Home crea8iveart January 29, 2021

UAE Foundations, Trusts, and Special Purpose Vehicles (SPV)

Foundations, Trusts and SPVs can play a substantial role in wealth management, asset protection and succession planning. Contact our seasoned experts for a free consultation to learn more about how each can benefit you.

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FOUNDATIONS

Separate entities from the person who establishes them.

TRUSTS

Protect your wealth and extend your legacy for future generations.

SPECIAL PURPOSE VEHICLE

Hold shares of companies, real estate property, intellectual property rights, and raise capital.

UAE Foundation

Foundations

Foundations are often compared to companies as they are separate entities from the person who establishes them. Like trusts, assets within them are ring-fenced from bankruptcies, creditors, and other external claims. Foundations in the United Arab Emirates can open bank accounts and participate in commercial activities.

Assets held by a Foundation are held for its beneficiaries. The flexibility of a Foundation includes the option to have additional beneficiaries over time which works well for succession planning.

  • Abu Dhabi Global Market (ADGM) – ADGM was the first jurisdiction in the UAE to offer Foundations. The entire registration process is entirely digital. They also allow migration from other jurisdictions into ADGM.
    Read more about ADGM Foundation.
  • Dubai International Financial Centre (DIFC) – A popular jurisdiction where companies can be converted into a Foundation. They can also own local real estate or support charitable initiatives.
    Read more about DIFC Foundation.
  • RAK International Corporate Centre (RAK ICC) – A jurisdiction that takes the privacy and anonymity of stakeholders very seriously. The authority keeps information confidential and does not have a public register. Foundations don’t require any annual fillings or audits.
    Read more about RAK Foundatoin.

All three jurisdictions that offer a Foundation in the UAE require

  • a registered office within the United Arab Emirates or within their jurisdiction
  • a founder (can be an individual or a legal entity)
  • a minimum of two council members
  • a guardian if the foundation has charitable purposes

Trusts

Trusts are intended to help protect your wealth and extend your legacy to future generations.

Trust consists of three elements:

  1. a settlor who places resources into it
  2. a trustee who administers the resources
  3. a beneficiary who can benefit from the resources placed into the trust.

Trusts in the UAE are not subject to local income tax.

A UAE Trust can only exist once registered with the UAE Ministry of Finance in an official registry. The settlor needs to prepare a Deed of Trust and transfer assets to the trustee to benefit the beneficiary.

The following are the necessary conditions that need to be fulfilled before establishing a Trust:

  • The same person cannot be the sole trustee and beneficiary.
  • The intended trust should have an identified beneficiary unless it is a charitable trust or discretionary trust
  • The property has been awarded to the trustee, who has defined duties, and such property is held for the beneficial interest of the beneficiaries
UAE Trust
SPV Company Formation in the UAE

Special Purpose Vehicles (SPV)

An SPV is a legal entity designed to fulfill a short-term business objective or carry out a specific business action. SPVs are particularly useful as the parent company’s assets cannot be targeted due to bankruptcy and other claims against the SPV.

You can use an SPV to hold assets such as shares of companies, real estate property, intellectual property rights, and raise capital.

ADGM provides two legal setups for SPVs; a private company limited by shares and a restricted scope company.

  • Private Company: Private limited companies are usually opted by the investors who intend to have a holding company or take up operational activities.
  • Restricted Scope Company: A restricted scope company can only be founded as a subsidiary of a public company or as a family office.

The DIFC offers an attractive venue for establishing one’s SPCs as they are not required to have their accounts filed or audited yearly. In addition, there is no requirement for shareholders to be based physically within the DIFC free zone. DIFC Corporate Services Providers (CSP) can act as SPC’s majority directors and company secretaries.

An SVP incorporation process consists of just four simple steps:

  • Initial processing: submit KYC documents and incorporation documents and sign a consent letter
  • Submit your application. This can be done electronically or via a company formation agent.
  • Application review and clearance.
  • Completion and license issuance.

Read more about UAE SPV.

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