Most entrepreneurs are channelling their energy into building a successful empire. However, many of these successful entrepreneurs overlook the significance of passing their legacy and wealth into successive generations even after turning their business into a behemoth. Many countries have legislations that enable legacy planning and wealth structuring through Foundations, but the high net worth individuals and family businesses in the UAE found the process of succession planning tough due to the laws here.
However, the family businesses got access to a UAE-based solution for this issue when the Abu Dhabi Global Market (ADGM) introduced the ADGM Foundation Law in 2017. By setting up a Foundation in ADGM, the UAE’s premium Financial Centre, the family businesses are now able to pass their legacy successfully to the next generation following the specific needs of the business owner. By consulting with the best business setup consultants in Abu Dhabi, business owners can make the setup process much easier.
Related: How to Setup a Business in Abu Dhabi Global Market?
Foundation As Per Abu Dhabi Global Market Law
The ADGM Law defines Foundation as a corporate body that has its own separate legal identity. A Foundation can hold assets and, just like a company, it can sue or be sued in its name. Investors can register a Foundation in ADGM for preserving their high-value assets, facilitating management and succession plans, and also safeguarding their income. However, as per the ADGM Foundation Law, a Foundation cannot be used for charity purposes and commercial activities.
Related: How to Register a Company in the UAE Free Zones?
A Foundation in ADGM is devoid of shareholders and partners and is often dubbed as an orphan structure. A Foundation in ADGM offers the investors safety from third party attacks including creditors and separations. Further, Foundations enhance the family governance structures in a great way as it offers greater asset protection when a key member of the family business suffers an unexpected illness or death.
Why ADGM is a Perfect Hub to Register the Foundation in the UAE?
The Foundations regime brought into force by ADGM is the first of its kind in the UAE (The DIFC Foundation Law came a year later in 2018). ADGM provides the family businesses in the UAE with an effective regime for purposes such as wealth management, succession planning, tax planning, corporate structuring, etc. and that too without depending on foreign regulations. For international businesses, ADGM offers a robust jurisdiction that is competent with any other international jurisdiction including Liechtenstein, Jersey, Guernsey, and the Netherlands. The following are the top benefits that make the ADGM an ideal Financial centre for registering a Foundation:
- The investors get access to UAE’s Double Taxation Treaties
- A competitive governance structure with the Foundation Council functioning similarly to the board of directors
- Mandatory requirement of appointing a Guardian when the Founder dies (optional during Founder’s lifetime)
- ADGM Foundations have a distinct personality that allows the flexibility to enter into contracts directly
- Provision for the separation of liability between the Founder and the Foundation
- An ADGM Foundation being a perpetual entity provides certainty even after Founder’s death
- Existence of a robust asset protection mechanism that safeguards the Foundation from bankruptcy claims (useful in situations including divorce and forced heirship rules)
- ADGM ensures the confidentiality of the Founder’s arrangement even though Registrar can access needed information
- ADGM provides governance controls enabling the Founder to exercise his control over Foundation
- The flexibility of migrating to ADGM and vice versa
Key Requirements for Registering a Foundation in ADGM
The Founder or any of his representatives can apply for registering a Foundation in ADGM. The Founder may or may not be a member of the Foundation Council. The following are the key requirements that the Founder should meet to set up a Foundation in ADGM.
1. Name of the Foundation
The ADGM mandates that the name of the Foundation should end with the suffix Foundation. The Foundation name should meet the requirements stipulated in the Business and Company Names Rules 2016 that have been amended from time to time. Business setup consultants in Abu Dhabi could provide further insights into the ADGM rules on naming a Foundation.
2. Foundation Charter
A Charter is a mandatory requirement for setting up a Foundation in ADGM. The Charter should contain the following information including:
- Foundation Name
- Name & Address of Founder
- Objects of the Foundation
- Name & Address of ADGM Registered Agent (if any)
- Purpose of the Foundation (if any specific purpose)
- Description of Initial Assets
- Name of Beneficiary
- Address of Registered Office in ADGM
- Provisions for Establishing the Foundation Council
- Term of Foundation
3. Registered Office
ADGM Authority mandates that the Foundation should always have a registered office in the financial centre. The address of the office will be used for sending all communications and notices. The address of the corporate service provider/ registered agent in the ADGM can also be used as the address of the Foundation.
4. Authorized Signatory
The Foundation is required to appoint an authorized signatory who will represent it in the ADGM. The Founder should support the appointment of the signatory with evidence that can be in the form of a statement in the Charter or a resolution. The signatory’s details should be submitted to the ADGM during the submission of the application along with documents such as a Passport copy, UAE visa, Emirates ID, etc.
5. Founder
A Founder is a legal or natural person who initiates the incorporation of the Foundation in ADGM. One or more Founders can set up a Foundation in ADGM. If the Founder is an individual then a passport should be submitted along with his details to the Authority. If the Founder is a corporate body, then a true copy of the certificate of registration must be submitted. Further, a copy of a resolution signed by the Founders approving the registration of the Foundation is required.
6. Council
A Council is an integral aspect of the Foundation, which carries out the objects of the Foundation and manage and administer its assets. The Council also carries out any activities that are required according to the Charter of the Foundation or as per the ADGM Regulations. It is mandatory for the Council to have at least two Councillors. The Foundation can appoint the Founder as one of its Councillors.
7. Guardian
The Guardian supervises the Foundation’s Council to make sure that it carries out its functions. The appointment of the Guardian is mandatory when the Founder dies. However, the Guardian’s appointment is only optional when the founder is alive. A Beneficiary can be appointed as a Guardian but a Founder, Councillor, or a sole beneficiary cannot be a Guardian.
How Business Setup Consultants in Abu Dhabi Can Assist?
Setting up a Foundation in Abu Dhabi’s ADGM is the best option for a family business to protect its assets and succession planning. The ADGM was the first in the UAE to introduce the Foundation Law which enabled both the locals and the international businesses a robust jurisdiction for legacy planning. Though ADGM has offers a flexible set-up process, the investors would require professional assistance in navigating the legal requirements and paperwork. The requirements of registered office and authorized signatory as well as drafting of the Charter need the guidance of experienced professionals. Business setup consultants in Abu Dhabi offer a helping hand for the family businesses in such a situation. Investors looking for assistance need to look no further than Jitendra Business Consultants (JBC) for successfully setting up a Foundation in ADGM. JBC’s business setup consultants in Abu Dhabi are well-versed in ADGM laws and regulations and assist the investors in the successful incorporation of the Foundation.