Franchise In Dubai Business Guide Operations

Dubai describes itself as the fastest-growing metropolis on the planet and there is no disputing the fact that it is one of the world's most desirable business centers, with very low or zero taxation, attractive investment incentives, a stable economy, superb communications, well-educated workforce, state-of-art infrastructure, robust economic cluster of technology, media, finance and healthcare hubs. All these make Dubai a viable and attractive proposition for any business and providing investors with a unique and comprehensive value added platform.

Legal Structures for Business

The Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organisation, which can be established in the UAE. It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. The seven categories of business organisation defined by the Law are:

• General partnership company

• Partnership-en-commendam

• Joint venture company

• Public shareholding company

• Private shareholding company

• Limited liability company (LLC)

• Share partnership company

 Out of these seven activities LLCs are more commonly used by the foreign investors.

 Apart from these seven categories, FDIs are encouraged through Branches and representative offices of foreign companies and 100% foreign owned professional firms. 100% foreign ownership is permitted in the Free Trade Zones too.

 Limited Liability Company

 A Limited Liability Company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the Company's capital. Most Companies with expatriate partners have opted for this Limited Liability Company, due to the fact that this is the only option which will give maximum legal ownership i.e. 49% to the expatriates for a trading license.

 51% participation by UAE nationals is the general requirement for the Limited Liability Companies. Therefore the normal shareholding pattern for an LLC will be:

 Local sponsor - 51% and

 Foreign Shareholder (s) - 49%

 The minimum capital requirement is AED 300,000 (US$ 82,000), contributed in cash. While foreign equity in the Company may not exceed 49%, profit and loss distribution can be mutually agreed. Responsibility for the management of a Limited Liability Company can be vested in the foreign or national partners or a third party.

 The time required to form a company will be approximate 1-2 weeks from the date of receipt of all the documents. The procedure and cost break up will be given upon request.

 

Except for foreign companies operating under special licences within duty-free areas in the State, foreign companies shall not practice their main activities or establish offices or

Branches thereof in the State until permit to this effect be obtained from the Ministry after prior approval of the Concerned Authority had been obtained. The issued permit shall specify the activity which a company is authorized to carry out.

Such permit shall be issued if the company engages an agent to be a natural person holding the state nationality or a company fully owned by natural citizens, and whose entire partners be nationals too.

The Agent's responsibilities towards the company and third parties shall be limited to rendering necessary services to the company without his h\bearing any financial liabilities or obligations related to the company or its branches and offices inside and outside the State.

Foreign Companies licensed to operate within the state, under the preceding para, shall not start their business except after registration at the Ministry in the Foreign Companies

Commercial Register.

Entries in the said Commercial Register as well as control of same Foreign Companies' accounts & balance-sheets shall be regularized vide a ministerial decision to be issued in this respect.

 The Foreign Company's officer or branches shall be governed by the laws applied within the State.

ARTICLE (315)

- 90 -

A foreign company or its offices or branches referred to in the preceding Article shall not

commence their activities in the State except after entry in the Register of commerce.

They shall have a separate balance-sheet, a separate profit a-and loss account and shall appoint auditors.

Now what happen if you need to trade in UAE while you are a foreign entity?

 Say you are a foreign entity trying to relocate your Commercial Business in Dubai; only companies who are into professional activities can only get a license in Dubai. But if you are a commercial trade company targeting Local exposure like DHL, Coco Cola, channel, Adobe to say the few you need to Franchise.

 A franchise acts like a license for rapid expansion, a brand’s recognition and provides a consistent method to deliver your brand‘s promise. Franchises are based on a financial relationship between the franchisor and franchisee.

This guide summary looks at what is franchising, how it works, why franchising is growing as a way of doing business and what makes a good franchise. Aside from a basic understanding of franchising, the guide considers the benefits given by a franchise and provides basic guidance to allow businesses to benefit from innovation.

Franchising is not restricted just to fast food outlets and gardening contractors. There are now franchises for mentoring managers and sportspeople and franchises for internet shopping.

In the future the Dubai economy will more likely be filled by innovative and creative franchises which seek to capitalize on their market lead and intellectual property advantage. Franchises fill a market need and therefore, are the fastest growing way of doing business.

