Corporate Governance For ADGM Foundations - 10 Leaves

  • 05-04-2021
Corporate governance for ADGM Foundations:

What is the ADGM?

The Abu Dhabi Global Market is an international financial centre for local, regional and international institutions, established in Abu Dhabi, the capital of the United Arab Emirates, and operational from 2015. It has been voted the ‘Financial Centre of the Year (MENA)” and has continuously brought out innovative solutions for the growing financial services market in the region.

ADGM has three independent authorities – the Registration Authority, the Financial Services Regulatory Authority (FSRA) and ADGM Courts. ADGM entities are established under Common Law. Whereas other jurisdictions codify the English common law, the ADGM has adopted it completely in its original form. This is implemented to help facilitate ease of doing business for foreign investors – a first in the region.

What is a Foundation?

A foundation is governed by its Charter, which is a publicly available document, and By-laws, which are private to the Foundation. The affairs of an ADGM Foundation are managed by the members of a Council and may be supervised by a Guardian.

Foundations provide a mechanism to consolidate holdings of various assets (shares, real property, intellectual property, royalties, etc.) into a single holding entity. This allows for clarity on the transfer of assets during a succession process, and also makes Foundations operate like common law trusts, with an important distinction – they are legally incorporated with a distinct legal personality. In effect, they have features common to a company. They can hold assets, but cannot issue shares or carry out commercial activities.

Foundations are operationally and tax-efficient. Much like a ‘Letter of Wishes” in a trust vehicle, a Foundation’s Charter and By-Laws help make the succession process much less challenging.

Click here to read a comprehensive guide on ADGM Foundations. 

Companies established in the Abu Dhabi Global Market are expected to implement and maintain a robust corporate governance framework. These include annual filings, event-driven filings, beneficial ownership controls, and conformance to the Economic Substance regulations that have been implemented all across the UAE.

Basic corporate governance:

At a minimum, corporate governance involves compliance with the rules that are applicable to a Foundation, both externally from the ADGM, and internally (Foundation Charter and By-laws) as well. Well-documented corporate governance processes, coupled with adherence to recommended best-practices, allows for Foundations management to maintain a good relationship with internal and external stakeholders.

Senior Management:

Minimum number of Founders – 1

Resident Founders – not required

Minimum number of Council Members – 2

Resident Council Members – not required

Minimum number of Guardians – 1, if no surviving Founder

Resident Guardians – not required

Resident Authorised Signatory – Mandatory.

This has to be UAE-resident, except in cases where the shareholders are from the GCC. Also, for banking purposes.

Resident Secretary – while the secretary is not required to be resident, the newly-implemented ADGM Company Service Provider framework now makes it mandatory for all Foundations to appoint a CSP that will carry out (among other things), secretarial services.

The company secretarial service can be outsourced as well. Contact us for a quote.

Council Meetings:

Not required. We recommend a meeting of the Council Members at least once every year.

Annual filings:

ADGM registered Foundations are obliged to complete a specified number of filings on an annual basis, during the same period each year. These usually fall on the anniversary of incorporation or registration of the entity.

ADGM Renewal:

The Foundation is renewable annually, and due on the anniversary of license issuance. The registered address will have to be renewed before the license renewal, so do get in touch for the issuance of a consent letter as a confirmation of the same.

Data Protection renewal:

The ADGM Foundation has to register with the Commissioner of Data Protection at the time of licensing and renew this registration on an annual basis. The renewal costs US $100 and late payment could result in a fine of US $15,000.

Maintaining Books of Accounts:

Every Foundation in the ADGM has to maintain accounts. These accounts do not have to be submitted to the ADGM Registration Authority (RA), however, the authority has the discretion of to request the Foundation to audit or submit it’s financial statements.

Event-driven filings:

An Event-driven Filing refers to an ADGM Foundation’s obligations to notify the Registrar of certain changes that occur in the company. Here are the events that trigger filing requirements (not an exhaustive list).

  • Change of name.
  • Amendment of the Charter or By-laws.
  • Appointment of authorised signatory.
  • Appointment, cessation or change in particulars of Council members.
  • Appointment, cessation or change in particulars of secretary.
  • Change of registered office address.
  • Alternative location of company’s record.
  • Maintain accounting reference date.

Banks:

In case you have a bank account opened for the Foundation, it is mandatory to submit the renewed license of the Foundation to the bank on an annual basis.

Corporate Registers:

All statutory registers have to be maintained on a continual basis. These include but not limited to:

  • Register of Founders.
  • Register of Council Members.
  • Register of Beneficiaries.
  • Register of Guardians.
  • Register of Council Minutes.
  • UBO Register.

The newly-implemented ADGM Company Service Provider framework now makes it mandatory for all Foundations to appoint a CSP that will carry out secretarial services, and maintain these registers on an ongoing basis.

Economic Substance:

The UAE Economic Substance Regulations were introduced in April 2019 and implemented as part of the UAE’s commitment as a member of the OECD Inclusive Framework, and in response to an assessment of the UAE’s tax framework by the European Union Code of Conduct Group on Business Taxation.

ADGM Foundations do not fall in the scope of these regulations.

Update:

The ADGM Company Service Provider Regulations come into effect in April 2021.

All ADGM Foundations are now required to appoint a Company Service Provider to carry out secretarial and registered agent services. The ADGM Company Service Provider will be the point of contact between the Registration Authority and the ADGM Foundation. 

10 Leaves is a Service Provider in the ADGM and offers the following services to ADGM Foundations:

  • Incorporation Agent – assistance in setting up the Foundation.
  • Registered address – providing the registered office.
  • Provision of council members.
  • Provision of company secretaries.
  • Provision of Authorised Signatories.
  • Provision of nominees. 
  • Provision of accounting services.
  • Customisation of the Foundation Charter and By-laws. 
  • Translations and attestations.
  • Assistance in bank account opening.

In addition to the above, we offer corporate and commercial services through 10 Leaves Legability. These include shareholding agreements, IP agreements, Share vesting plans and agreements and ESOPs.

For startups, we offer structuring solutions, including issuance of warrants, SAFE notes, convertibles and maintenance of cap tables. 

We provide all our services through a proprietary digital frontend, with a secure digital backend, to ensure that you have a seamless experience, unmatched by competition. As a client, you also have access to our industry-leading media solution that incorporates engaging videos, detailed podcasts and informative publications to keep you updated and informed of the latest developments that affect your company on an ongoing basis. 

For More Details On Corporate Goverance For ADGM Foundations, Contact us here

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