Creative Zone held a recent webinar about foundations in the UAE, diving into its legal and practical considerations for entrepreneurs and high net-worth individuals interested in wealth planning.
The virtual event garnered over 300 guests from the UAE, Singapore, Japan, the United Kingdom, South Africa, Central America, and other nations. It was moderated by Creative Zone CEO Lorenzo Jooris, and featured RAK ICC’s Alan Bougourd and Hourani & Partners’ Sunita Singh-Dalal as panelists.
“There’s a lot that entrepreneurs must keep up with when running business ventures, so constant education is another space where we provide value as long-term strategic partners,” says Jooris. “Particularly for procedures as integral as succession planning among families, guidance must be given as early as possible so that all parties have time to discuss legacies and how to uphold these,” he adds.
Adaptability in preparing for the future
“There has been an uptick in clients looking for succession planning,” said Singh-Dalal during the webinar. “Those without planning are more vulnerable to disruption – especially with unforeseen events like the pandemic,” she added. The experts emphasized the significance of wealth planning and asset protection in the midst of change, to prepare for circumstances outside one’s control. That’s where foundations come in as entities legally bound by a charter. Asset ownership & liabilities are transferred from individuals to a legal entity, protecting both those who initially owned the assets and anything else they own outside the foundation.
This makes foundations safer than trusts, which is what most are familiar with when wealth planning. Although trusts have their use cases, for asset consolidation and protection a foundation is ideal.
Another noted benefit was the foundation’s flexibility to meet an individual’s needs. At least for RAK ICC foundations, entrepreneurs can own assets inside and outside the UAE – so long as the assets’ home country also permits such. Multiple families may also come together to form a single foundation. Doing this requires counseling to set a common objective and navigate a more complex formation process, but it is an option.
Even digital asset holding is permissible. “The whole digital environment is fascinating, and there are no restrictions,” stated Bougourd. “You wouldn’t use a foundation to be a trading body for crypto assets…but I’m sure many of our foundations will have digital assets as part of their portfolio.”
The necessity of expert advice
Of course, there are some things to note when setting up a foundation. One is with regards to charity. Foundations in RAK ICC are generally structured as family entities with a philanthropic element, but not necessarily with a specific purpose. This is due to charity laws within and outside the UAE, as charities are high-risk entities from a regulatory point of view. Should charitable efforts be necessary, Singh-Dalal says its best to earmark funds that only come from the founding family.
There were also questions surrounding the implementation of corporate taxes on foundations. While further information is necessary to gauge its full impact, Bougourd noted a proactiveness in acting accordingly upon receiving more guidelines.
These matters led the panelists to suggest close coordination between entrepreneurs and experts with in-depth knowledge of UAE regulation. They also took several questions from the very engaged audience, who sent both general queries and personal inquiries on their own experiences.
“Don’t think of a foundation as an off-the-shelf product that you’re just going to pick up and pay a few dollars for. It’s much more than that. It needs a lot of consideration, research, and advice,” urged Bougourd. Meanwhile, Singh-Dalal informed attendees that “A trusted advisor is one who is always in touch with the client, and sometimes is able to pre-empt and give proactive advice before the clients even think of the questions themselves.”
With a business decision like opening a foundation, which will have effects far beyond the lifetime of its original founders, working with experts can reduce the uncertainty and back-and-forth throughout the process. Creative Zone provides bespoke solutions depending on an individual and their family’s needs for wealth and succession planning. For more information on Creative Zone and their partners, visit creativezone.ae, rakicc.com and houranipartners.com.
Head to the link to watch the full webinar episode. https://youtu.be/74ddxKJWLiw