HAVE YOU EVER CONSIDERED OPENING A FOUNDATION IN THE UAE?
Following a new Regulation, which came into effect from December 15, 2019, Ras Al Khaimah International Corporate Centre (known as “RAK ICC”) has just issued new rules and requirements regarding the setting up of a Foundation in the Emirate of Ras Al Khaimah.
WHAT IS A FOUNDATION AS PER RAK ICC REGULATION?
As per art. 4 of the New RAK ICC Regulation, a foundation is a corporate entity with a legal personality separate from that of its Founder(s) and any other person, which may have any objects, provided that they not contravene the said Regulation.
More in details, a foundation may be established for:
a. Objects which are exclusively charitable; or:
b. One or more of the following:
- i. Objects which are not exclusively charitable; or
ii. Objects to benefit persons by name, category or class
The only limit (as per art. 5.4) is that the foundations s shall not carry on any activity considered unlawful, contrary to any public policy of RAK ICC or UAE or prohibited under Regulation 40 of the RAK ICC Business Companies Regulation 2018 (the “RAK ICC Regulation”) ..
HOW TO FORM A FOUNDATION AT RAK ICC?
In accordance with the new RAK ICC Regulation, as per art. 9, the interested person(s) shall complete an application in the manner prescribed by the Registrar.
Mandatory requirements s of the application are:
a) The name of the proposed Foundation (which shall end with the word “Foundation” or “Fdn”);
b) The full name, nationality and address of each Founder;
c) The full name, nationality and address of each of the proposed members of the Council of the proposed Foundation;
d) The full name, nationality and address of the proposed Guardian(s) (if any) of the proposed Foundation;
e) The name and business address of the Registered Agent with RAK ICC;
f) The address of the proposed Foundation (which shall be in the UAE, any Emirate);
g) The Charter of the proposed Foundation;
h) The By-Laws of the proposed Foundation; and
i) Such other particulars as the Registrar may require.
The Charter of the Foundation has a crucial importance as it is the constitutional document of the Foundation.
The Charter shall include, among others, the object(s) and eventual specific purpose of the Foundation, a description of the initial property, the provisions for the establishment of the Council and the term for which the Foundation is established, if any, or the details of any contingent event which will trigger its dissolution.
Further, it will be necessary to include the name of the “Designee”, i. e. the natural or legal person to whom all property of the Foundation, for which provision has not otherwise been made, shall pass in the event of the termination thereof.
For ease of reference here below a possible RAK ICC Foundation Structure:
The Founder may reserve the following powers:
a) The power to amend, revoke or vary the terms of the Charter or By Laws, or both of them, in whole or in part;
b) The power to change the objects of the Foundation;
c) The power to direct or approve the investment activities of the Foundation;
d) The power to appoint and remove the Council or Guardian; and
e) The power to terminate the Foundation.
The Council shall comprise of at least two members and shall carry out the objects of the Foundation and administer its Property. It also has the obligation of keeping accurate Accounting records, comply with the Regulation, the Charter and the By-Laws and acting honestly, with diligence and good faith with a view of the best interests of the Foundation. The Guardian of the Foundation cannot be appointed as member of the Council.
The Guardian is a crucial subject within the Foundation entity. This figure may be a qualified recipient and may be a legal person, and must take reasonable steps to ensure that the Council of the Foundation carries out its functions. According to the new RAK ICC Regulation, the Guardian must have access to all information necessary for the exercise of his powers.
Further, other important subject of the Foundation is the Designee, a default recipient to whom all property of the Foundation, for which provision has not otherwise been made, shall pass in the event of the termination of the Foundation.
PROPERTY AND ADMINISTRATION OF THE FOUNDATION
For the purpose of the registration of a Foundation, the Charter must require an initial capital of US $100 or its equivalent in any other currency.
The Foundation grants high flexibility as the Property of the Foundation may comprise any property (both movable and unmovable).
Not only: a Foundation shall have a registered office in the UAE and, as per art. 31.2“shall carry on its activities in the UAE and elsewhere as permitted by the law”.
It is worth specifying that not any activity can be carry on.
For instance currently is not allowed to the Foundation opened within RAK ICC holding properties in the Emirate of Dubai.
A Registrar will be appointed in RAK ICC and shall administer the above mentioned Regulation and may give directions to the Foundation, requiring to produce documents or information still in pursuance of the Regulation.
MIGRATION, CONTINUATION AND DISSOLUTION OF A FOUNDATION
The flexibility accorded by the new RAK ICC Regulation is very clear and it is looking at the possibility of “migration” of a Foreign Foundation.
Upon registration with RAK ICC, the Foreign Foundation must cease to be registered in the jurisdiction in which it is currently registered and apply for a Certificate of Continuance.
Then again a Charter of Continuance may affect any amendment to the organisational instruments of the Foreign Foundation that applies for continuance.
Further, a Foundation may, upon unanimous resolution of the members of its Council and Registrar`s approval, apply to the appropriate official or public body of the other jurisdiction to be continued there as if it had been established under the laws of the other jurisdiction.
Not only: a Company incorporated under RAK ICC may apply to the Registrar for a Certificate of Continuance as a Foundation under the said Regulations.
Lastly, a Foundation may be dissolved where:
-The Foundation is established for a definite period and that period expires;
-The object(s) of the Foundation are fulfilled or become incapable of fulfillment, and the members of the Council, by unanimous decision, so resolve;
-Any provision of the Charter or By-laws of the Foundation so requires;
-The Court orders that the dissolvement of the Foundation (possible cause: insolvency, just cause, discordance of interests between RAK ICC and continuance for a Foundation on the Register);
-The Registrar strikes the Foundation off the Register (possible cause: contravention of the Regulation, prejudicial to the interest of RAK ICC for a Foundation to remain on the Register).