About Foundations

The objective of a Foundation is much the same as that of a trust. A Foundation is created for specific aims that can be charitable and/or non-charitable and can be to benefit people and/or to carry out a set purpose. A properly structured Foundation can offer tax and estate planning benefits, as well as a means to avoid forced heirship rules.

A Foundation is neither a company nor a trust, but has some similarities to both. It is an incorporated body that has separate legal personality and can hold assets, transact business and sue or be sued in its own name. Unlike a company, however, a Foundation has no shareholders.

A Foundation is formed by a founder, who provides the initial assets – known as the endowment. The assets are then held for the purposes set out in the Foundation’s document of establishment and are administered according to contractual rather than fiduciary principles.

The Foundation is governed by constitutional documents. These are a charter, which can be open to public inspection, and regulations, which are like a company’s articles of association and remain private. The founder can retain flexible powers over the assets in the Foundation if this is permitted in the constitution.

Whereas trust assets are held by a trustee, a Foundation has a council that administers the Foundation’s assets and carries out its aims in accordance with its constitution. It must act in good faith. It can have one or more members and is similar to a board of directors. A ‘guardian’ can be appointed to ensure that the council does what it is meant to do, similar to a trust protector.

Beneficiaries have contractual rights to enforce the operation of a Foundation in accordance with its constitution – rather than proprietorial rights to assets held by the Foundation. The people who potentially benefit under the Foundation do not normally have any rights.

Whether you are looking to establish a charitable Foundation in your family’s name, or you live in a civil law country and require a succession planning vehicle for private or family purposes, Sovereign can form Foundations in the following jurisdictions:

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