The Candid Take
- UAE foundations are an excellent structure — but not a panacea
- Most commonly cited reasons (separate legal status, orphan structure) can be achieved by trusts + companies too
- In common law countries (US, India, UK), trusts — not foundations — are recognised
- India and US both recognise foreign trusts; similar exemptions are not granted to foreign companies/foundations
- A country-specific structure often works better than a single centralised foundation
Why Foundations? A Critical Look
Foundations have separate legal status — but so do companies. Foundations are orphan structures with no stakeholders — but trusts have the same feature. Foundations combine features of a trust and a company — but a trust holding a company can achieve similar outcomes. So what are the real shortcomings?
The Recognition Problem
In most common law countries, trusts — not foundations — are recognised. The US, India, and UK all recognise trusts. Both India and the US recognise even foreign trusts. Transfer to a family trust in India is exempt (subject to conditions). A similar exemption can be claimed in the US for revocable (grantor) trusts. Such exemptions are not granted to foreign companies or foundations. Due to lack of recognition, foundations are likely to be treated as foreign companies in these jurisdictions.
The Way Forward
It’s better to follow a country-specific structure rather than a central structure: UAE foundations (DIFC/ADGM) are ideal for UAE assets and assets in most EU nations, while Indian/US/overseas trusts can be used for Indian/US assets. The right answer depends on where your assets are located and which jurisdictions’ laws will govern their treatment.