Family Businesses in the UAE often face challenges due to their complex structures and the involvement of multiple family members. Succession planning becomes crucial to ensure the smooth transfer of ownership and management from one generation to the next. To effectively address these challenges, it is better to have a corporate structure in place identifying the potential beneficiaries, objectives and clear governance structure.

One of the popular structures for effective succession planning is establishing a Family Foundation in the UAE. A Family Foundation is a form of legal entity created to protect and manage their assets for philanthropic endeavors or investments. It is similar to a Company as it has its own legal personality. A Family Foundation is usually set up to protect the will of the Founder. When established by the Founder, their assets are transferred and the legal title transferred to the Foundation. Foundations can own and hold assets in its own name, which creates a layer of separation between the Founder and its assets. Foundations are governed by its charter and bylaws. One simple way for the family to hand over management but retain control of their business is through the use of a foundation.

In the UAE, Foundations can be established in the following jurisdictions:

1. Abu Dhabi Global Market (ADGM), under the governance of Foundation Regulations 2017
2. Dubai International Financial Centre (DIFC), under the governance of Foundations Law No.

3 of 2018

3. Ras al Khaimah International Corporate Centre (RAK ICC), under the governance of RAK ICC Foundations Regulations 2019

A Family Foundation may comprise of the following:

• Founder
• Council of Member
• Guardian
• Registered Agent
• Beneficiaries

Essential benefits of the Foundation

1. Independent legal personality: unlike a typical trust, a Foundation is able to hold the assets of the Founder in the name of the Foundation offering improved asset protection measures. As the assets no longer belong to the Founder, it offers a layer of protection between the Founder and their assets against creditors, governments or other family members.
2. Privacy: information about the beneficiaries is kept confidential to allow for more discreet management of the Founder's family money and easier inheritance planning.
3. Family management: foundations provide for an effective corporate management system similar to a company or an office of one family. It allows to professionally manage wealth in the interests of the Founder and their family.
4. Perpetual existence: a Foundation is a perpetual concept, allowing arrangements to continue and therefore providing certainty after the Founder’s death.
5. Efficient succession planning: Foundations allow the Founder to state their wishes and to ensure that the assets (and/or benefits from them) will be distributed in accordance with their wishes.
6. Guardian supervision: the Guardian supervises the Foundation Council and ensures that it acts in accordance with the Foundation’s charter and bylaws, which provides an additional layer of protection to the Founder’s assets and its management.

How MBG can assist

MBG has a team of experts that can advise on the restructuring of assets of the Founder to meet their wishes and objectives. Establishment of a Family Foundation in the UAE can be undertaken with careful planning, proper documentation and compliance with legal requirements. Our experts ensure that this process is smooth and successful. To get insights and guidance on effective succession planning, please get in touch.