ADVISORY VIEW
The rise of foundations in the UAE Foundations have become a popular option for regional wealth structuring and succession planning in the UAE. Here, Nina Auchoybur, Managing Director of Ocorian, a global leader in fund administration, capital markets, corporate, private client and fiduciary services, breaks down the structure of a foundation and details the benefits it can provide to both families and businesses.
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hat is a foundation?
A fo u n d a t i o n i s a n independent legal entity and is derived from civil law jurisdictions, as opposed to a trust which is a common law concept. It also has no members or shareholders, but is self-owned. The foundation’s founder bestows assets to the foundation and owing to its separate legal status, will hold those in its own name and separately from the founder’s personal wealth. Those assets are then managed by the foundation council (equivalent to a board of directors for a company) in accordance with the foundation’s charter and by-laws (reflecting the
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intentions of the founder) in support of a cause or a purpose, or for the benefit of beneficiaries.
What differentiates a foundation from a trust? This a common question that we’re asked as a trust is often a more familiar concept. A trust is a legal obligation or relationship between the settlor (the person who creates the trust), the trustee (the person in charge of the trust) and the beneficiary (the person who receives benefits from the trust). Legal ownership of the trust sits with the trustees and beneficial ownership with the beneficiaries.
Banking and Finance news in the MEA market
What are the main reasons for establishing a foundation in the uae and what advantages do the offer families and businesses? At the moment we are seeing a variety of foundation structures being implemented to hold trading companies, real estate and liquid investments. It is an attractive vehicle for these purposes because it provides a number of benefits including: A sset protection - Because the foundation’s assets do not belong to the founder, they are not readily accessible to creditors, governments or other family members, provided certain conditions are met. P rivacy - The beneficiaries of a foundation are private and so the founder’s family wealth can be managed more discreetly. This provides its own benefits including: • reduction of the risk of claims/ judicial actions from third parties against the founder and their family to extort a monetary benefit/ settlement; • better bargaining power when negotiating business deals and/or acquiring assets; • reduced risk of being targeted and befriended by unscrupulous individuals in order to access their wealth; and • less urgency for potentially uncomfortable discussions around
