DIFC Foundations and RAK ICC Foundations: How the Two Structures Differ
By Dr Sunil Ambalavelil
The DIFC and RAK ICC each offer a statutory foundation for succession planning and asset holding. The two share the same basic architecture, but they differ on the mandatory appointment of a registered agent, the minimum capital, the court that governs the foundation and the level of public disclosure. These differences, rather than the common features, should drive the choice of jurisdiction.
What the Two Regimes Have in Common
Most of the structural features are the same, and it helps to set them out before turning to the differences. Each foundation is a legal person separate from its founder. Its assets belong to the foundation itself and are not held on trust for anyone. Each is managed by a council of at least two members, and the founder may serve on that council. Each is constituted by a charter and by-laws, although either regime permits a foundation to dispense with by-laws if every required matter is set out in the charter. The guardian is a supervisory office. It is mandatory where the foundation has charitable objects or a specified non-charitable purpose and optional where the purpose is to benefit named persons or a class of persons, and the guardian cannot sit on the council at the same time. Both regimes also prevent the foundation from trading, permitting commercial activity only where it is necessary for, or incidental to, its objects. A founder may reserve powers to amend the charter or terminate the foundation, but only if those powers are written into the charter, and they lapse on the founder’s death or, for a corporate founder, after fifty years.
Establishment: Registered Agent, Office and Capital
The first practical difference concerns who must be appointed. Under the DIFC Foundations Law a registered agent is optional, although a DIFC foundation must in all cases maintain a registered office in the DIFC. Where an agent is appointed, it must be licensed by the DIFC Authority and registered with the Dubai Financial Services Authority. The RAK ICC position is stricter. A foundation must have a registered agent, it may have only one at any time, and the agent must be registered with RAK ICC. The foundation must also keep a registered office in the UAE, which may be the office of its agent. A founder who wishes to retain more direct control of the administration will therefore find the DIFC more flexible on this point. The second difference is capital. DIFC law requires the charter to describe the initial capital but sets no minimum figure, and any property may be used. RAK ICC requires initial capital of at least USD 100 or its equivalent in another currency, which may be provided in property and may be given as a gift or in exchange for value. The sum is modest and unlikely to deter anyone. The distinction is still worth recording, because one regime leaves the amount entirely to the founder and the other fixes a floor.
Governing Court and Dispute Resolution
A DIFC foundation is governed by DIFC law, and its disputes fall within the jurisdiction of the DIFC Courts. A RAK ICC foundation is registered with RAK ICC, which is a government authority of the Emirate of Ras Al Khaimah, but its governing court is a matter of election. The charter and by-laws must name either the DIFC Courts or the ADGM Courts, and the law of the chosen jurisdiction then governs the validity and administration of the foundation. The choice is made at the drafting stage and deserves care, since it determines where an application to vary the charter or obtain directions for the council would be heard. Both regimes also allow the charter or by-laws to refer disputes to arbitration. In a DIFC foundation the DIFC Arbitration Law applies. In a RAK ICC foundation the arbitration law follows the court selected, so the ADGM Arbitration Regulations apply where the ADGM Courts are chosen and the DIFC Arbitration Law applies where the DIFC Courts are chosen. A founder with a connection to Abu Dhabi may regard the option of the ADGM Courts as a relevant consideration. The DIFC Courts are available under either regime.
Disclosure and Ongoing Compliance
Disclosure is where the two regimes part company most visibly. DIFC law requires the Registrar to keep a register of foundations and to make it available for public inspection on payment of a fee. The register shows the name and registered office of the foundation and details of its founders, council members and any registered agent. The law requires council members and any guardian to be named in it, but the nationality and address of individuals are excluded. The charter is not on the public register, although a person with a sufficient interest in the foundation may obtain a certified copy. The RAK ICC Regulations list the contents of the register as the name, registration number and date of registration, the registered agent and the council members. They contain no equivalent provision for public inspection, and they state that a foundation’s accounting records, accounts and returns are not publicly disclosed by the Registrar. Ongoing obligations differ as well. A DIFC foundation holds a licence that is renewed every twelve months together with a confirmation statement. Its approved accounts, signed by at least two council members, are filed with the Registrar, or given to its agent, within thirty days. A RAK ICC foundation files an annual return by each anniversary of its registration and keeps its accounting records at its registered office for five years. Failure to file the annual return is punishable by a fine of up to AED 5,000.
Conclusion
Neither structure is superior in every case. The DIFC suits a founder who values flexibility on the registered agent and the amount of capital and is comfortable with a public register. RAK ICC suits a founder who accepts a mandatory agent, wants a choice between the DIFC and ADGM Courts and prefers that accounts and returns remain undisclosed. The current legislation should be reviewed before a final decision is made.
For individuals, families and business owners considering foundation structures in the UAE, Dr Sunil Ambalavelil provides legal guidance on corporate structuring, asset ownership, succession planning and cross-border wealth arrangements. Seek professional advice to evaluate the legal requirements of DIFC and RAK ICC foundations and determine which structure aligns with your long-term objectives.
