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:
The Bahamas Foundation is the Bahamas common law equivalent of the civil law foundation of certain other jurisdictions. Foundations are registered and are require to have an independent Foundation Council comprising at least three members.
The introduction of the Guernsey Foundations Law has provided clients with a foundation solution to use alongside, or instead of, a trust. It is a very useful structure for asset protection, wealth planning and dynastic planning as well as charitable and philanthropic purposes.
Once registered, a Guernsey foundation acquires its own separate legal status or personality that is separate to that of its founder, who provides the initial assets of the foundation (the endowment). These assets are held for the purposes set out in the foundation’s constitutive document, known as the ‘charter’. The charter must be filed with the Guernsey Registry.
The Isle of Man Foundations Act 2011 provides an alternative to more traditional Isle of Man trust structure, particularly for clients in non-common law jurisdictions. The uses of Isle of Man foundations include succession planning, charitable and philanthropic purposes, and asset holding vehicles (for example, commercial assets such as private jets) for non-charitable purposes. Sovereign can assist with all aspects of setting up and registering an Isle of Man Foundation and can act as a council member, an enforcer and a registered agent. Sovereign is also able to provide full administrative services enabling a Foundation to perform including the preparation of financial statements, accounts, the completion and filing of tax returns and the opening and maintaining of bank accounts.
Foundations have been recognised and regulated in Malta for almost 200 years through case law and legal practice, but specific legislation was enacted to provide a clearly defined legal framework in 2008. As a result Maltese Foundations are now regulated under the Second Schedule of the Civil Code (Chapter 16 of the Laws of Malta), which allows for the set-up of two types of Foundations: ‘Private’ and ‘Purpose’.
The objects of a Foundation may be charitable, non-charitable (Purpose) and may benefit one or more persons or a class of persons (Private). The objects must be reasonable, certain and possible and must not be unlawful, against public policy or immoral. A Foundation is prohibited from trading or carrying on commercial activities, but it may own commercial property or a shareholding in a profit making company.
A Foundation is an alternative vehicle available in Mauritius that fulfils similar functions to those of a trust but also has the administrative flexibility and advantages of a company. It is generally used for wealth management, succession planning, charitable activities or for commercial purposes alongside trusts, limited partnerships and corporate structures.
The advantage of both trusts and foundations is that they exist separately from the persons – settlor or founder – who have created them and are also separate from the persons who may have an entitlement to their assets – the beneficiaries. Both allow for the interests in the assets to be directed flexibly in respect of who may benefit and the circumstances and extent to which they may benefit.
A Foundation is a structure that is generally used in similar circumstances to traditional family trusts but is familiar to clients and intermediaries with a civil law background. Foundations, unlike trusts, are legal entities and must be registered in Gibraltar. The founder provides the initial assets – known as the endowment – which are then held for the purposes set out in its constitutive documents and administered according to contractual rather than fiduciary principles.
A Foundation is run by a council (or board) that is responsible for fulfilling its purpose. At least one councilor must be a Gibraltar resident company that is licensed as a professional trustee in Gibraltar. A foundation has no shareholders and, depending upon its purpose, may or not have beneficiaries. Beneficiaries have contractual rights to enforce the operation of the foundation in accordance with its constitutive document.