The 1980’s and 1990’s brought radical changes to the employment market and the way people work. The oil-shocks and stock market corrections, the opening up of the world economy, reduction in subsidies, government deregulation and downsizing thrust into the job market capable, energetic and resourceful people who work on their own.

Franchisees are people who have been employed in the past by someone else and a franchise opportunity is seen as a more relaxed way of making the transition from working for an employer to being self-employed. The risk factor of a proven business is also seen as a better option than breaking totally new ground. Thus, franchises are taken up by people prepared to invest in themselves, their personality and their skills who look for freedom and the rewards of hard work. Franchises are a personal investment, in the equity invested in the business, in the time and energy required to achieve success. Therefore, it is important to take a few commonsense precautions when selecting a franchise.

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Common Customs Law of the GCC States

Common Customs Law of the GCC States

The GCC was established in accordance with an agreement concluded in 1981 in Riyadh, Saudi Arabia between: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE. These countries declared that the GCC is established in view of the special relations between them, their similar political systems based on Islamic beliefs, joint destiny and common objectives.

The geographic proximity of these countries and their general adoption of free trade economic policies are factors that encouraged them to establish the GCC.

The objectives specified were the achievement and enhancement of coordination in the different areas between the member countries and their people and the adoption of similar systems in economic and financial matters, commerce and customs, education and culture, social affairs and health, information and tourism, legislation and administration, science, technical, industrial, mining, agriculture, the establishment of joint project in these areas and the encouragement of private sector activities for the general benefit and welfare of their people.

GCC Law

In 1982 the GCC countries concluded the joint Economic Agreement granting specific privileges and advantages to nationals of member countries to perform economic and trading activities in other member countries. This was followed by similar other agreements to encourage economic relations, trade and practice of professions in the member countries.

Common Customs Law of the GCC States

Unification of the Customs laws and procedures in the Customs Administration of the GCC states is one of the main objectives that the GCC States seek to achieve. The adoption of a common Customs law, which unifies Customs procedures in all GCC Customs administrations and enhances cooperation among member States in the Customs field, is one of the envisaged objectives.

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GCC Common Customs Law English.pdf

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Cayman Creates Incorporated Cell Companies

A framework for incorporated cell companies in the insurance sector was created in the Cayman Islands on 25 March, when the Legislative Assembly passed an amendment to allow the registration of portfolio insurance companies, or PICs, within segregated portfolio company insurers (SPCs).

PICs offer four main advantages over existing SPCs, which also are offered in the Cayman Islands, said the Minister for Financial Services, the Hon. Rolston Anglin, who presented the Insurance (Amendment) Bill 2013 to the Legislative Assembly.

1. A PIC is a separate legal entity, whereas a segregated portfolio of an SPC is not. This means the PIC may have greater ease in dealing with counterparties than a segregated portfolio of an SPC.

2. Unlike a segregated portfolio of an SPC, a PIC can contract with another cell of its controlling SPC, or with the SPC itself.

3. Because each PIC is a separate legal entity, there should be less risk of inadvertent comingling of assets.

4. A single PIC can be wound up without affecting its controlling SPC or other PICs; this is not possible within an SPC structure.



Minister Anglin said that PICs compete with incorporated cell companies (ICCs) that are offered in other captive domiciles, and with structures such as the Delaware Series LLC. The PIC model is also more efficient and cost-effective than introducing standalone ICC legislation. And since PICs were created through an amendment to the Insurance Law, 2010, Cayman has positioned this vehicle to operate within fundamental and well-understood principles of corporate law, and to meet international standards.

‘PICs do not involve the highly creative and untested jurisprudence involved in an ICC’, Minister Anglin said. ‘Furthermore, because they will take on the form of an exempted company they will be subject to the same legal requirements as any exempted company’. The Bill also creates new class of insurer known as Class B(iv).


Minister Anglin thanked the Cayman Islands Monetary Authority, which regulates the country’s financial services industry; and the joint public-private sector Financial Services Legislative Committee, for their work on drafting the amendment.Cayman Islands Government Press Release 26 March 2013, George Town, Grand Cayman.

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What are types of Business license entities in Dubai/UAE?

What are types of Business license entities in Dubai/UAE?

The principal forms of business structures are:

   ·         -Limited Liabilities Company.

   ·        - Professional License.

