Amid global commerce, an intricate financial landscape, and philanthropic endeavours, the UAE has become a prime destination for foundations. Its solid framework and the Emirates’ business-friendly environment make it a top choice for discerning individuals and business magnates. However, registering a foundation in the UAE has its complexities. Our detailed guide delves into setting up a foundation in the UAE for a more efficient understanding, highlighting the legal prerequisites and considerations essential for entrepreneurs and high-net-worth individuals (HNWIs).

Guide to Setting Up Your Foundation in the UAE

As foundations become increasingly popular for wealth management, establishing one can face challenges. Here is a detailed guide to setting up a foundation in the UAE:

1. Clarify Your Foundation’s Mission

Before embarking on the journey, be clear about your foundation’s purpose. While philanthropy is a common cause, others may focus on family wealth management, asset protection, or other specific purposes. A clear understanding of your foundation’s mission can help prevent potential missteps in the future.

2. Select the Optimal Jurisdiction

The UAE offers multiple jurisdictions for establishing foundations. The Dubai International Financial Centre (DIFC) is a renowned free zone in the UAE. On the other hand, the Abu Dhabi Global Market (ADGM) caters to global financial entities and offers benefits similar to those of DIFC. For those valuing flexibility, RAK ICC presents a more lenient regulatory environment.

3. Appoint a Registered Agent

In the UAE, many jurisdictions require a registered agent to assist with the application process and manage legal procedures. Our business specialists at Creative Zone Premier are equipped to guide you. With an impeccable history and a profound grasp of the UAE’s legal landscape, we ensure an efficient and economical foundation setup.

4. Draft the Foundation Charter

The Foundation Charter is the cornerstone document detailing the foundation’s objectives, beneficiaries, capital, and governing structure. Accuracy and clarity are essential in this document. Given its importance, consulting our legal experts for guidance is highly recommended.

5. Finalize the Foundation Council

The Foundation Council plays an integral role in the strategic operations and governance of the foundation. It is customary for a foundation to require a minimum of one council member. However, appointing individuals or corporate entities that exhibit reliability and alignment with the foundation’s overarching objectives is imperative.

6. Registration and Licensing

After gathering all required documents and following the guidelines, submit your registration application to the appropriate authority. Depending on your jurisdiction, it will be the regulating body for your foundation. Upon approval, secure the essential licenses to operate your entity legally in the UAE.

7. Regular Compliance and Reporting

Foundations in the UAE must adhere to regular compliance checks. It’s crucial to submit financial statements promptly and remain informed about any legal framework changes to uphold the foundation’s reputation.

8. Key Considerations

• Tax Regulations: While the UAE boasts a tax-friendly environment, it’s essential to be aware of tax implications, especially if you or the beneficiaries have ties to other jurisdictions.
• Privacy and Confidentiality: Foundations provide a confidentiality shield, safeguarding beneficiary details and associated assets.
• Duration: Unlike corporations, foundations can exist indefinitely, ensuring the sustained realization of goals.

The Right Partner for Your Foundation

We understand the sophisticated challenges high-net-worth individuals (HNWIs) and seasoned entrepreneurs face. To address these, we’ve designed bespoke solutions at NH Management that cater to your requirements, including forming trusts, foundations, special purpose vehicles (SPVs), and offshore companies. As you navigate the complex financial landscape, our experts, backed by a proven track record and vast experience, are poised to offer strategic insights. Our handpicked specialists are specifically chosen to align with the unique financial aspirations of discerning individuals, ensuring a seamless and prosperous financial journey in the UAE.

DIFC Foundation at a Glance

A UAE-based foundation functions as a distinct legal entity independent of its initiators. This design ensures that its philanthropic, family wealth preservation or other missions remain intact. Esteemed financial centres like the Dubai International Financial Center (DIFC) and the Abu Dhabi Global Market (ADGM) are prime locations for foundation establishment. The DIFC introduced the DIFC Foundation regime in 2018 (DIFC Law No.3 of 2018) as an alternative wealth structuring vehicle for Muslim and non-Muslim expats in the UAE and international investors wishing to protect their assets and family businesses. A foundation can be set up for charitable purposes, such as holding a family business or real estate or assets like artwork. A DIFC Foundation is an innovative way to manage your assets in the UAE and minimize risk.

Why Set Up a Foundation?

As the UAE is a civil law jurisdiction, DIFC Foundations are becoming increasingly popular. One of the most attractive features is allowing property ownership in Dubai. A Memorandum of Understanding (MoU) exists between the DIFC and the Dubai Land Department, allowing entities such as a DIFC Foundation to purchase real estate registered with the Dubai Land Department. DIFC Foundations are legal entities that can hold wealth and assets for their beneficiaries. International investors (non-residents) or residents of the UAE can structure their investments through a DIFC Foundation.

Structure of a DIFC Foundation

There are four main parties to a DIFC Foundation:

1. The Founder: At least one founder must create the foundation to structure their assets.
2. The Council: Formed by the founder, it must have at least two members, including the founder. By its charter and by-laws, the council administers the foundation like a board of directors.
3. The Beneficiaries: This can be an individual, group, or entity appointed by the founder who will benefit from the foundation’s assets.
4. The Guardian: Ensures the council follows the requirements of the charter and regulations. This supervisory role ensures that the commission acts in good faith and the best interests of beneficiaries.

DIFC Foundation Documentation

• Charter: This is the foundation incorporation document.
• By-laws: They define the various functions and duties of the council. This document details the founder’s explicit wishes.

Registering a Foundation in DIFC

As a DIFC Foundation must have a registered office in the DIFC, TWS can provide registered agent services (being a ‘Qualified Person’) when appointed as the registered agent of a DIFC Foundation, as we are licensed with the DIFC and have an office in the DIFC. As an appointed registered agent, we can:

• Register the foundation and provide the registered address of a DIFC Foundation
• Prepare the incorporation documentation of a foundation
• Submit the charter and by-laws to the DIFC Registrar of Companies
• Be the point of contact for ongoing queries relating to your foundation/structure

NH Management, as a licensed DIFC corporate services firm, can expedite the DIFC foundation formation process and navigate you through any legal hurdles.

Benefits of a DIFC Foundation

• Solid governance structure
• Privacy and confidentiality
• Private wealth management and asset preservation
• Succession and legacy planning
• Creditor and divorce protection
• Mitigates forced heirship rules
• Charitable and non-charitable purposes
• Self-managed with competitive setup costs

Types of Foundations in UAE

A foundation is typically formed by a founder who vests certain assets for a charitable or non-charitable purpose. There are different types of foundations, each based on the objectives behind the creation of the entity:

• Objects which are exclusively charitable
• Objects which are not charitable
• To provide benefits to persons identified in its charter or by-laws
• A combination of the above

Each type of foundation has different governance rules.

Foundation Formation with NH Management

Having advised clients on wealth structuring strategies for over a decade, our lawyers will carefully assess your needs and create a robust legacy plan under a foundation that fulfils your objectives.

Our lawyers can advise and create a foundation that reflects your wishes for future wealth protection and preservation. We will ensure it is appropriately structured to transfer your assets to your beneficiaries according to your wishes. 

At NH Management, our in-house partners are well-versed in the procedures and regulations of the DIFC to ensure a hassle-free foundation registration process. Reach out to info@nhmanagement.com and +97142221327 to learn more about starting a foundation in the UAE.