What is the Foundation in UAE?

What is a Foundation?

A foundation is a separate legal entity that manages and holds assets for a specific purpose, different from a trust, which manages and holds assets for a certain purpose; it does bear, however, a distinct legal identity. This structure may serve for purposes such as asset protection, asset management, estate planning, and even charity. The foundations are highly popular among high-net-worth individuals and corporations looking for flexibility and security in managing their wealth or business assets.
In the UAE, the foundation setup is regulated by specific laws, depending on the jurisdiction (ADGM, DIFC, and RAKICC). These legal frameworks are designed in such a way that they ensure that the foundation operates transparently and according to the founder's wishes.

Key Characteristics of a Foundation:

➤ Separate Legal Entity: There exists a separate legal entity with a foundation; hence, it has its own legal personality, which could own property, undertake contracts and be able to participate in legal actions.

➤ No Shareholders: Foundations do not have shareholders as other businesses do. Instead, they have beneficiaries, which makes the governance simpler and less complicated.

➤ Flexible Purpose:  The purpose of setting up a foundation can vary from family wealth management to corporate restructuring, charities, and succession/inheritance planning.

Benefits of Setting Up a Foundation in the UAE

There are several benefits of laying the foundation in the United Arab Emirates. Here are a few of the most typical applications:

1. Wealth Preservation and Management: The foundation would be considered ideal for the protection and administration of wealth since they offer a structural or legal way to ensure the security of the assets in the long term, which can evade disputes or mismanagement.

2. Succession Planning: There is a well-structured and organised method through which the wealth and assets are transferred to successive generations in a foundation, based on proper adherence to the founder's wishes.

3. Asset Protection: The assets of a foundation are kept out of the reach of creditors, any litigation that may arise, and economic instability that may occur. One can protect one's capital from any potential risks by transferring one's assets to a foundation.

4. Philanthropy / Charity: One of the reasons foundations can be set up is for philanthropic purposes. This is a great avenue for the founder to give back to society on causes that he or she wants to endorse. Through the foundation, funds for social causes, educational causes, or environmental causes can be given in an organised manner.

5. Corporate Structuring: Using the foundation, ownership structures of businesses can be managed, shares retained, and succession plans can be made. This is particularly useful and advantageous in the case of family-owned businesses.

6. Tax Efficiency: Generally, UAE foundations ensure tax neutrality, meaning that they are not subject to any income taxes, corporate taxes, or capital gains taxes. This is particularly prudent for individuals and families who strive to properly protect their assets in a tax-efficient manner.

7. Confidentiality and Privacy: UAE foundations pride themselves on strict confidentiality laws. Because of this, personal information about the founders and the operations of a foundation are private. Businesses and large net worth individuals find this amount of privacy alluring.

8. Flexible Governance: The governing body of a foundation can be established in multiple structures. You might opt for a council to oversee your family wealth or to manage companies or to carry out charity work and adapt the workings as per your individual requirement. 

In order to establish a foundation in the UAE, the following statutory requirements must be met:

1. Founder: 

• A foundation must have at least one founder who initiates the foundation's creation. 
• The founder can be an individual or a legal entity. 
• The founder must be at least 18 years old to legally establish a foundation

2. Council Members: 

• A foundation must have at least two members on the council. The council members constitute the board and are engaged in the governing of the foundation's assets and maintaining objectivity with respect to the purposes of the foundation.
• Council members can be individuals or corporate entities, and their role is crucial to the foundation’s operations. 
• The council member should also not be below 18 years of age, and any under-age individual who might be involved has to be represented by a legal guardian or any other appointee who shall serve until such time that the individual is of majority age.

3. Beneficiaries: 

• The foundation can also appoint one or more beneficiaries in whose benefit the assets or activities are used. However, when the purpose of the foundation itself is of a charitable nature, no beneficiaries need to be specified.
• Beneficiaries can be individuals of any age, including minors. 
• Where a beneficiary is below the age of 18years, a legal guardian will have to manage their interest in the foundation. The governing documents of the foundation may describe how benefits are to be applied to minor beneficiaries to safeguard their interest.

4. Guardian:
 

There may be the appointment of a guardian, usually if the founder intends to keep the activities of the council in check. This guardian ensures the council operates within the framework of the statutes and goals of the foundation.

5 . Foundation Charter:

A legal document describing the purposes of the foundation, structure, and governance of the foundation, the legal capacity of the founder, the council, the beneficiaries, and the guardian.

How to Set Up a Foundation in the UAE
 

The process for setting up a foundation in the UAE is straightforward and quick, and it can be completed efficiently if you follow the right steps. Here is a breakdown of how to set up a foundation in any of the three key jurisdictions:

1. Choose the Right Jurisdiction

It is essential that you choose the jurisdiction that best meets your demands. Depending on your objectives—wealth management, company restructuring, or philanthropy—ADGM, DIFC, and RAKICC each have unique benefits.

2. Define the Foundation’s Purpose

Your foundation's goal should be clearly stated. This might include everything from succession planning to asset protection to wealth management. The foundation's goals will dictate how it is organised and run.

3. Prepare Legal Documents

Create the bylaws and charter for the foundation. These documents outline the foundation’s objectives, governance structure, and management roles and responsibilities.

4. Appoint a Foundation Council

The foundation council oversees the foundation's resources and makes sure it carries out its goals. The council may consist of close relatives, dependable counsellors, or outside experts.

5. Register the Foundation

Submit the necessary documentation to the relevant authority (ADGM, DIFC, or RAKICC). After approval, the foundation is officially registered and can begin operations.

6. Transfer Assets to the Foundation

You can transfer assets to the foundation, such as shares of your company, real estate, and financial interests, once it has been registered. These assets will be managed as per the foundation’s rules and objectives, which are mentioned in the bylaws.

Establishment of Foundations in the UAE provides flexibility, confidentiality, and long-term security for ideal wealth preservation, succession planning, and any charitable purposes. If you think about establishing a foundation, the UAE is the ideal legal and financial environment to support your goals in the best possible way.

Since all the conditions are favourable in the UAE, your foundation would work smoothly and successfully for the protection of your wealth and its continued growth for generations to come.

 

Therefore, to learn more about What is the Foundation in UAE? Book a free consultation with one of the Flyingcolour Business Setup team advisors.

The article was published on 07/08/2025. It is important to note that the federal policies and updates mentioned may have changed since then. For the most current information, please contact our consultant!