   ·         -Industrial License

The main key differences between LLC License & Professional License

The difference between the two forms of license is as following:-

a)  L.L.C.: Owners have limited personal liability for the debts and actions of the LLC. Other features of LLC are more like a partnership, providing management flexibility and the benefit of pass-through taxation. A Limited Liability Company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the Company's capital. The time required to form a company will be approximately 1-2 weeks from the date of receipt of all the documents. and procedures and the breakdown of the cost can be given upon request.

 b)  Professional License: A Professional License is a type of company formation structure in Dubai whereby the foreign investor or foreign owner has 100% ownership of the company. It is compulsory to appoint a local UAE agent not the sponsor for this type of company also, with the only exception being that the local UAE sponsor does not own any equity in the company. Professional firms are those which consist of professionals and practitioners and practice non-commercial activities. In setting up a professional firm, 100% foreign ownership, sole proprietorships or civil companies are permitted. The firms, which are registered as professional companies or firms may only practice specific activities and not extend that to any commercial business.

These activities include the following services:-

·        - Legal practice and consultancy

·         -Auditing, Organizing and keeping accounting records and books

·         -Civil engineering and architecture consultancies.

·         -Managerial and economic consultancies and studies

·         -Technical services

·        -Medical and curative services

·        - Educational services

No, limited liabilities companies are restricted to trading and industrial activities, and civil business companies are established for practicing professional activities.

What are the formalities for registration of the Business?

·         Initial approval from economic department

·         Trade name approval

·         Court Document (depend on company share capital)

·         Typing LLC contract (Arabic & English)

·         Ministry of economic fees

·         Sponsorship Fee

Do I need a local sponsor?

Yes, to operate any kind of business we need local sponsor for commercial license and Agent for Professional license in U.A.E.

How many partners can we have in the Company?

We can have minimum of 2 partners and maximum of 42 partners in the co. (U.A.E. Sponsor 51% + Expat 49%

Do I need an office for registration?

Yes, to operate any type of business and to get trade license, tenancy contract of the office is required

Why Sponsor have 51% Shares in the Company?

 Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organizations which can be established in the UAE. It categorises and defines the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. It further lays down provisions governing conversion, merger and dissolution of companies.

The seven categories of business organizations defined by the law are:

·         General Partnership Company

·         Joint venture Company

·         Public Shareholding Company

·         Private Shareholding Company

·         Limited liability Company

·         Share Partnership Company

Of the entities listed above, most foreign businesses choose the limited liability company

as foreigners can exert significant control over them and it requires a relatively small

amount of minimum capital to start up. Previously limited liability companies in Dubai

were required to have a minimum share capital of AED 300,000 and those in other

Emirates required a minimum of AED 150,000. However, following an amendment to

Article 227 of the Companies Law,8 shareholders now have the right to determine the

share capital of their limited liability companies, provided that such company will have

sufficient capital to achieve its objects.9 Such an entity may, however, be inappropriate to

achieve certain business goals. For example, businesses involving banking, insurance

or investment activity on behalf of third parties may only be conducted by a public joint

stock company, and limited liability companies may not offer their shares for public

subscription, which is a central feature of the public joint stock company.

The key limitation on entities incorporated under the Companies Law is that 51 percent

of the capital of a company must be owned by a UAE national.10 However, it is possible

for the constitutional documents of a limited liability company to contain the following

provisions designed to protect the interests of a foreign minority shareholder:

• the foreign shareholder may appoint all of the directors;

• the foreign shareholder may appoint the general manager;

• the foreign shareholder may veto major decisions of the company;

• the foreign shareholder may be entitled to all of the assets of the company on winding

   up; and

• the foreign shareholder may be entitled to more than 49 percent of the company’s profits.11

How much time does it take to establish a Company?

It takes approximately 5-7 working days depending on the availability of required documents from you.

You need to renew your trade license after every one year based on Annexure-2. Normally the license is issued for one year and the same has to be renewed every one year. But if you have a tenancy contact valid for to 2 year you can also get your license valid for 2 years.

What is the Benefit of registering the L.L.C. COMPANY from A Free Zone Company?

·        You are eligible to trade any were comparing to Free Zone you can only trade with the free zone its self, if you trade out of free zone you are subjected to 5 % of the custom duty

·        You can operate without the interference of the local ?

All business activities carried out in Dubai are tax free at corporate and personal level. Docs, required for formation of Co.

