures 

• • Seek to maintain privacy and limited public disclosure 

• • Need international recognition and credibility 

• • Intend to establish foundations or family offices 

Additionally, ADGM permits detailed customization of governance rights in its company constitution, enabling clients to emulate features of a JSC without being bound by the UAE CCL limitations. 

Practical Considerations for Foundation Incorporation in ADGM 

When incorporating a foundation in ADGM, consider the following steps: 

1. 1. Prepare Charter & By-Laws: Clearly define beneficiaries, objectives, and governance. 
   2. Appoint a Council: Similar to a board of directors, responsible for managing foundation assets. 
   3. Register with Registrar: Submit required documents and pay the incorporation fee. 
   4. Obtain Legal Advice: To structure asset transfer, tax implications, and succession matters. 

Key Advantages of ADGM Foundations 

• • Legal Personality: Can own assets, enter contracts, and sue/be sued 

• • Asset Protection: Prevents forced heirship claims 

• • Control & Flexibility: Founders can define how assets are managed 

• • International Recognition: Respected by courts and institutions globally 

• • Privacy: Beneficiaries are not listed in public registries 

Conclusion: Tailored Structuring with Legal Precision 

For businesses and high-net-worth individuals exploring strategic incorporation in the UAE, foundations offer a versatile, protective, and future-proof solution. While JAFZA and RAKICC have structural or procedural limitations, ADGM offers a robust framework and international compliance standards ideally suited for modern business and legacy structuring needs. 

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