A Foundation is a corporate body with a separate legal entity, usually established by the founder to hold assets with the objective of managing these assets for the benefit of a class of persons on a contractual basis. It is deemed a separate legal entity from its managers (i.e. its officers and its counsel) and is typically used for private wealth management and charitable purposes.
All aspects of Foundations are governed by the Foundations Act 2010. Islamic Foundations are provided for and are required to ensure it’s aims and operations comply with Shariah principles. A Foundation is essentially an investment holding vehicle and by definition conducts only investment holding activities.
A Registered office
A Foundation must be registered with Labuan FSA and have a registered office, where the administration and operations of a foundation are carried out in accordance with contractual principles.
The relationships within a foundation and contractual and the charter sets out the parameters within which the Labuan Foundation is to be managed and governed.
The key management of a Labuan Foundation consists of a council, an officer and a secretary.
The council is responsible for the general supervision of the foundation’s management, ensuring that the purpose for which the foundation was established is fulfilled in accordance with the charter, articles and the law.
In effect, the council is similar to the Board of Directors of a company. The duties of the officer are to ensure responsible and proper administration of the foundation. The secretary acts as the service provider to the foundation and performs all secretarial functions including filing and lodging of documents with Labuan FSA.
Assets placed in the Labuan Foundation are owned by the foundation and are to be applied according to identified purposes.
This may include individuals, corporate entities or charities and are those who have vested interest in the assets of the foundation. Unless specifically provided in the charter or articles, beneficiaries have no rights to the foundation’s assets and are not owed any fiduciary duties.
A Labuan Foundation can be dissolved upon the passing of a resolution by the officer on the basis that the foundation is established for a definite period and that period has expired; the purpose of the foundation is fulfilled or becomes incapable of fulfillment, or the charter requires such dissolution. After the dissolution, the ownership of the remaining assets will be transferred to the beneficiaries.
- An independent legal entity that can sign a contract or any other legal transaction.
- Protection of the creditor’s claims and claims or intentional fraud in the establishment of a foundation, disposal of property, and the founder’s act as a beneficiary.
- Founder Set charter and item governance.
- Prevent forced inheritance.
- Not subject to mandatory permanent constraints.
- Confidentiality and Anonymity, the Foundation’s information will not have any public records.
- Simple and direct taxation system, taxation of non-trade activities are not taxed.
- The beneficiaries of the Foundation are tax-free in Labuan. However, beneficiaries are required to meet their tax obligations in their respective tax residences.
- Not subject to exchange control, exempt from withholding tax, no capital gains tax
- All tools related to offshore business activities are free of stamp duty.