-Passport Copy of the investors.

-Min 3 names to be provided for registering Trade name.

-Tenancy contract of the Office which need to be attested from the Land department 

What are the benefits of business setting up in Dubai?

United Arab Emirates       0% 

Income Tax Rate

United Arab Emirates      0%
Corporate Tax Rate

United Arab Emirates       0%
Sales Tax / VAT Rate

No taxes of any sort and no tax department

No filing of accounts

No tax exchange agreements with ANY country

No public record of directors or shareholders

Highly flexible banking system geared to the requirements of high net worth international investors

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Offshore financial structures

Offshore financial structures

The bedrock of most offshore financial centre is the formation of offshore structures – typically:

·         offshore company

·         offshore partnership

·         offshore trust

·         private foundation

    

     Offshore structures are formed for a variety of reasons.

Legitimate reasons include:

Asset holding vehicles.  Many corporate conglomerates utilize a large number of holding companies, and often high-risk assets are parked in split companies to prevent legal risk accruing to the main group (i.e. where the assets relate to asbestos, see the English case of Adams v Cape Industries). Similarly, it is quite common for fleets of ships to be separately owned by separate offshore companies to try to circumvent laws relating to group liability under certain environmental legislation.

Asset protection.  Wealthy individuals who live in politically unstable countries utilize offshore companies to hold family wealth to avoid potential expropriation or exchange control limitations in the country in which they live. These structures work best when the wealth is foreign-earned, or has been expatriated over a significant period of time

Avoidance of forced heirship provisions. Many countries from France to Saudi Arabia (and the U.S. State of Louisiana) continue to employ forced heirship provisions in their succession law, limiting the testator's freedom to distribute assets upon death. By placing assets into an offshore company, and then having probate for the shares in the offshore determined by the laws of the offshore jurisdiction (usually in accordance with a specific will or codicil sworn for that purpose), the testator can sometimes avoid such strictures.

Collective Investment Vehicles. Mutual funds, Hedge funds, Unit Trusts and SICAVs are formed offshore to facilitate international distribution. By being domiciled in a low tax jurisdiction investors only have to consider the tax implications of their own domicile or residency.

Derivatives trading. Wealthy individuals often form offshore vehicles to engage in risky investments, such as derivatives trading, which are extremely difficult to engage in directly due to cumbersome financial markets regulation.

Exchange control trading vehicles. In countries where there is either exchange control or is perceived to be increased political risk with the repatriation of funds, major exporters often form trading vehicles in offshore companies so that the sales from exports can be "parked" in the offshore vehicle until needed for further investment. Trading vehicles of this nature have been criticised in a number of shareholder lawsuits which allege that by manipulating the ownership of the trading vehicle, majority shareholders can illegally avoid paying minority shareholders their fair share of trading profits.

Joint venture vehicles. Offshore jurisdictions are frequently used to set up joint venture companies, either as a compromise neutral jurisdiction (see for example, TNK-BP) and/or because the jurisdiction where the joint venture has its commercial centre has insufficiently sophisticated corporate and commercial laws.

Stock market listing vehicles. Successful companies who are unable to obtain a stock market listing because of the underdevelopment of the corporate law in their home country often transfer shares into an offshore vehicle, and list the offshore vehicle. Offshore vehicles are listed on the NASDAQ, Alternative Investment Market, the Hong Kong Stock Exchange and the Singapore Stock Exchange. It is estimated that over 90% of the companies listed on Hong Kong's Hang Seng are incorporated in offshore jurisdictions. 35% of companies listed on AIM during 2006 were from OFCs.

Trade finance vehicles. Large corporate groups often form offshore companies, sometimes under an orphan structure to enable them to obtain financing (either from bond issues or by way of a syndicated loan) and to treat the financing as "off-balance-sheet" under applicable accounting procedures. In relation to bond issues, offshore special purpose vehicles are often used in relation to asset-backed securities transactions (particularly securitisations).

Illegitimate purposes include:

Creditor avoidance. Highly indebted persons may seek to escape the effect of bankruptcy by transferring cash and assets into an anonymous offshore company.

Market manipulation. The Enron and Parmalat scandals demonstrated how companies could form offshore vehicles to manipulate financial results.

