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INTRODUCTION TO LABUAN FOUNDATIONS
Name of Labuan foundation
Shall end with the words “Labuan Foundation” or “(L) Foundation”.
Legal status
It is a legal entity, it can enter into contracts, buy and sell properties, own bank accounts or own shares or interest in other corporations.
Duration
May be fixed or infinite life span.
Founder
Minimum One (1), either natural person or corporate entity
May be residents or non-residents of Malaysia
May also be one of the beneficiaries
Beneficiaries
May include individuals, corporate entities, class of beneficiaries or charities and are those who have vested interest in assets of the foundation
May be residents or non-residents of Malaysia
Officer
Compulsory appointment
Minimum One (1), either natural person or corporate entity
May be residents or non-residents of Malaysia
Founder or Beneficiary may be appointed as Officer (but not be a council member at the same time)
Duties are inter alia to ensure proper administration of the foundation and to carry out decisions of the Council
Council member
Not a compulsory appointment, at the discretion of the Founder (unless foundation that solicits donation from the public)
May be either natural person or corporate entity
May be residents or non-residents of Malaysia
Cannot act as Officer at the same time
Council is similar to the Board of Directors in a company context. The council is responsible to manage and oversee operations (general supervision) of the management of the foundation by its officer and to ensure compliance by the Labuan foundation and its officer with the charter of the foundation and provisions of the LFA
Secretary
Compulsory appointment
The secretary must be a licensed Labuan Trust Company
Service provider to the foundation and performs a compliant agent function and acts as a conduit between foundation and Labuan FSA
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Supervisory person
Compulsory for foundation that solicits donation from the public.
Role to monitor the Council’s decision, power to add or remove Officers, Council members etc.
Registered office
Mandatory to maintain a registered office in Labuan which shall be the address of the Secretary of the foundation.
Capital/Wealth requirements
No capital requirements as a foundation does not have share capital. Minimum endowment of USD1.00 as an initial asset at time of establishment.
Founder’s rights, powers and obligation
A founder may transfer its rights, powers and obligations if allowed by the charter of the foundation or any instrument in writing (e.g. deed of assignment) to be executed between the founder and his assignee. In this regard, the assignee who is assigned with such rights, powers and obligations shall be deemed to be a founder when exercising them or performing such obligations. The assignee also has the rights to endow his own assets into the Labuan foundation.
Property of Foundation
Property of the Labuan foundation is owned legally and beneficially by the foundation and is to be utilised solely for the purposes and objects stated in the charter of the foundation.
Property of the Labuan foundation can be Malaysian and/or non-Malaysian property.
Any assets endowed to a Labuan foundation shall be the properties of such foundation. This includes:
（1）Assets of every kind whether corporeal or incorporeal, tangible or intangible, movable or immovable, however acquired may be endowed to a Labuan foundation; and
（2）Legal documents or instruments in any form, including electronic or digital, evidencing title to or interest in, such assets as described in the above bullet point including bank cheques, money orders, shares, securities, bonds, bank drafts and letters of credit.
The accounting records and other records shall be kept at the registered office of the Labuan foundation or at such other place in Labuan as the officers think fit and shall at all times be open to inspection by the council members, supervisory person, officers and the approved auditor, if appointed.
A Labuan foundation shall ensure that its founder, council member, officer and secretary remain as fit and proper persons throughout their appointment with the foundation as may be prescribed in the Guidelines on Fit and Proper Person Requirements issued by Labuan FSA.
A Labuan foundation shall ensure compliance with the Anti-Money Laundering and Anti-Terrorism Financing Act 2001.
Dissolution of Labuan foundation may happen:
（1）upon the passing of a resolution by the officer on the basis that the foundation is established for a definite period and that period has expired;
（2）when the purpose of the foundation is fulfilled or becomes incapable of fulfilment; or
（3）when the charter requires such dissolution.
After the dissolution, the ownership of the remaining assets will be transferred to the beneficiaries.
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Labuan IBFC offers a wide range of wealth management tools suitable for high-net-worth individuals, family offices and other wealth managers who need a range of structures offering efficient wealth transfer, dynastic planning and inheritance management.
A foundation is a corporate body with a separate legal entity, usually established by the founder to hold assets with the objective of managing these assets for the benefit of a class of persons on a contractual basis. It is a separate legal entity from its managers (that is, its officers and its council) and is typically used for private wealth management and charitable purposes.
