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DIFC FOUNDATONS

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Overview

The foundation regime has been enacted in the DIFC by way of the DIFC Law No. 3 of 2018 (“Foundation Law”), providing an alternative mechanism for regional wealth structuring and inter- generational legacy planning to Muslims and Non-Muslim families.

The DIFC is the second common law jurisdiction within the UAE to introduce a foundation regime, combining the best practices, models and principles of existing foundation regimes of both common law and civil law backgrounds, including some features that are unique to the DIFC Foundations.

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Key features of DIFC Foundations

  • 01
    Founder(s) and object of the foundation

    A DIFC Foundation might be established by one or more founders who dedicate certain assets towards a specified charitable or non-charitable purpose. The scope of permitted objects is broad. However, the foundation cannot undertake commercial activities, except those necessary for, and ancillary or incidental to its objects.

  • 02
    Presence in the DIFC

    The DIFC Foundation must be registered and located in DIFC. In most cases, a registered agent is appointed to provide the domiciliation in the jurisdiction, nevertheless it is also possible for the foundation to rent its own office space to comply with the necessary presence in the jurisdiction.

  • 03
    Charter and By-laws

    The management, governance and control of the DIFC Foundation and its assets can be tailor- made, to the extent permitted by the Foundation Law, to reflect the arrangements that the founder desires, via a combination of provisions set out in the Charter and By-laws. The founder(s) may for instance retain significant control powers via the By-laws and can decide to be appointed as one of the Council members (see below point 4). Whilst the Charter is publicly available, the By-Laws remain strictly private.

  • 04
    Council of foundation and Guardian

    Although a DIFC Foundation has a separate legal personality, it does not have partners, shareholders or members, but it is rather a ‘self-owned’ entity. In the absence of an ownership structure as such, a DIFC Foundation is administered by a Council of foundation, composed of two members appointed by the founder(s), and it may be supervised by a guardian who will be in charge to verify that decisions undertaken by the Council are in line with the Charter and By-laws.

  • 05
    Beneficiaries

    The founder can be part of the beneficiaries as well his/her family members or even a corporate vehicle.

  • 06
    Capital / assets

    A DIFC Foundation shall have a capital, which can be in the form of cash or in kind/other assets, including real estate within the Emirate of Dubai. There is no minimum capital requirement, any endowment will be sufficient for the establishment of the foundation. Further endowment towards the capital can be made by the founder(s).

The DIFC Foundation concept proves to be suitable in the context of succession planning as the founder(s) can remain in control of the assets of the DIFC Foundation during his/her lifetime and beyond, under the terms of the Charter and the By-laws. Once the assets of the founder(s) are transferred to the DIFC Foundation, those assets cease to form part of his/her private estate. Those assets then form part of the DIFC Foundation’s capital, providing a robust asset protection, by safeguarding these assets from forced heirship or creditor claims.

CREATION OF THE DIFC
FOUNDATION

For the creation of the DIFC Foundation, the steps will be the following:

  • 01
    Collection of information
    • Object of the foundation.
    • Structure of the foundation.
    • Assets to be transferred to the foundation.
    • Important information/clauses to integrate in the Charter and/or the By-Laws.
    • Rational beyond the creation of a foundation in DIFC.
  • 02
    DUE DILIGENCE
    • a. Founder
      • Certified true copy of a valid passport
      • Certified true copy of a proof of address, less than 3 months
      • Source of funds and wealth (i.e. CV, personal bank statements, title deeds, portfolio of investments, corporate documents of his current business, etc.)
    • b. Beneficiaries, Council Members, and Guardian (if any)
      • Certified true copy of the valid passport
      • Certified true copy of a proof of address, less than 3 months
    • c. Description of the assets to be transferred along with the supporting documents demonstrating the founder’s ownership on the assets.
  • 03
    Preparation, review and validation of the Charter, the By-Laws, and the Letter of wishes (if requested)
  • 04
    Preparation of the application and submission to DIFC along with all supporting documents

Provided all information is accurately submitted to the DIFC, the standard process is usually completed within 3-4 weeks.

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