Tax evasion. Although numbers are difficult to ascertain, it is widely believed that individuals in wealthy nations unlawfully evade tax through not declaring gains made by offshore vehicles that they own. Multinationals including GlaxoSmithKline and Sony have been accused of transferring profits from the higher-tax jurisdictions in which they are made to zero-tax offshore centres

 

Ship and aircraft registrations

Many offshore financial centres also provide registrations for ships (notably Bahamas and Panama) or aircraft (notably Aruba, Bermuda and the Cayman Islands).

Aircraft are frequently registered in offshore jurisdictions where they are leased or purchased by carriers in emerging markets but financed by banks in major onshore financial centres. The financing institution is reluctant to allow the aircraft to be registered in the carrier's home country (either because it does not have sufficient regulation governing civil aviation, or because it feels the courts in that country would not cooperate fully if it needed to enforce any security interest over the aircraft), and the carrier is reluctant to have the aircraft registered in the financier's jurisdiction (often the United States or the United Kingdom) either because of personal or political reasons, or because they fear spurious lawsuits and potential arrest of the aircraft.

E.g., in 2003, state carrier Pakistan International Airlines re-registered its entire fleet in the Cayman Islands as part of the financing of its purchase of eight new Boeing 777s; the U.S. bank refused to allow the aircraft to remain registered in Pakistan, and the airline refused to have the aircraft registered in the U.S.

Insurance,A number of offshore jurisdictions promote the incorporation of captive insurance companies within the jurisdiction to allow the sponsor to manage risk. In more sophisticated offshore insurance markets, onshore insurance companies can also establish an offshore subsidiary in the jurisdiction to reinsure certain risks underwritten by the onshore parent, and thereby reduce overall reserve and capital requirements. Onshore reinsurance companies may also incorporate an offshore subsidiary to reinsure catastrophic risks.

Bermuda's insurance and re-insurance market is now the third largest in the world.[46] There are also signs the primary insurance market is becoming increasingly focused upon Bermuda; in September 2006 Hiscox PLC, the FTSE 250 insurance company announced that it planned to relocate to Bermuda citing tax and regulatory advantages.

Collective investment vehicles

Many offshore jurisdictions specialise in the formation of collective investment schemes, or mutual funds. The market leader is the Cayman Islands, estimated to house about 75% of world’s hedge funds and nearly half the industry's estimated $1.1 trillion of assets under management,  followed by Bermuda, although a market shift has meant that a number of hedge funds are now formed in the British Virgin Islands. As at year end 2005, there were 7,106 hedge funds registered in the Cayman Islands, 2,372 hedge funds in the British Virgin Islands and 1,182 in Bermuda. These figures do not include other collective investment vehicles. See also the recent survey by Deloitte in Hedgeweek.

But the greater appeal of offshore jurisdictions to form mutual funds is usually in the regulatory considerations. Offshore jurisdictions tend to impose few if any restrictions on what investment strategy the mutual funds may pursue and no limitations on the amount of leverage which mutual funds can employ in their investment strategy. Many offshore jurisdictions (Bermuda, British Virgin Islands, Cayman Islands and Guernsey) allow promoters to incorporate segregated portfolio companies (or SPCs) for use as mutual funds; the unavailability of a similar corporate vehicle onshore has also helped fuel the growth of offshore incorporated funds.[citation needed]

Banking Traditionally, a number of offshore jurisdictions offered banking licences to institutions with relatively little scrutiny. International initiatives have largely stopped this practice, and very few offshore financial centres will now issue licences to offshore banks that do not already hold a banking licence in a major onshore jurisdiction. The most recent reliable figures for offshore banks indicates that the Cayman Islands has 285 licensed banks, the Bahamas has 301. By contrast, the British Virgin Islands only has seven licensed offshore banks.

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What Foundation Vs Trust legal use and Purposes Case Study #1

Case Study #1 

How Tragedy and Human Weakness Can Endanger Your Life's Work

Richard was a fairly wealthy man you can. He had three beautiful adult children, all of whom were married to great partners. He himself had been married to the same women for 35 years. At the age of 57, Jacque, his still young and beautiful wife, had a car accident that disfigured her face so badly that even plastic surgery did very little to restore her once beautiful countenance.

Richard and Jacque were accustomed to a life that included socializing with what I call "the beautiful people." Some of Jacque's friends were starlets and quite notable individuals. With the disfigurement resulting from the accident, she never seemed to feel comfortable in the same circles. Jacque went into a deep depression over this and her Dr. put her on prescription medications for anxiety.

