DIFC and ADGM Foundations

A DIFC foundation can be established for diverse purposes, including charitable initiatives, the management of family businesses, and the holding of assets such as real estate and artwork. This innovative vehicle provides a strategic approach to asset management in the UAE, offering a means to mitigate risks effectively.

For the ADGM foundation, a significant attraction for affluent investors opting for a foundation, as opposed to a Trust, is the notable ability of the Founder to maintain a significantly higher level of control over the management of assets within the Foundation.

Why DIFC Foundations?

The growing popularity of DIFC Foundations in the UAE, especially in Dubai, is attributed to the civil law jurisdiction of the region. Notably, one of its compelling features is the permission for property ownership in Dubai, facilitated through a Memorandum of Understanding (MoU) between the DIFC and the Dubai Land Department.

This legal framework enables entities like DIFC Foundations to acquire real estate registered with the Dubai Land Department, making them an attractive option for international investors and UAE residents alike.

Why ADGM Foundations?

With over 3000 entities registered and actively operating within its precincts, ADGM stands as a hub of progressive financial and legal initiatives. It is backed by the esteemed Abu Dhabi Government with top sovereign credit ratings and stands as a trailblazer in the MENA region.

ADGM holds the distinction of being the first jurisdiction in the region to comprehensively apply English Common Law, showcasing its commitment to international legal standards. Additionally, ADGM has spearheaded innovative advancements, hosting the world’s inaugural fully digital courtroom and establishing the world’s first digital banking license regime. Setting precedents, it introduced the region’s pioneering virtual asset regulatory framework.

A foundation in DIFC and ADGM involves four main parties:

• The Founder: It must include a minimum of one Founder who initiates the Foundation.
• The Council: It is formed by the Founder and comprises a minimum of two members, including the Founder. The Council functions akin to a Board of Directors, administering the Foundation in alignment with its By-Laws and Charter.
• The Beneficiaries: Individuals, groups, or entities can become beneficiaries of the Foundation and benefit from its assets. These are designated by the Founder.
• The Guardian: They are responsible for ensuring the Council adheres to the Charter and regulations, playing a supervisory role to ensure actions are in the best interests of beneficiaries.

DIFC Foundation

Establishing a DIFC Foundation necessitates adherence to the following prerequisites:

• At least one founder and two council members.
• A registered office within the DIFC at all times. This condition can be met by selecting any one of these options:
  • Leasing an office space in the DIFC
  • Getting a shared office space with an affiliated entity already established in the DIFC
  • Appointing a Registered Agent
• Limitation on engaging in commercial activities, except those deemed necessary for, or ancillary to, its specified objectives.
• Foundations with charitable or specified non-charitable objectives must appoint a Guardian to oversee their operations.

ADGM Foundation

• At least one founder and two council members.
• Having a registered office within the Abu Dhabi Global Market. It may serve as both a legal address and the address of its Corporate Service Providers or Registered Agent.
• A designated individual authorized to serve as its permanent representative in the ADGM. The details of this representative, including a copy of their passport, UAE Visa or entry stamp (in the case of UAE), and other relevant information, need to be provided.

The documentation for a DIFC or ADGM Foundation includes the Charter (foundation incorporation document) and By-Laws, detailing the explicit wishes of the Founder.

To facilitate the registration process, Davidson & Co. offers comprehensive services such as preparing incorporation documentation, submitting required documents to the relevant authority, and acting as a point of contact for ongoing queries.

DIFC Foundation

DIFC Foundations offer numerous advantages, including a robust governance structure, privacy, private wealth management, succession planning, creditor and divorce protection, mitigation of forced heirship rules, and flexibility for both charitable and non-charitable purposes. Additionally, they are self-managed with competitive setup costs.

ADGM Foundation

The Foundation structure within ADGM offers a range of benefits and features, including access to the UAE’s Double Tax Treaties (subject to compliance with the UAE Ministry of Finance requirements) and robust wealth management capabilities.

In addition, ADGM Foundations possess a distinct legal personality, affording them the ability to directly enter into contracts and arrangements. This legal separation ensures liability is segregated while maintaining control over assets.

Foundations can be categorized based on their objectives, including exclusively charitable, non-charitable, providing benefits to specified individuals, or a combination thereof. Each type adheres to different governance rules.