Since 2017, foundations have rapidly become the first-line option for territorial wealth construction and international inheritance planning. Like trusts, foundations are used for different purposes, including wealth administration, wealth planning and conservation, succession planning, wealth protection, and tax planning. The trust has originated from the common law, while the foundation has its roots in the civil law originated in continental Europe. The Abu Dhabi Global Market (ADGM) authorities provide an alternative to these trusts for financial structuring and planning. For the very first time in the United Arab Emirates, ADGM permits the High Net Worth Individual (HNWI), family, and other corporate communities to locally acquire a much sought-after product from a world-class Financial center. ADGM foundations are used for different purposes, including wealth planning, management and conservation, family succession, tax planning, corporate structuring, and public purposes, excluding charities.
Foundations provide a system to unite the family holdings from the various assets to a top single holding entity. Usage of such foundations to transfer any family properties, investments, and other assets will permit a comprehensive instruction to be legalized for succession. As the family holdings are transferred to a single unit, it helps avoid all the complex procedures of transferring the assets separate to the individuals, which is very cost-efficient and tax-efficient. The family members could charter all their wishes, plans, and By-laws in the foundations, which helps to reduce the disputes in the family due to the death of any senior family member. Even after the founder’s death, the foundation will operate according to the chartered foundation. Thus, the foundation offers a high degree of certainty and convenience. The significance of the foundations is benchmarked worldwide as it provides a perfect balance between the regulations, confidentiality, and administration.
The foundations are very fast, easy to set up and handle as it gives straight ongoing reports. Hence there are some highlights which make the ADGM attractive. Let’s summarize the highlights of the ADGM;
Since the foundation acts more like a trust under common, its features are very similar to a company. ADGM has a robust governance mechanism as the regulations of the foundations follow international best practices and set standard legislation for the foundation council. i.e., the foundations will possess both statutory duties of common law and equitable duties similar to the company directors. Whether the foundation council actions abide by the foundation’s charter and By-laws are supervised and ensured by the guardian. The guardian’s appointment is optional with the presence of the founder and compulsory after the death of the founder. The foundation will have a well-defined legal personality, unlike trust. This personality will offer flexibility entrusts the foundations the power to enter into the contracts and arrangements directly like any other company. As the foundation is considered a separate legal entity, liabilities are separated between the founder and foundation while maintaining the control of the assets. Just like a company, the foundation also possesses a perpetual concept. This concept permits the foundation to continue and allows the arrangements even after the death of the founder. Firewall provisions outlined in the ADGM foundations help to protect the rights of the successors or beneficiaries and conserve the properties of the foundation away from the bankruptcy claims, claims in the instance of divorce, and from the effect of compelled heirship rules.
From the above highlights and benefits, it is evident that the ADGM foundations operate efficiently. But now, let’s examine why the ADGM foundations are different from other foundations or the reasons that make them more attractive and peculiar.
ADGM foundation is an independent jurisdiction possessing its own civil and commercial laws. It offers a high degree of legal certainty as the common laws are applied directly. The foundation is flexible to all amendments to the rules and regulations of the foundations when required. The ADGM foundation has its own separate and independent courts to deal with the matters related to it. The ADGM offers high efficiency as it uses the standard form for the transaction of documents.
The ADGM has access to the growing ecosystem of finance, talent, and other services. This access shape it as a home to the world’s leading and popular professional advisory firms. Thus, its benchmarked significance offers a high degree of operational efficiency shaping the ADGM bizarre and unique from other foundations.
ADGM comprise of 0% tax and 0% personal income tax. ADGM also doesn’t have any of such withholding taxes. Another feature that makes the ADGM unique is that it does not possess any restrictions on the profits repatriated. ADGM also approaches the growing number of Double Tax Treaties that is 84 in force and 31 in progress. Along with this tax exemption and access, ADGM also possesses fully digital application and support visas and other government services.
The ADGM offers recent and latter-day infrastructure facilities and offices classed as ‘grade A.’ since the ADGM consists of world-class institutions and experts, it has connections across the globe through world-class airlines. The airlines and the ADGM also have a relationship with leading or world-class hotels, healthcare and other lifestyle facilities.
The legislation of the ADGM could be classified into three sets or categories. The first one is the structure of the ADGM, its form, and its naming. The second one is the legislation of ADGM concerning its governance, and the last one is the legislation of the ADGM concerning its transparency and confidentiality. The legislations are summarized as follows:
Section 3(5) defines that the company will come into effect from the date of registration itself. The foundation will be considered the separate legal entity holding an individual legal personality so that the foundation can sue and could be sued. Section 6 of the legislation defines the naming of the foundation; it states that the foundation’s name shall end with the word “Foundation,” and it must fall in with Business and Company Rules 2016.
Section 26 of the legislation gives the founder power to appoint a guardian during his lifetime. This power is optional as the founder can nominate a guardian during his lifetime only if he wants to. But it is mandatory to appoint one after the death of the founder. While Article 20(1) of the legislation specifies it is compulsory to keep proper accounting records by every foundation. Section 21(8) states that these records are only disclosed or submitted to the registrar before their requests. The audit records are delivered to the registrar within the period stipulated by the registrar, specified in section 21(9). Section 19(3) & (4) expounds on the council’s duties to perform the objectives of the foundation and carry out the duties chartered under the ADGM foundation and its by-laws. In contrast, the duties of the conciliar are defined in section 23 of the legislation. The ADGM has its courts to carry out matters related to the foundation. Thus, section 32(5) states that any foreign judgments outside the court will not be recognized for defining the succession rights of the heirs.
Section 1 of the legislation states that only after the registrar receives the required documents and the registration application, a foundation seems registered and established. The foundation will also have Bye-laws, which should not be disclosed to the registrar. Section 9 of the legislation states that a charter includes the foundation’s name, founder’s name, objectives, purpose, description of the assets, and other statutes regarding the council. In addition to it, the “confidential disclosure” containing the name and address of the councilors, beneficiaries, guardian (if any), beneficial owner of each founder who is a legal person (if any) are required to be held confidentially by the registrar and subject to disclose to public authorities lays under the section 3(10).
You can apply online with a copy of the foundation charter. Once all the required information is precisely submitted, the process of registration could be completed within a few days. The documents which are needed for the application are summarized as follows;
Abu Dhabi Global Markets (ADGM) is an international financial centre and an independent jurisdiction situated in the capital of UAE, which is fully opened for business on 21 October 2015. ADGM consists of three separate authorities: regulatory, financial, and registration authority, which creates an integrated environment that ensures the companies operate their business with so much confidence.