All aspects of Labuan foundations are governed by the Labuan Foundations Act 2010.
Characteristics of Labuan Foundations
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• No minimum capital is required to register a foundation in Labuan.
• It is a legal entity with the ability to enter into contracts or any other lawful dealings on its own, which may be charitable or non-charitable. Trade and commercial activities are generally incidentals or ancillary to its main purpose of management of its properties. All trade activities are carried out through an underlying legal entity and not directly via the foundation.
• A founder may reserve its powers and thus giving the founder more control on the foundation. Additionally, since a founder may also be a council member, he may further direct and manage the foundation’s assets.
• All aspects of the foundation are kept confidential. Confidentiality provisions restrict the officer, council member, supervisory person and secretary from disclosing any information relating to the foundation, unless otherwise required or provided for under the Act, the court or the charter.
• There is no statutory requirement for an audit for private foundation.
• For non-charitable foundation, endowment of properties can only be done by a founder and the person to whom he had assigned or transferred his rights, powers and obligations.
• The Labuan Foundations Act 2010 provides for a fraud disposition period of two years. A Labuan foundation is protected from foreign claims and cannot be forcefully liquidated to satisfy other obligations such as claims arising from divorce, lawsuit or creditors.
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• As the foundation is a separate legal entity, all liabilities remain the liabilities of the foundation.
• Council members do not owe fiduciary duty to beneficiaries and hence, this eliminates competing beneficiaries’ interests.
• The foundation’s officers, council members, supervisory person and secretary are indemnified for liabilities incurred by the foundation, unless the liabilities arise from personal negligence or there is proof of bad faith on the part of the officer.
• A Labuan foundation can be dissolved:
- upon the passing of a resolution by the officer on the basis that the foundation is established for a definite period and the said period has expired;
- when the purpose of the foundation is fulfilled or becomes incapable of fulfilment; or
- if the charter requires such dissolution. After the dissolution, the ownership of the remaining assets will be transferred to the beneficiaries in accordance with the constituent document of the Labuan foundation.
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Registration Requirements
The registration requirements of a Labuan
foundation are as follows:
• Labuan foundation can be established by a founder by subscribing his name to the charter of the foundation, complying with the requirements under the Labuan Foundations Act 2010 and having received a certificate of registration from Labuan FSA.
• Specifying in the charter the type of initial assets endowed for the establishment of the foundation at the point of its registration.
• The founder shall before the registration of a Labuan foundation, appoint a Labuan trust company to be the secretary of the proposed Labuan foundation. The registration of the foundation must be made by the secretary of the foundation by submitting the following documents:
- A statement on the particulars of the charter.
- A list of names and addresses of the officers.
- A statutory declaration of compliance by the secretary.
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Operational Requirements
The operational requirements are as follows:
• The Labuan foundation shall ensure its founder, council member, officer and secretary remain as fit and proper persons throughout their appointment with the foundation.
• The Labuan foundation shall ensure compliance with the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001.
• The officer may also be the founder or beneficiary of the Labuan foundation, provided he is not a council member and he is not disqualified.
• A founder may transfer its rights, powers and obligations if allowed by the charter of the foundation or any instrument in writing (e.g. deed of assignment) to be executed between the founder and his assignee. In this regard:
- The assignee who is assigned with such rights, powers and obligations shall be deemed to be a founder when exercising them or performing such obligations. The assignee also has the rights to endow his own assets into the Labuan foundation.
• The officer of the Labuan foundation, who is duly appointed by the founder, shall be responsible for the administration of the Labuan foundation.
• The founder may also appoint a council for the Labuan foundation to ensure compliance by the Labuan foundation and its officer with the charter of the foundation and the provisions of the Labuan Foundations Act 2010 as well as to be responsible for general supervision of the management of the foundation by its officer.
• The accounting records and other records shall be kept at the registered office of the Labuan foundation or at such other place in Labuan as the officers deem fit, and shall at all times be open to inspection by the council members, supervisory person, officers and approved auditors, if appointed. Such records shall be retained for a period of not less than six years from the date of an account transaction has been completed.
• A council, if appointed, must comply with the meeting requirements.
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Fees
The registration fee and subsequent annual fee are payable on or before the anniversary date of registration.
Registration fee
USD 200 / RM750
USD 200 / RM750
Annual fee