Unfortunately, her withdrawal from the social circles left her home with her feelings and she started turning to alcohol and eventually cocaine as an escape from all her unfamiliar life. She started herself in a cycle of being up and down, depending on how much of what substance she had in her. The only time she ventured out of the home was to make a trip to the drive-thru liquor store or to see her "dealer." This was devastating to Richard. He couldn't comfort her and she was spinning out of control.

 Soon came another car accident - Jacque was inebriated, at fault, and she caused injuries to the other parties. With a DUI charge under her belt, Richard, fearing that the worst was yet to come, set up an asset protection plan making their three children equal beneficiaries.

About eight months passed, Jacque had sought help for her substance abuse and was attending depression class , AA meetings and had been sober for almost six months. Even though her license had been suspended due to accident number two, she still drove to her meetings occasionally, whenever Richard or a friend couldn't drive her.

She still struggled with depression but was making what "seemed" like progress. Until one night on her way to a meeting, she decided instead to stop and get a single wine cooler. Tragically, this led to a four-hour relapse and ended in a third automobile accident and the bills soared, as well as the legal fees for her defense and the lawsuits from the victims and their insurance companies.

This story doesn't get any better.

Three months later, Richard left town on a business trip and Jacque, so deep in her guilt, shame, depression and loneliness, spent the next four days on a cocaine binge which ended in a cardiac arrest. Richard returned from his trip to find his once lovely wife sprawled out on the floor, drugs and paraphernalia scattered about their home.

Suspecting foul play, Richard immediately called the paramedics…but it was far too late. Once they pronounced Jacque dead, Richard called his oldest son to break the news. The next five hours or so must have been very difficult with the police swarming his home gathering evidence.Sixteen hours later, when the first of his three children arrived at the estate, Richard was also dead…his son found him in his study…with an empty bottle of his wife's prescription Klonopin, a half bottle of Kelt Petra "Tour du Monde" on the table in front of him and in his lap…a picture of him and Jacque on their 25th wedding anniversary trip.This story made the local news and the media had a heyday with it… but none of the judgment creditors were able to access any of Richard's wealth, nobody except his children, because he had set up an ironclad asset protection plan.

BOTTOM LINE:

This is a story that is so tragic that it's hard to say there were any winners. This story does show the frailty and unpredictability of life. The ONLY positive thing here is that the children weren't further tortured by a long and arduous probate period or watching their parents estate be gobbled up by greedy litigants. The painful loss of both parents was excruciating enough for them.

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What Foundation Vs Trust legal use and Purposes

Trusts are a legal concept developed in common law jurisdictions, the laws and principles of which are found in statute and judicial decisions.

Foundations are a civil law concept, primarily governed by the statutory laws of the relevant jurisdiction.

LEGAL STRUCTURE E & OWNERSHIP

A Trust is created when a person (the settlor) transfers property to another person (the Trustee) to deal with that property for the benefit of a third party (the beneficiary). The trust is not a legal entity and therefore does not have legal personality. It is a private arrangement between the trustees, settlor and beneficiary ies. There is no requirement to register a trust.

There is a split in legal ownership of the trust assets, whereby the trustees legally own and hold the assets in their own name but for the sole benefit of the individuals or institutions designated as beneficiaries in the trust deed.

The trust is governed by the terms of the trust deed. A non-binding letter of wishes might also be issued by the settlor to guide the trustees.

The beneficiaries are defined in the trust deed. They may be natural persons, companies or charities. The beneficiaries may include the settlor.

A trust may be revocable or irrevocable. The' duration of a trust is sometimes limited by the governing law, although some trust jurisdictions have abolished their rules relating to maximum duration (perpetuity). Charitable and purpose trusts may be of unlimited duration.

A foundation is a legal entity with legal personality. For a foundation to exist, the [name/ details] of the foundation as well as its statutes have to be registered with the Foundation register in the jurisdiction in which the foundation is incorporated.

Assets donated by the founder to the foundation arc owned by the foundation in its own name. These assets may be held directly by the foundation or consist of shares in an underlying company.  Assets are then endowed to the foundation which is governed by regulations issued according to the desires of the economic founder

Generally speaking, beneficiaries are designated by the founder in a separate document or by-law. They may be natural persons, companies or charities. The founder may also be a beneficiary.

