TRUST AND FOUNDATION

INTRODUCTION

In the United Arab Emirates, Shari’ah is the principle source of succession planning based on which several federal laws have been promulgated.

• DIFC Law No. (3) of 2018, ADGM Foundation Regulation 2017, regulates the Law, relating to “Foundation”.
• DIFC Law no. (4) of 2018, Trusts (Special Provisions) Regulations 2016, regulates the Law, relating to “Trust”.

 

FOUNDATION

Currently, the best way for Muslim owners to avoid potential Shar’iah implications on inheritance matters is to have all UAE assets held by a foundation registered with the DIFC, the Abu Dhabi Global Market (ADGM) or the RAK International Corporate Centre (RAK ICC).

The concept of a “foundation” was introduced into the UAE by the DIFC Foundations Law No. 3 of 2018 and the ADGM Foundation Regulations in 2017. Furthermore, on 22 September 2019, the RAK International Corporate Centre (RAK ICC) launched the RAK ICC Foundations Regulations 2019 and became the third jurisdiction within the UAE to adopt the foundation.

A foundation is an independent legal entity with a distinct personality, separate from the founder. This allows the foundation to enter into contracts or hold assets in its own name.

Specifically, for properties located in Dubai, DIFC, ADGM and RAK ICC have executed Memorandum of Understandings (MoU) with the Dubai Land Department (DLD), enabling properties located in Dubai to be owned by entities incorporated in the corresponding jurisdictions. They are present in three of the UAE’s free zones (Dubai International Financial Centre, Abu Dhabi Global Market and Ras Al Khaimah International Corporate Centre).

 

1. DIFC Law No. (3) of 2018

A Foundation is a body corporate with a legal personality separate from that of its Founder(s) and any other person. A Foundation may, but need not, be established for a fixed period or for a specified limited period,  provided that it may be dissolved at an earlier time in accordance with the provisions of this Law.

 

 

Application of this law

 This Law applies in the jurisdiction of the Dubai International Financial Centre.

 

This Law applies to:

1. Any Foundation established in accordance with this Law;
2. Any Recognised Foreign Foundation to the extent stated in Article 62; or
3. Any Foreign Foundation which is established in another jurisdiction which has transferred its registration to the DIFC .

A Foundation must have a Charter which shall be in the English language.

The Charter must contain the following:

1. Its name
2. The object(s)
3. A description of the initial capital
4. The duration of the Foundation (if it is to subsist for a limited period only); and
5. A declaration by each Founder requesting the Council to comply with the terms of the charter.

 

The legal procedures to establish a “Foundation”

• The Founder(s) may apply for the establishment of a Foundation by signing and filing with the Registrar an application for its establishment:
• The application filed with the Registrar under Article 17(1) shall be signed by each Founder and shall include:
• The name of the proposed Foundation;
• The address of the proposed Foundation’s registered office in the DIFC;
• The full name, nationality and address of each Founder;
• The full name, nationality and address of each of the proposed members of the Council of the proposed Foundation;
• If applicable, the name and business address of the proposed Registered Agent in the DIFC;
• The Charter of the proposed Foundation; and
• Such other particulars as the Registrar may deem fit.

 

 

On the registration of a Foundation, the Registrar shall:

1. Issue a certificate that the Foundation is established and such certificate shall expressly set out its status as a Foundation;
2. Assign to the Foundation a number, which shall be the Foundation’s registered number; and
3. Issue a Licence in its name.

 

For a new foundation, it should take about 3-5 days to set up once the Registrar has received all required information and documentation.

Our team, Musaab Ali AlNaqbi Advocates and Legal Consultants will provide the appropriate guidance to assist in establishing these entities.

 

Costs for the establishment of the Foundation.

The costs and expenses of and incidental to an application to the Court under this Law shall be borne and paid in such other manner or by such other person as the Court may order.

The registration fees- USD 200

 

1. ADGM FOUNDATION REGULATION 2017

 Legal procedures for application of Foundation under the ADGM Foundation Regime

1. Submit an online application and a copy of the foundation charter.
2. Once information is accurately submitted, the process can be completed within a few days.

Foundation fees

1. Registration of Foundation-$200
2. Annual renewal of Foundation-$200
3. Continuation into / out of ADGM- $500
4. Notification of changes

 

 

 

 

TRUST

1. DIFC Law no. (4) of 2018

Application of the Law

This Law applies in the jurisdiction of the Dubai International Financial Centre.

This Law applies to:

1. All DIFC trusts, other than trusts created under the Investment Trust Law (DIFC Law No. 5 of 2006).
2. To foreign trusts in respect of all acts, omission or transaction occurring in the DIFC, whenever the trust was created, provided that all questions arising from acts or omissions occurring prior to the commencement of this Law shall be determined in accordance with the Previous

 

Establishment of Trust

 A trust may be created by:

1. transfer of property to another person as trustee during the settlor’s lifetime or by will or other disposition taking effect upon the settlor’s death;
2. the transfer of property from one (1) trust to another;
3. declaration by the owner of identifiable property that thereupon the owner will hold the property as trustee; or
4. Exercise of a power of appointment in favour of a beneficiary.
5. A trust shall come into existence by an instrument in writing.

 

Legal procedures for the Establishment of Trust

 A trust is created if:

• the settlor has the capacity to create a trust;
• the settlor indicates an intention to create the trust;
• has a definite beneficiary;
• is a charitable trust, as provided for in Article 38; or
• is a non-charitable purpose trust, as provided for in Article 39;
• the trustee holds or has vested in him or it, property for the benefit of a beneficiary or for a purpose;
• the trustee has duties to perform; and
• the same person is not the sole trustee and sole
• A beneficiary is definite if the beneficiary can be ascertained now or in the future.
• A trust may have at the same time a definite beneficiary and a

 

Most importantly, a trust deed has to be created for the aforementioned “Trust” formation.

 

Costs for the creation of Trust

The costs and expenses of and incidental to an application to the Court under this Law shall be paid out of the trust property or be borne and paid in such other manner or by such other person as the Court may order.