What is a Foundation?

Foundations are a separate legal entity, without members or shareholders and are generally set up to reflect the wishes of the Founder. The Founder can be an individual or a corporate entity. The Founder’s wishes are thus integrated into the Foundation’s Charter and Regulations. A Foundation can be used for charitable, commercial or family purposes.

A Foundation is an important tool for structuring the ownership of family and commercial assets. A Foundation is particularly important where there may be a lack of trust.

It is not permitted to carry out commercial activities for a Foundation, but a Foundation can own a business, e.g. a holding company or an operating company.

What is the purpose of a Foundation?

A Foundation sets out to protect assets and preserve wealth, forming part of a tax planning strategy. The main purposes for setting up a Foundation are:

  • Protection of wealth and assets
  • Protection against creditors
  • Inheritance / succession planning
  • Protection of family businesses
  • Legacy continuity to the next generation
  • Protecting assets for people who are unable to take care of their own affairs, such as minors or the disabled.
  • Commercial investments
  • Assist family members or chosen persons with specific needs, such as financial support for studies, starting a business, housing or other.
  • To replace wills, prenuptial agreements, etc.
  • Can be used to hold shares, dividends, bonds, bank deposits, real estate, art collections or other valuable assets
  • Hold intellectual properties
  • Hold life insurance policies
  • Confidential realisation of Founder’s wishes
  • To separate the Foundation’s assets from the Founder’s other assets in order to achieve full protection from third parties (creditors, public, authorities).

What are the benefits to a Foundation?

  • It is an excellent way to ensure investor anonymity.
  • A nominee Founder is permitted.
  • The person who endows the Foundation need not be the Founder.
  • A Founder can transfer his or her rights, influence, powers of attorney and obligations to another person, who will then be considered the Founder.

In a Foundation, the Founder also retains the right to:

  • Make investments
  • Make amendments to the Regulations
  • Appoint or remove Councillors
  • Appoint or remove the Protector
  • Change the rights or restrictions of any Beneficiary
  • Add or remove any Beneficiary
  • Dissolve a Foundation
  • Protect against forced heirship rules

In which jurisdictions does CPIE Services establish Foundations?

CPIE Services specialises in setting up Foundations. We can establish Foundations in several European jurisdictions both inside and outside the EU such as:

  • Seychelles
  • Cyprus
  • Guernsey
  • Jersey
  • Liechtenstein
  • Luxembourg
  • Malta

Are there any requirements for the name of a Foundation?

There are no requirements for the name of a Foundation other than that it must contain the word Foundation. You can add words and phrases to the name itself, e.g. referring to the Founder personally, to heirs, beneficiaries, to the purpose, etc.

Most names and additions are accepted, but not if the text is misleading, unethical or illegal.

How to set up a Foundation?

Before you can start setting up a Foundation, certain KYC information and documents are required:

  • Name of the Foundation
  • Name and address of the Founder
  • Objectives of the Foundation
  • Overview of the assets to be transferred to the Foundation
  • Councillors and their powers
  • Power of the Protector
  • Notarised passport for Founder, Protector, Councillors and Beneficiaries

A document called the ‘Letter of Wishes’ must be prepared. This document specifies how the Foundation’s assets are to be handled in the event of the Founder’s death, incapacity, etc.

The document also defines the distribution between beneficiaries and therefore requires careful consideration. There is no specific format for this document, but it is clear that the more precisely it can be worded, the easier it will be.

Most Founders want to keep the ‘Letter of Wishes’ private so that the Beneficiaries and Protector can remain anonymous to the outside world.

The Foundation Regulations determine what can happen in the Foundation and are designed to consider the Founder’s wishes, including the content of the Letter of Wishes.

The structure of a Foundation

A Foundation consists of a Founder, Councillors, a Protector, Beneficiaries, Charter and Regulations. Below we have created a dictionary for all roles:

The Founder
A Founder is a natural or legal person. It can be a company, trust, family fund or foundation that has set up a Foundation. The Founder transfers a portion of his or her assets to this Foundation. A Founder can be anonymous.

The Councillors
The Councillors manage and conduct all business of a Foundation. The Councillors are similar to a board of directors in a company and consist of one or more persons. Councillors can appoint or remove Beneficiaries, dispose of assets, amend or dissolve a Foundation.

A Charter sets out the main guidelines, including responsibilities and roles of the Councillors. The Councillors can hold meetings anywhere in the world. However, minutes must be kept. A Founder or Protector can be appointed, provided that they are not sole Councillor.

The Protector
A Foundation can appoint a Protector if provided in the Charter or Regulations. A Founder, Councillor or a Beneficiary may be appointed as the Protector, the exception being that a sole Councillor or sole Beneficiary cannot act as a Protector.

The provisions in the Charter will determine the limits and extent of the Protector’s role and actual responsibilities. Duties could include the appointment or removal of Council members or any other specific duty which the Founder would want the Protector to perform.

The Beneficiaries
The Founder can define Beneficiaries or class of Beneficiaries in the Charter and Regulations. Councillors can also appoint Beneficiaries if they are not appointed by the Founder.

The Founder can be sole Beneficiary provided there is another Beneficiary at the time of the Founder’s death or legal incapacity.

The Foundation Charter
A Foundation Charter is the constitutional Foundation document to be filed with the Public Registry and available to the outside world. The Charter contains details such as the Founder’s name and purpose of the Foundation, its duration, assets of the Foundation, the name and address of the registered agent and any rights the Founder retains for himself, the appointment of the Protector and their role and responsibilities as well as the responsibilities assigned to the Councillor(s).

The Foundation Regulations
A private document, incorporating the ‘Letter of Wishes’, that is not required to be filed with any public registry.

The figure below shows the most important features of the Foundation structure.

Foundations protect assets and wealth.

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