THE LABUAN FOUNDATION AS A WEALTH MANAGEMENT TOOL IN SUCCESSION PLANNING

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1 THE LABUAN FOUNDATION AS A WEALTH MANAGEMENT TOOL IN SUCCESSION PLANNING PRESENTED BY DATIN ISHARIDAH ISHAK FIRST FIDUCIARY (LABUAN) LLP by Datin Isharidah Ishak First Fiduciary (Labuan) LLP

2 WEALTH MANAGEMENT AND SUCCESSION PLANNING Wealth advisory community wealth creation and accumulation succession planning asset protection alongside investment and taxation efficiencies

3 WEALTH MANAGEMENT AND SUCCESSION PLANNING A succession plan The 4Ds -Death, Disability, Divorce and Dispute probate process takes time cross-border assets and beneficiaries fiscal efficiency inequality in talents and differing characters of family members family expansion multiple families forced heirship laws

4 LACK OF SUCCESSION PLANNING Lack of A Succession Plan family dispute inaccessibility of assets due to legal process breakdown of family legal costs negative publicity breakdown of family business

5 LACK OF SUCCESSION PLANNING Reasons difficult and sensitive subject, particularly in Asian culture takes time to make a plan - multitude of considerations involves the giving away of assets, reluctance to relinquish control

6 LACK OF PLANNING (CONT D) Advisors bring these considerations to the fore over time client consciousness to make a plan Address separation of ownership vs retention of control need for flexible vehicles bespoke to each client' needs to preserve wealth amidst social (family), economic and political changes for the passing down of not only wealth but also family values family discipline

7 LABUAN FOUNDATION - LABUAN FOUNDATIONS ACT 2010 Foundations originated in civil law countries used for multi-generational succession planning and asset protection Labuan first in Asia to have foundation laws Labuan Foundations Act 2010

8 TYPES OF FOUNDATIONS private beneficiary (family) foundation charitable foundation non-charitable or private purpose foundation (similar to Bill & Melinda Gates Foundation) Labuan allows for the set up of Islamic Foundation:- under Labuan Islamic Financial Services and Securities Act 2010 where the Foundation s aims and operations must be in compliance with Shariah principles

9 WHAT A FOUNDATION IS TRUST COMPANY FOUNDATION It is a combination of the best features of a trust with the best features of a company

10 STRUCTURE OF A FOUNDATION Founder Council Member Officer Beneficiaries Supervisory Person Secretary

11 MANAGEMENT OF FOUNDATION Founder (can be joint Founder or nominee Founder) the person who subscribes his name to the Foundation Charter Beneficiaries the people who will benefit from the Foundation Supervisory Person monitors and safeguards the Foundation's affairs Council Members ensure compliance of the Foundation and its officers Officer administers the Foundation to achieve its purpose of managing the Foundation's assets Secretary a Labuan trust company

12 CONSTITUENT DOCUMENTS OF A FOUNDATION Charter (mandatory registration but not a public record) Articles (registration optional) Letter of Wishes Constituent documents are crafted to reflect the bespoke Founder's needs Purpose of Foundation - to manage property

13 INTERNAL STRUCTURE OF A FOUNDATION OFFICER COUNCIL MEMBER SUPERVISORY PERSON FOUNDATION (new legal owner of assets ) Endows assets (transfers ownership) MANAGEMENT OF ASSETS Benefits distributed to BENEFICIARIES FOUNDER

14 FLEXIBILITY OF TRUST- COMPANY COMBINATION separate legal entity can hold property in Foundation's name Founder endows assets to a Foundation, it becomes the legal owner of the asset separation of ownership allows for reservation of powers/rights by the Founder in the individualised constituent documents a body corporate that has no owners/shareholders managed by Foundation Council and supervised by a Supervisory Person can act, sue and be sued in its own name duration can be in perpetuity or for a fixed duration

15 FURTHER FEATURES Founder can assign some or all of his rights and powers to a third party revocably or irrevocably Foundation can be redomiciled to another jurisdiction which has foundation laws Arbitration can be provided for by the Constituent documents Confidentiality criminal offence to divulge information of Foundation fine of up to RM1,000,000 and imprisonment Dissolution voluntary or by Court Order

16 STATUTORY FIREWALL Section 58 of the Labuan Foundations Act fraudulent disposition test of solvency burden of proof crucial timing of accrual of cause of action and disposition of property to the Foundation limitation period presumption effect of disposition

17 IMMUNITY Section 61 of the Labuan Foundations Act 2010 against foreign claims or judgments divorce forced heirship creditor claims in insolvency

18 ADVANTAGES OF A LABUAN FOUNDATION effective succession planning and asset protection vehicle separation of asset and ownership Founder able to reserve powers and rights can be established for charitable or non-charitable purposes unenforceability of foreign claims or judgements confidentiality fiscal efficiency

19 FURTHER ADVANTAGES Labuan as a jurisdiction on the OECD white list skilled wealth management industry strategically located, same time zone as many major Asia Pacific cities as part of Malaysia, Labuan follows the English legal system with a highly developed legal infrastructure

20 THANK YOU THANK YOU For any enquiries please contact Datin Isharidah TEP at [email protected] This presentation should not be regarded as offering a complete explanation of the matters referred to and is subject to changes in law. It is not intended to be a substitute for detailed research or the exercise of professional judgment. Labuan IBFC cannot accept any responsibility for loss occasional to any person acting or refraining from action as a result of any material in this presentation.