The long-awaited Dubai International Financial Centre (DIFC) Foundations Law 2018 (DIFC Law No 3 of 2018) has now come in to effect as of 21 March 2018. The new law, which is in addition to the pre-existing DIFC Companies Law and the newly reformed DIFC Trust Law, is intended to provide an enhanced framework for succession planning and wealth structuring platforms in the region.
What is a Foundation?
A Foundation is an incorporated legal entity, viewed as a hybrid between a company and a trust. Similar to that of a company, a Foundation is deemed to have a separate legal personality however, rather than being owned by shareholders or members, a Foundation is self-owned and administered by its Council, in accordance with the Foundation’s by-laws.
A Foundation is established when the Founder places assets in to the Foundation to be used in accordance with designated purposes and objects.
DIFC Foundation Categories
The DIFC Foundations law provides for four categories of Foundations based upon their objects; 1) objects which are exclusively charitable; 2) objects which are not charitable; 3) in order to provide benefits to persons identified in its Charter or By-laws and; 4) a combination of the above. For all categories of Foundations, commercial activities must not be carried out, except where deemed necessary for, and ancillary or incidental to. the Foundation’s objects.
Different governance requirements will apply depending on which Foundation is created.
Key Benefits
- Flexibility
- Degree of control maintained by Founder
- Family involvement
- Maintain family ties for geographically diverse families and/or assets
- Continuity
- Separate Legal Personality
- Independent
- Robust governance structure
- Facilitates philanthropy
Who will benefit from the DIFC Foundations Law?
Foundations can be created for a variety of purposes, whether it be to assist the multi-generational family with asset protection, the High Net Worth individual with geographically diverse assets, an individual or family with philanthropic objectives, or a company or family office wishing to restructure, the DIFC Foundations regime is a welcome introduction for individuals, families, businesses, and entrepreneurs alike both locally and globally.
For further information on DIFC Foundations please contact Victoria Smylie on +971 4 343 8897 or vsmylie@davidsoncolaw.com
