Foundations: A Channel Islands and Middle East comparison
19 October 2020
Foundations have become increasingly popular as vehicles for holding private wealth. For families who are less familiar with trusts, which require a separation of legal and beneficial interests in assets, establishing a foundation may be a good solution for succession planning and asset protection. A foundation is an incorporated entity, so it is akin to a company in that respect. However it does not have beneficial owners therefore, from a succession perspective, assets can be held in a foundation perpetually, thereby avoiding probate issues.
The Dubai International Financial Centre ("DIFC") and Abu Dhabi Global Market ("ADGM") have both introduced new foundations legislation recently while Guernsey and Jersey in the Channel Islands have had their foundations legislation for a number of years. This table compares the foundations legislation of these four jurisdictions.
When choosing where to establish a foundation, founders should consider the following key factors:
- reputation of the jurisdiction;
- regulatory framework;
- strength of the legislation;
- purpose of the foundation and proposed governance structure;
- type and location of assets to be held by the foundation;
- quality of service providers;
- quality of the judiciary; and
- body of case law.
In some cases it may be appropriate for a founder to establish foundations in several jurisdictions, as it might not be possible for one jurisdiction to satisfy all of the founder's objectives.