Guidelines, and Annual Compliance
The ADGM Foundations Regime stands as an alternative to trusts[1], catering to the needs of individuals, families, and corporations navigating financial planning and structural solutions. This framework unlocks a gateway for High Net Worth Individuals, families, and businesses to access a highly valued opportunity from a globally esteemed international financial hub.
With versatile applications, ADGM Foundations fulfill various purposes, such as wealth management, asset preservation, family succession planning, tax optimization, asset safeguarding, and corporate structuring. Foundations are considered to have a mechanism to consolidate a wide array of family assets into a single centralized entity. Utilizing a Foundation to hold several family assets, including business interests, properties, financial investments, and other valuable holdings, allowing the inauguration of clear legal directives for their transfer during succession.
Effectively, said procedure of consolidation streamlines asset transfer, minimizing complex and costly procedures associated with transferring assets individually. It enables family members to establish their wishes, plans, and By-laws within the foundation, reducing family disputes upon the passing of senior members. Even after the founder’s death, the foundation operates based on its established charter, ensuring continuity.
When it comes to the advantages of foundations, there is quite a range worth noting. Here is a selection of key benefits:
- Governance Enhancement: ADGM Foundations adhere to worldwide best practices and regulatory standards. The Foundation Council operates with statutory obligations similar to those imposed on corporate directors, guaranteeing accountable and transparent decision-making. Oversight by a Guardian, although optional during the Founder’s lifetime, becomes mandatory after the Founder’s passing, strengthening supervision and continuity while adhering to the Foundation’s Charter and By-Laws.
- Legal Personality: Unlike a Trust. Having a legal personality provides Foundations with the flexibility to enter into contracts and arrangements directly, as a company would be able to[2].
- Separate Liability: The Foundation’s separate legal personality warrants a clear division between the Founder and the Foundation itself, thus, safeguarding the Founder’s personal assets from potential claims or liabilities linked to the Foundation, and offering an additional layer of security.
- Perpetual Continuation: Beyond the Founder’s lifespan, an ADGM Foundation continues to exist indefinitely. This enduring nature assures stability and continuity for ongoing arrangements, securing the Foundation’s objectives and legacy for future generations.
- Asset Protection and Succession Planning: ADGM Foundation regulations include firewall provisions aimed at safeguarding beneficiaries’ rights and preserving the Foundation’s assets. These measures shield the Foundation’s assets from bankruptcy, divorce claims, and forced heirship rules, strengthening asset protection and conservation.
- Information regarding individuals not listed in the registrar remains undisclosed to the public, confirming confidentiality. This offers a balance between transparency and confidentiality aligned with ADGM’s objectives and international treaties involving the UAE.
Foundations procure a higher level of certainty that assets will be distributed as per the Founder’s intentions, with the Foundation continuing beyond the Founder’s passing. ADGM Foundations are designed for swift and uncomplicated setup and management, featuring transparent ongoing reporting obligations and competitive pricing.
Moreover, the ADGM Foundations Regime offers multiple highlights that make it an attractive option.
Indeed, Foundation re-domiciliation, allowing movement both into and out of ADGM, is a notable feature. Additionally, it provides the flexibility to amend governance structures after establishment. For those seeking affordability, the regime boasts low initial setup costs, requiring as little as USD 100 to commit as initial assets to the Foundation.
On top of that, the mandatory appointment of a Company Services Provider for Non-exempt Foundations secures compliance. Interestingly, there’s no physical office requirement; non-exempt Foundations need a registered Company Service Provider, while exempt Foundations can use the registered office address of a parent or related entity. Furthermore, all roles within the Foundation can be carried out by individuals or corporations.
As for the establishment process of an ADGM Foundation, it involves a structured sequence of essential steps crucial for both its formation and regulatory compliance.
Firstly, it begins with outlining the Foundation’s objectives, purpose, and governance structure. This includes drafting essential documents such as the Foundation Charter and By-Laws, which set the operational guidelines.
Next, the prepared documentation, including the Foundation’s Charter, By-Laws, and other relevant materials, needs to be submitted to the ADGM Regulatory Authority (“RA”).
Following submission, the ADGM RA thoroughly reviews the application to ensure adherence to the Foundation regulations. Upon successful review and approval, the Foundation gets incorporated, and a Certificate of registration is issued.
Once officially registered, the Foundation can start fulfilling its objectives, managing assets and engaging in activities according to the rules outlined in its Charter and By-Laws.
Riwa Madi
CSP Associate
30/3/2024
For personalized guidance regarding Foundations, please do not hesitate to contact our team by sending an email to: assiss@assiss.com.
DISCLAIMER: This blog post does not constitute professional advice. Additional facts or future developments may affect the content of this blog post. Before acting or relying upon any information within this document, please seek the advice of a member of our team.
[1] Foundations, rooted in civil law, differ from common law trusts. Foundations operate akin to a company, with their own legal identity, holding assets for beneficiaries, but without engaging in commercial activities. Unlike trusts where control shifts to trustees, founders retain more control in foundations, while trustees’ duties in trusts are towards beneficiaries, rather than the settlor.
[2] A Foundation in ADGM cannot be used for charitable purposes and cannot conduct commercial activities unless they are ancillary to its primary purpose (but can be used to hold shares in a commercial entity).