The demand for DIFC foundations continues to grow, driven by increasing needs for legacy planning, wealth preservation, and business continuity. According to the latest DIFC report, the number of registered foundations has surged by 51%, reaching a total of 671 by the end of 2024 - a significant milestone as the centre celebrates its 20th anniversary. Our DIFC office is proud to have contributed meaningfully to this success, being reponsible for more foundation formations in 2024 than any other firm in the market.
In this context of rapid adoption and global recognition, DIFC Foundations have emerged as a preferred vehicle for high-net-worth (HNW) and ultra-high-net-worth (UHNW) individuals seeking robust, flexible, and confidential structures. These foundations offer a unique blend of features drawn from both trusts and companies, making them especially attractive for international families navigating complex succession and governance challenges.
Unlike traditional trusts, which are legal arrangements without separate legal personality, DIFC Foundations are standalone legal entities. This distinction allows them to hold assets, enter contracts, and operate independently, while still providing the privacy, control, and asset protection typically associated with trusts. Their growing popularity reflects a broader shift in wealth structuring preferences, particularly among families with cross-border interests and multigenerational planning needs.
Understanding the Mechanics of a DIFC Foundation
Established under legislation introduced in 2018, DIFC Foundations are governed exclusively by DIFC law, offering a high degree of legal certainty and autonomy. A foundation is a legal entity with its own personality, capable of holding assets, entering into contracts, and suing or being sued in its own name.
Key Elements of Setting up a DIFC Foundation
- Founder: At least one founder is required to establish the foundation.
- Council: A minimum of two council members must be appointed to manage the foundation’s affairs.
- Registered Office: The foundation must maintain a registered presence in the DIFC, either directly or via a registered agent.
- Charter and By-Laws: These documents define the foundation’s purpose, governance, and operational rules. They can be tailored to meet specific family or business needs.
- Guardian: Required if the foundation has charitable or specified non-charitable objects. In all other cases, it is optional but strongly recommended, as it adds an additional layer of governance.
- Qualified Recipients: Beneficiaries can be named individuals or classes of persons, and this information remains confidential.
How DIFC Foundations differ from Trusts
While both trusts and foundations are used for wealth structuring, they differ significantly in form and function.
A trust is a legal arrangement where a settlor transfers assets to a trustee, who holds and manages them for the benefit of beneficiaries. It does not have a separate legal personality. In contrast, a DIFC foundation is a legal entity in its own right, similar to a company, but without shareholders. It is established by a founder and governed by a council, with optional beneficiaries.
In a trust, control lies with the trustee, who owes fiduciary duties to the beneficiaries. In a foundation, control is exercised by a council, and the founder can retain significant influence, including the ability to amend or revoke the foundation’s charter and by-laws.
Trusts are rooted in common law and may not be recognized in civil law jurisdictions. Foundations, being legal entities, are generally more familiar and acceptable in civil law countries, making them well-suited for international families.
While both structures are flexible, foundations provide more formal governance and can be tailored through their charter and by-laws. Trusts, by contrast, rely more heavily on the trust deed and the trustee’s discretion.
Unique Features of the DIFC Regime
The DIFC offers a globally respected, English-language common law framework with independent courts and a robust regulatory environment. Key advantages include:
- Legal Certainty: DIFC law is clear, modern, and internationally aligned.
- Confidentiality: Beneficiary details are not publicly disclosed.
- No Requirement for Audit: Foundations must prepare annual accounts, but audits are not mandatory.
- Flexible Governance: Founders can amend or revoke the foundation’s charter and by-laws, or even terminate the foundation during their lifetime.
- Global Recognition: The DIFC is a well-established financial hub with a reputation for transparency and compliance.
Ease of Setup and Administration
Establishing a DIFC Foundation is relatively straightforward, and the process typically involves:
- Drafting the Charter and By-Laws (standard templates are available but can be customized).
- Appointing the Council and Guardian (if required).
- Registering with the DIFC Registrar of Foundations.
- Maintaining a registered office or appointing a registered agent.
Ongoing administration is light-touch, with no audit requirement and minimal reporting obligations, making DIFC Foundations an efficient solution for families and businesses alike. Our team has extensive experience administering foundations for international families and is well versed in ensuring all regulatory requirements are met.
Why HNW and UHNW Families prefer DIFC Foundations
Families are increasingly seeking long-term, values-driven structures rather than short-term, product-based solutions. DIFC Foundations meet this demand by offering:
- Multigenerational Planning: Foundations can be structured to span generations, ensuring continuity and preserving family values.
- Governance and Control: Founders can define roles, responsibilities, and succession pathways clearly, reducing the risk of disputes.
- Cultural Compatibility: Foundations are more easily understood and accepted in civil law jurisdictions, making them ideal for international families.
- Shari’ah Considerations: While not Shari’ah-compliant by default, foundations can be structured to respect Islamic inheritance principles, offering flexibility for Muslim clients.
- Asset Protection: Foundations can shield assets from personal liabilities, political instability, or family disputes.
Conclusion
DIFC Foundations represent a powerful, flexible, and internationally respected tool for wealth structuring and succession planning. With their distinctive combination of legal certainty, confidentiality, and adaptability, they are rapidly becoming the preferred choice for HNW and UHNW individuals worldwide. As families grow more global and their needs more complex, the DIFC Foundation offers a modern solution, rooted in tradition, but designed for the future.
How Trident can assist
Trident is one of the largest independent global providers of corporate and fiduciary services and can assist with the establishment of DIFC Foundations, as well as provide corporate Guardian and Council Member services from our local office in DIFC. We offer corporate formation and administration services in more than 20 internationally recognised corporate domiciles, and trust establishment and professional trustee services in over 15 jurisdictions worldwide. For more information, please contact your usual Trident Trust representative or our office at dubai@tridenttrust.com.
For more information, you may also want to read our DIFC Foundation Key Facts or our Corporate Guardian Services Key Facts and Corporate Council Services Key Facts or reach out to Dave Lange, Managing Director of our DIFC office at dlange@tridenttrust.com.