The RAK International Corporate Centre (RAK ICC) is a globally recognised corporate hub, providing innovative solutions for businesses and individuals. Among its many offerings, RAKICC Foundations stand out as a powerful vehicle for succession planning, asset protection, and corporate structuring.
This article explores everything you need to know about RAKICC Foundations, including the concept behind them, their many benefits and uses, their governing framework, steps to set them up, and how they are controlled and managed.
So, let’s get started.
What are RAKICC Foundations?
RAKICC Foundations are corporate entities with a separate legal personality from their founders. They are governed by the RAK ICC Foundations Regulations 2019 and designed to manage and protect assets while carrying out specific objectives. The foundations act as distinct legal structures, ensuring founders and beneficiaries do not bear the liabilities of the foundation.
A key feature of RAKICC Foundations is their ability to hold and administer assets in accordance with the founder’s wishes. They provide a flexible governance framework, enabling founders to define the foundation’s objectives and operational guidelines through a charter and by-laws. These documents are central to the foundation’s operation, outlining its purpose, governance structure, and rules for managing assets and beneficiaries.
RAKICC Foundations operate through a council, which oversees their administration and ensures compliance with regulatory requirements. The council acts as the decision-making body, ensuring that the foundation’s objectives are met and that it adheres to the established by-laws. Additionally, the ability to appoint guardians provides an added layer of oversight, safeguarding the foundation’s assets and ensuring its long-term sustainability.
Let’s now look at some of the key objectives of RAKICC Foundations:
- Succession planning and asset protection: RAKICC Foundations provide a robust mechanism for succession planning, ensuring assets are protected and passed on seamlessly to future generations. By centralising asset management, these foundations eliminate uncertainties and disputes often associated with inheritance processes, creating a structured and transparent framework for wealth transfer.
- Governance structure: They introduce a strong governance framework, enabling effective management and oversight of assets. This structure empowers founders to appoint trusted individuals or professional advisers as council members to oversee the foundation’s operations. The governance framework ensures the foundation’s objectives are pursued in a systematic and compliant manner, promoting long-term sustainability.
- Liability separation: By creating a distinct legal entity, RAKICC Foundations separate liability while maintaining control over the assets. This separation ensures that the foundation’s liabilities do not extend to the founder’s personal assets, providing an added layer of security and risk mitigation.
- Philanthropic endeavours: Foundations can also be established for charitable or non-charitable purposes, supporting philanthropic initiatives or specific objectives. Whether funding educational programmes, healthcare initiatives, or community development projects, RAKICC Foundations offer a flexible and regulated platform to achieve philanthropic goals.
- Tailored solutions for specific needs: RAKICC Foundations provide bespoke solutions for unique individual or business requirements. Founders can design foundations to cater to specific objectives, such as managing complex asset portfolios, maintaining confidentiality, or creating multi-generational trusts.
Benefits of setting up a RAKICC Foundation
RAKICC Foundations offer several advantages for individuals and businesses:
- International compliance: The RAK ICC registry adheres to international standards, ensuring transparency and global credibility. This compliance strengthens investor confidence and facilitates cross-border operations.
- Attractive tax regime: Foundations benefit from the UAE’s favourable tax environment, including the absence of corporate and income taxes. This makes them a highly appealing choice for global investors looking to maximise financial efficiency.
- Minimal administrative burden: With no requirement to file or audit accounts, RAKICC Foundations significantly reduce administrative overheads. This simplicity allows founders and council members to focus on strategic goals rather than bureaucratic processes.
- Cost-effective: Setting up and maintaining a RAKICC Foundation is relatively inexpensive compared to similar structures in other jurisdictions. The low costs make these foundations accessible to a wide range of individuals and businesses.
- Flexible: RAKICC Foundations provide unparalleled flexibility in defining governance structures, operational guidelines, and beneficiary classes. This adaptability ensures that the foundation meets the specific needs of its stakeholders.
What are the different uses of RAKICC Foundations?
RAKICC Foundations are versatile entities that can be used for various purposes:
- Asset holding: RAKICC Foundations are ideal for holding and managing assets, including real estate, shares, intellectual property, and other investments. This ensures centralised control and efficient management of diverse asset portfolios.
- Corporate structuring: These foundations can act as holding entities for shares in operating companies, including RAK ICC companies. By consolidating corporate ownership under a single entity, RAKICC Foundations streamline governance and reduce administrative complexity.
- Dividend distribution: Foundations simplify the distribution of dividends from operating companies to designated beneficiaries. This mechanism provides clarity and consistency in financial disbursements, aligning with the founder’s objectives.
- Family wealth management: RAKICC Foundations are widely used for managing family wealth. They provide a structured framework for protecting and growing assets, ensuring that they are preserved for the benefit of qualified recipients, such as family members or heirs. This is particularly beneficial in avoiding disputes and ensuring seamless succession planning.
