Trust And Foundation Law In Dubai

The Ruler of Dubai, Vice President and Prime Minister of the UAE His Highness Sheikh Mohammed bin Rashid Al Maktoum enacted on the 21 March 2018, the Trust Law and Foundations Law, superseding the Trust Law of 2005.

The new laws (Foundations Law No. 3 of 2018 and Trust Law No. 4 of 2018) have been issued with the aim of providing an enhanced framework for succession planning and wealth structuring platforms in the region.

The new laws forms part of the DIFC’s implementation plan relating to the 56 recommendations made by the DIFC’s Wealth Management Working Group to the Governor’s Strategy & Policy Committee and approved by the DIFC Higher Board in December 2016.

The new trust law builds on the existing legislation through enhancements to promote better trust administration, provide greater certainty and flexibility for settlors, trustees and beneficiaries and contains several technical amendments.

The new foundations law introduces a “completely new regime” alongside the existing DIFC companies’ law and trust law to promote, according to the announcement, better creditor protection, succession planning and private wealth planning for family businesses. It should also provide greater certainty and flexibility to private wealth management and charitable organizations.

A foundation is an independent legal entity with own legal personality, separate from the founder.

The foundation can enter into contracts and can hold assets in its own name. The foundation does not have shareholders or members.

Foundations have some characteristics of companies and some of trusts, due to the fact that they find their origins in civil-law principles.

The constitutional documents are the charter, a public document which outlines the object(s) and duration of the foundation and the by-laws, which describes how the foundation will be governed and operated.

The DIFC foundation is managed by the foundation council and may be supervised by a guardian. A DIFC foundation may be set up purely for charitable purposes but may not carry out any commercial activities as far as they are not incidental or ancillary to its objects.

Trusts are vehicles for the asset protection, succession planning and wealth preservation. In order to to settle assets into a trust, their property has to be transferred to another person as trustee, either during lifetime or through a will. The trustees will hold the legal ownership of the trust property, while beneficial ownership remains with the beneficiaries. The trust will be governed by the Trust Deed, which outlines the terms of the trust, duration, beneficiaries and the powers of the trustees, etc.

The DIFC free zone is currently the only location in Dubai where a trust or a foundation can be established. Elsewhere in the region, trusts and foundations can be established in Abu Dhabi Global Market (ADGM) or in Bahrain.


Chiara Stanzione, Legal Counsel Fidinam DMCC

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