The international financial centre said its new legal framework for establishing and operating foundations is intended to guarantee greater choice in asset structuring and legacy planning by providing an alternative to trusts or corporate vehicles.
In a press statement ADGM said that the foundations structure would “allow private and corporate entities in the UAE a local method for succession and tax planning without resorting to overseas investment vehicles”.
It added that it had been created in line with international standards and was immediately available for use.
A foundation is a legal category for a nonprofit organisation that will typically either donate funds and support to other organisations, or provide the source of funding for its own charitable purposes. Foundations can be either private or public.
Wealth management push
ADGM held a consultation in May on the most suitable foundation regulations and has based its framework on similar regulations found in Guernsey and Jersey.
The structure had been created in a bid to make the ADGM a more attractive venue for the wealth management and the safeguarding of assets for individuals, companies and families.
“The new foundations regime, together with the existing world-class legislative and regulatory framework, adds to ADGM’s extensive corporate and legal structure offerings,” said Dhaher Al Mheiri, chief executive of ADGM’s Registration Authority.
“This is part of ADGM’s ongoing commitment to enhance its ecosystem and serve the needs of its stakeholders by introducing innovative and efficient business solutions.”
How it works
The foundation structure is available to international users as well as those based in Abu Dhabi. Its features include:
- Creating a new type of legal structure with its own distinct attributes;
- Protecting the confidentiality of the foundation’s arrangements;
- Incorporating appropriate protection mechanisms for ADGM foundations;
- Safeguarding the founder’s ability to exercise control over a foundation; and
- Facilitating migrations from other jurisdictions to ADGM and vice-versa.
A foundation is an incorporated entity with a separate legal personality, with features and uses similar to a company yet without individual shareholders.
However, unlike a company, a foundation cannot carry out commercial activities other than those necessary, ancillary or incidental to its purposes.
At the same time foundations, like trusts, can be used for the inter-generational wealth management of family assets. They typically hold assets in their own name on behalf of beneficiaries or for particular purposes, or both, and operate in accordance with a constitution.