What is a Foundation?
A foundation is an incorporated legal entity, which whilst sharing some similar aspects with limited companies and trusts, has some distinguishing features.
A foundation has a separate legal personality and as such is capable of holding assets for its objects, and is capable of suing and being sued and prosecuted. However, by contrast to a limited company, a foundation cannot directly engage in commercial trading that is not incidental to its objects. However, a foundation may hold a trading subsidiary and as such this restriction is not a difficult to overcome.
Possible uses for foundations
- Wealth planning for successive generations of family members
- Alternative to purpose trust
- Wasting assets e.g. business jets or yachts.
What is needed to establish a Foundation?
|Foundation Instrument||The foundation instrument is the main constitutional document of a foundation and must include details of the objects of the foundation.|
The objects of the foundation must be certain, reasonable and possible and must not be unlawful, contrary to public policy or immoral. The objects may be for charitable purposes and/or non charitable purposes and may be to benefit a person or a class of persons or to carry out a specified purpose.
|Foundation Rules||A foundation must also have foundation rules which comply with the Foundations Act 2011.|
The foundation rules should include provisions regarding:-
the appointment, retirement, removal of council members,
set out the functions and how the decision of the council are to be made, and if any decision requires the approval of any other person, specify the decisions and that person;
distribution of foundation assets
the beneficiaries, and what rights (if any) they are to have.
The identity of the registered agent and provision dealing with their retirement and removal.
The rules must also establish a council of members to administer the foundation’s assets and to carry out its objects.
|The Council||This is the group of persons who are responsible for the day to day administration of the foundation.|
A council member may be an individual or a body corporate.
If the council member is an individual they must be at least 18 years old.
The Council, must conduct the foundation’s affairs in accordance with the foundation instrument, foundation rules, the Foundations Act and any other enactment which affects the foundation.
The Council Members must act honestly and in good faith and exercise the care, diligence and skill of a prudent person. These duties are of a fiduciary nature.
|Registered Agent||A foundation must have a registered agent.|
To act as a registered agent of a foundation the person must hold a class 4 licence issued by the Isle of Man Financial Services Authority.
The registered agent may also be a Council Member.
|Enforcer||There is no requirement to have an enforcer unless a foundation is to carry out a specified non-charitable purpose.|
Services we can provide
MannBenham have experience in drafting foundation instruments and rules to meet client needs.
We also have a wholly owned subsidiary, MannBenham Fiduciaries Limited *, which is licensed by the Isle of Man Financial Services Authority which allows MannBenham Fiduciaries to provide registered agent facilities to foundations.
Should you wish any further information regarding foundations, please contact our commercial team on 01624 639350.
This guidance only provides a very brief overview of some of the main aspects of the Foundations Act 2011. It should not be taken as providing legal advice or providing a comprehensive guide to the Foundations Act 2011. No person should act in reliance on any statement contained in this guide without first obtaining specific legal advice.
* MannBenham Fiduciaries is the trading name of MannBenham Fiduciaries Limited an Isle of Man company (company number 088712C) which holds both a Class 4 – Corporate Services and a Class 5 – Trust Services licence and is regulated by the Isle of Man Financial Services Authority (www.fsaiom.im)