The DIFC and RAK ICC each offer a statutory foundation structure for succession planning and asset holding. Both share the same basic architecture, but differ in their requirements for the appointment of a registered agent, minimum capital, the court with jurisdiction over the foundation and the extent of public disclosure. These differences, rather than their common features, should guide the choice of jurisdiction.
What the Two Regimes Have in Common
Most of the structural features are similar, and it is useful to set them out before examining 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 any beneficiary. Each is managed by a council comprising at least two members, and the founder may serve on that council. Each is constituted by a charter and by-laws, although both regimes permit a foundation to dispense with by-laws if all required matters are included in the charter.
The guardian's role is supervisory. The appointment is mandatory where the foundation has charitable objects or a specified non-charitable purpose, but optional where its purpose is to benefit named individuals or a class of persons. A guardian cannot simultaneously serve as a council member. Both regimes also restrict foundations from trading, permitting commercial activities only where they are necessary for, or incidental to, their objects. A founder may reserve powers to amend the charter or terminate the foundation, but these must be expressly provided for in the charter. Such powers lapse upon the founder's death or, in the case of a corporate founder, after 50 years.
Establishment: Registered Agent, Office and Capital
The first practical difference concerns the appointment of a registered agent. Under the DIFC Foundations Law, appointing a registered agent is optional, although every DIFC foundation must maintain a registered office within 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 more stringent. A foundation must appoint a registered agent, may have only one at any given time, and the agent must be registered with RAK ICC. The foundation must also maintain a registered office in the UAE, which may be the office of its agent. A founder seeking greater flexibility in administering the foundation will therefore find the DIFC regime less restrictive on this point.
The second difference concerns capital requirements. DIFC law requires the charter to specify the initial capital but does not prescribe a minimum amount. The initial capital may consist of any form of property. RAK ICC, by contrast, requires initial capital of at least USD 100 or its equivalent in another currency. This may be contributed in the form of property and may be provided as a gift or in exchange for value.
The amount is modest and unlikely to deter prospective founders. Nevertheless, the distinction is worth noting: one regime leaves the amount entirely to the founder, while the other prescribes a minimum threshold.
Governing Court and Dispute Resolution
A DIFC foundation is governed by DIFC law, and disputes concerning it fall within the jurisdiction of the DIFC Courts. A RAK ICC foundation, although registered with RAK ICC, a government authority of the Emirate of Ras Al Khaimah, allows greater flexibility in selecting its governing court.
Its charter and by-laws must specify either the DIFC Courts or the ADGM Courts. The law of the selected jurisdiction then governs the validity and administration of the foundation. This choice must be made at the drafting stage and requires careful consideration, as it determines where applications to amend the charter or obtain directions for the council will be heard.
Both regimes also permit the charter or by-laws to provide for arbitration. For a DIFC foundation, the DIFC Arbitration Law applies. For a RAK ICC foundation, the applicable arbitration framework depends on the court selected. The ADGM Arbitration Regulations apply where the ADGM Courts are chosen, while the DIFC Arbitration Law applies where the DIFC Courts are selected.
For a founder with connections to Abu Dhabi, the option of choosing the ADGM Courts may be an important consideration. The DIFC Courts, however, remain available under both regimes.
Disclosure and Ongoing Compliance
Disclosure is one of the most significant areas of difference between the two regimes. DIFC law requires the Registrar to maintain a register of foundations and make it available for public inspection upon payment of a fee. The register contains the name and registered office of the foundation, together with details of its founder, council members and any registered agent.
The law requires the names of council members and any guardian to be recorded, but excludes the nationality and residential addresses of individuals. The charter itself is not included in the public register, although a person with sufficient interest in the foundation may obtain a certified copy.
The RAK ICC Regulations specify that the register must contain the foundation's name, registration number and date of registration, details of its registered agent and the names of its council members. However, they contain no equivalent provision for public inspection. They also expressly provide that a foundation's accounting records, accounts and returns are not publicly disclosed by the Registrar.
The ongoing compliance requirements also differ. A DIFC foundation holds a licence that must be renewed every 12 months, together with the submission of a confirmation statement. Its approved accounts, signed by at least two council members, must be filed with the Registrar or provided to its registered agent within 30 days.
A RAK ICC foundation must file an annual return by each anniversary of its registration and retain its accounting records at its registered office for five years. Failure to submit the annual return may attract a fine of up to AED 5,000.
Conclusion
Neither structure is universally superior. The DIFC may suit a founder who values flexibility in relation to registered-agent requirements and initial capital, and is comfortable with a publicly accessible register. RAK ICC may be more appropriate for a founder who accepts the mandatory appointment of an agent, values the option of choosing between the DIFC and ADGM Courts, and prefers greater confidentiality in relation to accounts and returns.
The final decision should take into account the founder's objectives, the nature and location of the assets, succession arrangements and the applicable regulatory requirements. The relevant legislation and regulations should also be reviewed in their current form before the structure is established.
Dr. Sunil Ambalavelil is the Global Executive Chairman of Kaden Boriss, an international law firm specialising in franchise and business agreements. A seasoned legal adviser, he has advised and supported the international growth of numerous global brands, helping them navigate the legal complexities of cross-border expansion.
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