The Ras Al Khaimah International Corporate Centre (RAK ICC) announced the launch of a new ‘Foundations’ regime with the issuance of the RAK ICC Foundations Regulations on 15 December 2019.
The regulations result from a global benchmarking exercise to ensure they meet the appropriate international standards and market requirements. They provide for the registration of a Foundation established by a founder to dedicate certain assets towards specified charitable or non-charitable purposes.
A Foundation is neither a company nor a trust but has some similarities to both. It is an incorporated body that has separate legal personality and can hold assets, transact business, and sue or be sued in its name. Unlike a company, however, a Foundation has no shareholders.
A Foundation is established by a founder, who provides the initial assets – known as the endowment. The assets are then held for the purposes set out in the Foundation’s document of establishment and are administered according to contractual rather than fiduciary principles.
The Foundation is governed by constitutional documents. These are a charter that can be open to public inspection, and regulations, like a company’s articles of association, remain private. The founder can retain flexible powers over the assets in the Foundation if this is permitted in the constitution.
Whereas trust assets are held by a trustee, a Foundation has a council that administers the Foundation’s assets and carries out its aims in accordance with its constitution. It must act in good faith. It can have one or more members and is similar to a board of directors. A ‘guardian’ can be appointed to ensure that the council does what it is meant to do, similar to a trust protector.
Foundations can be used for several purposes, including but not limited to, financial structuring, succession and tax planning, private wealth management and preservation, asset protection, and by charitable institutions.
The Foundation Regulations are designed to protect the founder’s wishes and the Foundation’s assets. Some of the regime’s other key features include:
- Council Members (minimum of two) – the appointment of corporate entities is allowed;
- Privacy – the Register is not open for public inspection;
- Flexibility – continuation (from RAK ICC company to RAK Foundation), as well as migration and amalgamation, are allowed;
- Registration – an authorized registered agent and a registered office in the RAK free zone are required;
- Legal jurisdiction – may opt for either ADGM or DIFC Courts to hear out disputes, which are both common law jurisdictions.
RAK ICC is not the only free zone authority in the UAE that offers the potential benefits of a Foundation. The Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) have their own regimes. Each location shares the core benefits of these entities, but there are a few unique advantages to each jurisdiction.
The Foundation can be used for:
- Enhanced succession planning and asset protection;
- Providing a robust governance structure;
- Providing guardian oversight of assets;
- Creating a structure with a distinct legal personality that separates liability while maintaining control of assets and which has continuous existence after the death of the Founder.
Sovereign Corporate Services is a registered agent for the RAK International Corporate Centre (RAK ICC). We would recommend getting professional advice to determine if a RAK ICC foundation is a suitable structure for your requirements.