Understanding The Legal Framework Of ADGM Foundations: Key Considerations For Founders

While weighing options for entailing asset protection and wealth management in the UAE, Foundations and Trusts are prominent structures that individuals and organisations consider. While both these vehicles facilitate estate planning, they have distinct features. Moreover, establishing these mechanisms in attractive jurisdictions, such as the ADGM, offers distinct benefits.

What is an ADGM Foundation?

Often regarded  as a hybrid structure of a trust and a company, a legally incorporated Foundation is an independent legal entity, to which assets are transferred by the ‘Founder’, enabling it to hold and manage those assets independently in its own name.

 A Foundation is overseen by a  Foundation Council and managed in accordance with its Charter or the By-laws by which set out its establishment and define its specific objectives and purposes.  

ADGM Foundations serve as a strategic vehicle for the preservation and distribution of assets, in facilitating wealth management, succession planning and income protection. Therefore, unlike many offshore structures, incorporating a foundation in the ADGM jurisdiction can help individuals, families, or corporates harness these benefits as they offer robust, flexible, and compliant structures for long-term wealth preservation.

Key Elements of an ADGM Foundation

• Legal Framework: Foundations in the ADGM are created under the ADGM Foundation Regulations 2017 (the ‘Regulations’) and in consonance with the laws of Abu Dhabi Global Market, wherein the ADGM Registration Authority entails regulatory oversight.
• A Separate Entity: An ADGM Foundation is a body corporate with a separate legal personality, wherein the foundation has an existence similar to a person or a company. This feature enables a foundation to legally hold assets, and initiate or defend legal proceedings independently of the Founder or Council.
• Founder: A founder can either be an individual(s), (i.e, a natural person) or a legal person) that registers and incorporates a foundation with their assets. A founder entails the power to constitute the foundation’s charter and bylaws, and plays a key role in the appointment and removal of the council members.
• Charter: A significant document, the Charter to a foundation acts as the Memorandum of Establishment, also used for the registration process, if any. It envisages the foundation’s fundamental aspects, such as its name, purpose, governing framework, and duration. It is the charter that lays out the rules for managing the foundation.
• Council: The Council of a foundation serves as its governing body, responsible for ensuring the effective management and operation  of the foundation. They primarily carry out the objects of the Foundation, manage and administer its assets and perform acts as required by the Charter, by-laws and the ADGM’s regulatory framework. The Council shall consist of at least two Councillors.
• Beneficiaries: Beneficiaries are individuals for whose benefit the foundation was created.
• Designee: Designee is a legal person designated to become a beneficiary to the foundation only in the circumstances where a Foundation has no other Beneficiary.
• Guardian: Foundations can also appoint individuals as guardians to oversee the actions of the council. Such a person may be a beneficiary but shall not be the Founder, Council member or the sole Beneficiary. The appointment of a guardian becomes a compulsory mandate only upon the death of the last standing Founder.

A Practical Checklist and the Key Considerations for Founders

Foundation’s Name: The foundation shall have a valid name, complying with the ADGM Business and Company Names Rules and such proposed name shall end with the word ‘Foundation’.

Submission of the Charter: Every foundation shall have its own governing Charter signed by one or more of the Founders, envisaging the following information:

• the Foundation’s name
• the name and address of the Founder(s)
• the objects of the Foundation
• the specific purpose for which the Foundation has been established, if any
• a description of the Initial Assets which shall be transferred by a Founder
• provisions for the Foundation to be endowed with Supplementary Assets
• provisions for the establishment of the Council and making the By-laws
• the name of the Beneficiaries
• the Designee (only in circumstances where a Foundation has no other Beneficiary)
• the name and address of the Foundation’s Registered Agent, if any
• the address of the Foundation’s registered office in the ADGM
• the duration for which the Foundation is established
• description of events that may trigger the dissolution of the Foundation

A copy of the signed charter is required to be uploaded to complete the declaration for the foundation’s registration.

Significance of Foundation By-laws

The By-laws of a Foundation serve as its internal governance manual, complementing the provisions of the Charter. While the Charter establishes the foundation’s existence and primary objectives, the By-laws provide detailed guidance on the management and administration of its affairs. They typically address matters such as the composition, appointment, and powers of the Foundation Council, the roles of guardians or beneficiaries (if any), decision-making procedures, and rules governing meetings and record-keeping. The By-laws are generally private documents, offering flexibility and confidentiality to founders in defining how the foundation will operate on a day-to-day basis.

Establish a Registered office : A Foundation shall mandatorily have a registered office in the ADGM to which all communications and notices may be addressed. Foundation may also appoint a Company Service Provider (CSP) to act as its registered agent. Acting as an intermediary between the foundation and the ADGM regulator, the registered agent ensures that the foundation complies with the prevailing laws, including timely filings and maintaining up-to-date records.

Appoint an Authorised Signatory: The Foundation must appoint an individual as an authorised signatory to act as its permanent representative in ADGM and such individual must be a resident of the United Arab Emirates.

Payment of Fees: Registration shall be completed once the applicant completes the required payment of fees, after which the application form shall be submitted for review.  Once the application is approved, a certificate of registration will be issued to the applicant.

While establishing and registering a Foundation, the Founder shall also submit a signed declaration stating that all requirements relating to registration have been fulfilled and the submission of information comprising confidential disclosure.

Why set up an ADGM Foundation?

Unlike other succession planning and wealth management vehicles, a foundation continues even after the founder’s death, providing permanence in asset protection. Foundations are characterised by perpetual existence and certainty to the founder’s heirs . Proper structuring within the ADGM regulatory framework ensures effective asset protection and robust governance over the long term.

Beyond succession and wealth preservation, ADGM foundations are increasingly being used as sophisticated tools for holding family businesses, investments, real estate, and intellectual property. They provide flexibility to define clear governance rules, appoint councils or guardians for oversight, and separate ownership from control, thereby reducing personal liability risks. The robust legal infrastructure of ADGM, supported by common law principles and regulatory clarity, makes it an attractive jurisdiction for founders seeking a secure, transparent, and internationally recognised structure for long-term asset management and legacy planning.