Labuan Private Foundation: a Solution for the Wealthy Families in Asia

Labuan Private Foundation for Wealth Management and Planning

Asians are familiar with the use of a Trust as an asset holding structure. But not many have knowledge or are aware of a Private Foundation. A private foundation, also referred to as a ‘private interest foundation,’ is a product with specific laws found mostly in civil law jurisdiction and adopted by some common law jurisdictions over the last 2 decades. It is particularly useful as an alternative to a trust.

A private foundation generally has no restrictions on their legal activities. A private foundation is a non-governmental, stand-alone legal entity, and it can be used for private beneficiary or charitable purposes. Its principal fund usually comes from a single source, such as an individual, a family, or a corporation.

Labuan International Business and Financial Centre, Malaysia (Labuan IBFC) is the first common law jurisdiction in Asia to adopt the civil law concept of a private foundation. The Labuan Foundation Act 2010 provides more choices for wealthy Asian families seeking to structure their estate planning. A Labuan Foundation, either in the form of a Labuan Private Beneficiary Foundation or a Labuan Charitable Foundation, can be structured in either the Conventional or the Islamic form which allow more families to further plan for their long-term objectives.

Both forms of private foundations are excellent solutions:

As an ultimate investment holding structure for companies and shares
To improve family governance
To strengthen the cohesion of the family and mutual trust
To prepare the next generation for their role
To secure family values and principles for several generations (dynastic structuring)
As a neutral exit for family members wanting to cash in
As a safety net for family members in need (bonding)
For family business succession planning
For wealth protection and preservation
To avoid forced heirship rules
For global families inheritance/ income tax planning
For family charitable purposes
For control and management of family asset

Advantages of a Labuan Private Foundation

Low setup and maintenance cost.
Flexible lifespan of foundation: can be perpetual or a fixed period.
Muslims may set up Labuan Foundations that are Syariah compliant or otherwise.
The founder is protected from foreign claims and the foundation cannot be forcefully liquidated to satisfy claims arising from divorce, lawsuit or debts after 2 years. *
The founder has unlimited and exclusive powers.
Ability to be redomicile to another jurisdiction of your choice at any time.
Provisions stated in the constituent documents are permitted to be amended, when needed.
Fully confidential as no information can be accessed by the public.
Legal ownership of assets “remains” within the control of the foundation.
It is a legal entity fully protected by Labuan Foundations Act 2010.*

Under Labuan Foundation Act Section 61, provides prevention from a foreign claim or judgement being enforced against a validly established Foundation. It cannot be forcefully liquidated to satisfy other obligations after 2 years.

Main Elements and Keys individuals involved in the creation of a Labuan Private Foundation

Foundation Establishment Steps

A Trust Officer will examine each case or family setup carefully. There is no one-size-fits-all setup, as every family is unique. We will advise the best possible structure that may suit you and your family. The timeframe of setting up a Foundation depends on the complexity of the Founder’s wishes and family needs.

About FA Advisory

Comprising a team of seasoned professionals well-versed in Labuan’s business landscape, FA Advisory Limited extends a comprehensive suite of services covering corporate services, private wealth management, and licensing compliance administration, all tailored to meet the unique needs of our clients.

At FA Advisory Limited, our expertise lies in delivering Labuan insights that facilitate business expansion, simplifying intricate processes, and offering valuable information to guide you through various facets of your journey.

Choose FA Advisory as your trusted partner in navigating the dynamic business landscape of Asia. With our commitment, we are your gateway to success in Labuan and beyond.

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