- Philanthropy: Foundations are excellent vehicles for pursuing philanthropic goals. They can be established to support charitable activities, fund educational initiatives, or contribute to social causes. This enables families and businesses to leave a lasting impact on society while maintaining control over how the funds are utilised.
What is the governing framework of RAKICC Foundations?
RAKICC Foundations operate under the RAK ICC Foundations Regulations 2019. Their governing framework includes the following key components:
- Governing law: Common law jurisdictions, including the Abu Dhabi Global Market (ADGM) or Dubai International Financial Centre (DIFC).
- Language: English is the official language for all documentation and operations.
- Regulation and oversight: The Registrar maintains a Foundations Register with basic details, while other information remains private unless required by authorities.
Steps to set up a RAKICC Foundation
Before we look at the actual steps to set up a RAKICC Foundation, let’s first define our terms:
- The Founder refers to the individual or corporate entity that initially establishes and finances the RAKICC foundation. Ras Al Khaimah does not impose any limitations regarding the nationality or residency of the founder.
- Foundation Council Members are required for every RAKICC foundation, with a minimum of two members. These individuals are tasked with fulfilling the foundation’s objectives, ensuring compliance with its regulations, charter, and by-laws, and managing its internal accounting records. Council members can be individuals or corporate entities, with no restrictions on nationality or jurisdiction. The founder, family members, trusted associates, or professional advisors may serve in this capacity.
- The Guardian is an individual or corporate entity responsible for overseeing the activities of the council members to ensure they comply with the foundation’s regulations, by-laws, and RAKICC’s legal framework. It is highly recommended that a qualified legal professional or registered agent familiar with local laws be appointed to this position to facilitate smooth operations and regulatory compliance.
- The Designee is the individual or entity that will receive the foundation’s assets in the event of its termination.
- The Qualified Recipient is the individual or individuals entitled to receive a specified share or amount of the foundation’s assets, as outlined in the Charter and By-Laws. There are no limitations on the nationality, age, or relationship status of the qualified recipients, offering significant flexibility in inheritance and succession planning. This flexibility ensures the foundation’s distribution is not subject to the local inheritance laws of the founder’s country of residence or where the assets are located.
- The background to the process: The process to set up a RAKICC Foundation is straightforward and efficient, assuming the necessary documentation and properly drafted Charter and By-Laws are submitted by a qualified Registered Agent, such as our firm. Following registration, the local registry requires a certified copy of identification documents, a utility bill, a completed FATCA form, and professional and bank reference letters for all foundation assignees. This information will be stored confidentially at the registry and is not publicly accessible, but it must be updated annually during foundation renewal. While RAKICC foundations must maintain ongoing accounts, they are not required to submit them to regulatory authorities, and they are exempt from tax. Additionally, a RAKICC foundation must have a Registered Agent and a Registered Address in the UAE to maintain the foundation’s financial and statutory records in case of inspection.
Now we have defined our terms, let’s break down the steps:
- Determine the Founder: The founder can be an individual or a corporate entity.
- Appoint Council Members: A minimum of two council members must be appointed. These can include the founder, family members, or professional advisers.
- Register a UAE office: A registered office in the UAE is mandatory.
- Appoint a Registered Agent: The agent handles compliance and liaises with the Registrar
- Charter and by-laws: Draft and submit the foundation’s charter and by-laws, outlining its objectives and governance structure.
- Submit the application: Complete the application form, signed by the founder, and submit it to the Registrar along with the required documentation.
- Capital contribution: Contribute a minimum of USD 100, or its equivalent, as the foundation’s initial capital.
Control and Management of RAKICC Foundations
Effective control and management are central to RAKICC Foundations. Key elements include:
- Council Members and Guardians: The council, comprising at least two members, oversees the foundation’s operations. Guardians (if appointed) supervise the council to ensure compliance with by-laws.
- Governance through by-laws: Private by-laws govern the foundation’s operations, providing a tailored approach to management and control.
- Information and record-keeping: The Registrar maintains a record of essential details, while private records, such as financial accounts, remain confidential and are not publicly disclosed.
About Creative Zone
Creative Zone, one of the UAE’s largest and most trusted company formation specialists, brings extensive expertise to help you establish a RAKICC Foundation. With over a decade of experience and more than 12,000 successful registrations, Creative Zone offers a team highly skilled in navigating the specific requirements and regulations of a RAKICC Foundation setup, ensuring a smooth setup process with quick turnaround times. Our personalised assistance includes support across all stages, from structuring governance to compliance and strategic planning, making it seamless for businesses to establish and operate their holding companies within RAKICC.