Where there is a civil law mandate, the foundation ran be dissolve and liquidated on the instructions of the launder. A foundation may be set up for an unlimited period of time.

CONTROL & ADMINISTRATION

The control and administration of the trust assets is exercised by one or more trustees in accordance with the terms of the trust deed and the Jaw of the trust. Trustees may be individuals or corporations

In founder may the power of control and administration belongs  to the foundation board, which is appointed by the founder. Such board can comprise individuals or corporate members.

Once the trust has been settled, the settlor no longer has any rights in respect of the trust. Unless these are reserved expressly by the trust instrument. The settlor may express his wishes in a non-binding way as to how the discretionary powers of the trustees are  to be exercised.

The founder may maintain control over the foundation through a written mandate. The founder frequently acts as principal and instructs the foundation board on all relevant matters.

The foundation board is required to act in the interests of the founder and the beneficiaries.

The trustee, as the legal owner of the assets, has a fiduciary duty to act in the best interests of the beneficiaries. A protector or other advisor may be designated in the trust deed, which will also designate such person’s powers and/ or duties. Any person may be granted a proxy by the foundation.

A Foundation may have a protector or advisory board with similar powers to those used in a trust context.

ASSETS, MANAGEMENT & DISTRIBUTION

Bankable and non-bankable assets can be held by a trust.  There is no minimum amount as long as there is an asset of some value. Bankable and non-bankable assets can be held by a foundation.  The minimum amount usually required is CHF 30,000. The trustee is legally responsible for the management of the assets and must art in the best interests of the beneficiaries.

The trustee is liable to the beneficiaries if it fails to carry out its duties. The- extent of the trustee's liability, if in default, varies between jurisdictions and may be limited to a certain extent by the terms of the trust deed. The usual standard is liability for gross negligence or willful default.

Management is usually restricted as to who may act as a member of the foundation board. Directors of the Foundation do not owe direct fiduciary duty to the beneficiaries and must act in accordance with the by-laws.  The trustee ran carry out any commercial activities and makes any investments as long as they arc in the best interests of the beneficiaries. Distributions made by the trustees must comply with the conditions set by the trust deed and take into account d1e wishes of the settlor.

Distributions are typically made in accordance with the instructions of the founder and regulated through the by-laws.

 PURPOSES

Trusts are mainly used as a vehicle to hold business and personal assets for estate and tax planning purposes as well asset protection (e.g. in case of divorce, incapacity, political risk etc.). Trusts may also be created lor charitable purposes. Forever,  a trust. May be used to facilitate commercial transactions such as purchases of real estate, opening and administering bank accounts, investing in stock markets and mutual funds,  and the entering into of international agreements.

Foundations are also created for succession purposes but less frequently used for tax planning. A private foundation is not suitable for the pursuit of commercial purposes. A foundation can only be run in a commercial manner if this facilitates the attainment of its non-economic purpose or when required for the preservation or administration of assets. Foundations may also be used to manage and administer the distribution of money and family properties, for philanthropic or ecclesiastical purposes, or to be the holding entity that operates as the corporation's owner.

CONFIDENTIALITY & BENEFICIARIES' RIGHTS TO INFORMATION

Trusts are private arrangements between the settlor and the- trustee and trustees are subject to a duty of confidentiality. The beneficiaries are only known internally and are not registered anywhere. The assets are often held in the name of an underlying company which is owned by the trustees. The beneficiaries usually have a right to information relating to the trust's documents and the accounts. This may be more restrictive in some jurisdictions and may be restricted to some extent by the trust deed.

Total anonymity is guaranteed through a foundation. Although the statutes are registered, the regulations and therefore the beneficiaries are only known internally. The beneficiaries' rights to information can be limited or in special cases excluded.

FLEXIBILITY & PORTABILITY

Trusts can easily be transferred between common lawful jurisdiction as the governing law of the trust can usually be changed felon one jurisdiction to another without room much difficulty. Moreover, changing the place of management  is not normally a problem.

Foundations are generally tied to one civil law jurisdiction and therefore, although the possibility of transferring a foundation to another jurisdiction exists, it is more restrictive than with trusts. In addition, the articles and by-laws may limit this flexibility.

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