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Setting up a DIFC Foundation

What is a DIFC Foundation?

The DIFC introduced the DIFC Foundation regime in 2018 (DIFC Law No.3 of 2018) as an alternative wealth structuring vehicle for Muslim and Non-Muslim expats residing in the UAE and for international investors that wish to protect their assets and family businesses in the UAE.

A Foundation can be set up for charitable purposes, to hold a family business, real estate, or assets such as artwork. A DIFC Foundation is an innovative way to manage your assets in the UAE and minimize risk.

Why set up a Foundation?

As the UAE is a civil law jurisdiction, DIFC Foundations are becoming increasingly popular. One of the most attractive features is that it allows ownership of property in Dubai. A Memorandum of Understanding (MoU) exists between the DIFC and the Dubai Land Department allowing entities such as a DIFC Foundation to purchase real estate registered with the Dubai Land Department. DIFC Foundations are legal entities that can hold wealth and assets on behalf of their beneficiaries. International investors (non-residents) or residents of the UAE can structure their assets through a DIFC Foundation.

Structure:

There are 4 main parties to a DIFC Foundation:

  1. The Founder – there must be a minimum of 1 Founder who creates the Foundation to structure their assets.
  2. The Council – formed by the Founder, must have a minimum of 2 members which can include the Founder. The Council's role is to administer the Foundation similar to a Board of Directors in accordance with its Charter and By-Laws.
  3. The Beneficiaries – this can be an individual, group, or entity appointed by the Founder who will benefit from the assets held by the Foundation.
  4. The Guardian – Must ensure the Council follows the requirements of the Charter and regulations. This supervisory role ensures that the Council acts in good faith and in the best interests of beneficiaries.

DIFC Foundation Documentation:

  1. By-laws – They define the various functions and duties of the Council. This can include the appointment/removal of the Guardian for example.
  2. Charter – This is a document that details the explicit wishes of the Founder.

Registering a Foundation in DIFC:

As a DIFC Foundation must have a registered office in the DIFC, TWS can provide Registered Agent services (being a ‘Qualified Person’) when appointed as the Registered Agent of a DIFC Foundation as we are licensed with the DFSA and have an office in the DIFC. As an appointed registered agent, we can:

  1. Register the Foundation and provide the registered address of a DIFC Foundation
  2. Prepare the incorporation documentation of a Foundation
  3. Submit the By-Laws and relevant documentation
  4. Be the point of contact for ongoing queries relating to your Foundation/ Structure

As a licensed DIFC Corporate Services firm and as TWS is a registered agent in the DIFC we can expedite the company formation/ Foundation process and navigate you through any legal hurdles.

Benefits of a DIFC Foundation:

  • Perpetual Existence after a lifetime of Founder
  • No corporation, income or wealth tax
  • Solid governance structure
  • Privacy and confidentiality
  • Private wealth management and asset preservation
  • Succession and legacy planning
  • Creditor and divorce protection
  • Mitigates forced heirship rules
  • Charitable and non-charitable purposes
  • Self-managed with competitive set-up costs

Are there different types of Foundations?

A Foundation is typically formed by a Founder who vests certain assets towards a specified charitable or non-charitable purpose. There are different types of foundations, each based on the objectives behind the creation of the entity:

  • objects which are exclusively charitable
  • objects which are not charitable
  • to provide benefits to persons identified in its Charter or By-laws
  • a combination of the above

Each type of Foundation has different governance rules.

How can TWS  help?

Having advised clients on wealth structuring strategies for over a decade, you can be confident that our lawyers will carefully assess your needs and create a robust legacy plan under a Foundation that fulfills your objectives.

Our lawyers can advise and create a Foundation that reflects your wishes for future wealth protection and preservation. We will ensure that it is properly structured to ensure your assets are transferred to your beneficiaries according to your wishes. At TWS our lawyers are well versed with the procedures and regulations of the DIFC to ensure a hassle-free Foundation registration process.