A Gibraltar Private Foundation was originally governed by the Private Foundation Ordinance of 1999 which defined foundations as “vehicles for holding private assets”. Then the Gibraltar Income Tax Act of 2010 classified foundations the same as trusts. Foundations are separate legal entities with assets protected by a specific purpose. Foundations have a corporate structure with a management system.
In April of 2017, Gibraltar’s new law called the “Private Foundations Act” went into effect. One important feature with this new law is the abolishment of the requirement to first create a company limited by guarantee before registering the company as a private foundation. Now private foundations are recognized as separate legal entities able to buy and sell properties and to sue or be sued in a court of law.
Gibraltar’s Parliament specifically cited foundation laws in Panama and Jersey as motivations for the new law.
Private Foundation Benefits
A Gibraltar Private Foundation can enjoy the following benefits:
• Totally Foreign: The foundation can be formed and controlled by foreigners.
• Control: A founder can retain powers and can limit the rights of councilors, beneficiaries and guardians, as well as, amending the Charter.
• Privacy: The names of the beneficiaries are not included in the public records.
• Perpetual Life: The foundation can be perpetual (indefinite lifetime).
• Asset Protection: The assets are protected from foreign debt collectors.
• Estate Planning: The founder’s heirs can benefit for unlimited generations.
• English: Gibraltar is a British Territory with English as its official language.
Gibraltar Private Foundation Name
The word “Foundation” must appear at the end of its name or its abbreviation “Fdn”.
Foundations cannot have the same names or similar to other legal entities in Gibraltar.
Definition of a Foundation
The law passed by the Gibraltar Parliament in March of 2017 which took effect in April defines a “Foundation” as:
• A separate legal entity;
• formed in Gibraltar;
• with the ability to hold and deal with real and personal properties in its own name as the legal owner; and
• be able to file lawsuits and be sued in a court of law.
Advantages
The following are some advantages for creating a Gibraltar foundation:
• Asset Protection – a good way to protect a family’s assets;
• Estate Planning – a solution to guaranteeing heir succession and holding assets to benefit specific beneficiaries for many generations;
• Prevention of Debt Collections – an effective legal tool for the prevention of foreign debt collections against the assets; and
• Tax Minimizing – a way to minimize global taxation.
Establishment
The Founder may establish the foundation by:
(a) Subscribe his or her name as the founder to a Foundation Charter;
(b) Endow the foundation with initial assets; and
(c) Otherwise complying with section 13 of the Act.
Irrevocable
All endowments to the foundation will be irrevocable.
Registration
Every foundation must be registered with the Registrar of Foundations (Registrar)
The Registrar will maintain a Foundations Register (Register) which will contain:
(a) Foundation’s name and registration number;
(b) Registration date;
(c) Councilors’ names and addresses;
(d) Guardian’s name and address;
(e) Registered office address; and
(f) Foundation’s Charter, initial endowment details, notarized acknowledgement by the councilors of the receipt of the endowment (assets) and they had no conditions
The Registrar will then issue a Certificate of Establishment as evidence of the foundation’s registration.
Foundation Charter
A private foundation’s charter will act similar to a company’s Articles of Association in that it will describe the management structure, the wishes of the founder, the duties of the councilors, and the guardian, along with the rights of the beneficiaries. In addition, it will direct how assets will be managed and distributed. It will also specify the removal and replacements of all parties and the duration of its lifespan.
The Foundation Charter will include the following:
(a) Name of the foundation;
(b) Founder’s name and address (if the founder is a legal entity, the place of registration and number);
(c) Foundations’ purposes;
(d) Initial endowment of assets;
(e) Declaration that the governing law if Gibraltar;
(f) Power to amend the Charter (including purpose) by the founder or any other person;
(g) How beneficiaries will be designated;
(h) Period of life (whether definite time period or perpetual);
(i) Registered local office address; and
(j) Service of process address in Gibraltar (if different from the registered office).
Amendments may only occur of the Foundation Charter specifically authorizes them, or a petition is made to the Gibraltar Court.
Foundation Rules – Further details regarding the running of the foundation will be included similar to a company’s by-laws called the Foundation Rules which shall:
(a) Describe the councilors’ functions;
(b) Procedures for appointing, resignation, and removal of councilors;
(c) Appointment of a guardian (if required), resignation and removal and replacement procedures;
(d) Procedures for the accumulation and distribution of assets;
(e) Procedures for future endowments of properties to the foundation;
(f) Procedures for winding up of the foundation; and
(g) Any other provisions the founder wishes to include.
Assets
Absent any fraud, when transferred to the foundation, assets will be the foundation’s property with full title to them. They will cease to remain as the founder’s property. The assets will not become the property of the beneficiaries until distributed to them in accordance with the Foundation’s Charter and/or the Foundation’s Rules and under the provisions of the Private Foundation Act of 2017 and its amendments.
The assets will be managed in accordance with the Foundation Charter, Foundation Rules and the Private Foundation Act of 2017 and its amendments.
Purpose
A foundation may be established for any purposes which are not illegal, immoral, or in contradiction with Gibraltar’s public policies.
While not engaging in trading or commercial activities, the foundation may do so as long as those activities are incidental in attaining the purposes.
A foundation’s purpose may be philanthropic or charitable, but is not a requirement.
Founder
Different than the founders of a foundation or trust settlors, statutes do not acknowledge the people who move assets into an FC. Although, their Constitution may acknowledge founders and keep rights and powers should he or she want them. As an example, founders might retain the rights to alter the terms and conditions in the foundation’s constitution.
Founders cannot reserve any powers other than the following:
(a) Power to amend the Foundation Charter and Rules;
(b) Power to amend the foundation’s purpose;
(c) Power to appoint or remove councilors; and
(d) Power to appoint or remove the guardian.
A founder may also be a beneficiary.
Beneficiaries
A beneficiary is an individual who will benefit from the foundation’s purposes. The foundation Charter may provide for specific beneficiaries different types of benefits. The Charter will specific the typical duties, rights, or powers of beneficiaries.
The founder could also be a beneficiary.
Councilors
Councilors serve the same functions as directors of a company or corporation. Councilors must abide by the terms of the foundation’s Charter and the Rules
Every foundation must include a resident licensed Gibraltar company to be on the foundation’s council.
A beneficiary may also be a member of the council.
Unless the Charter prescribes differently, every councilor will be liable for any loss in a property’s value due to a breach and any lost profits lost because of the breach.
The foundation’s Charter cannot limit a councilor’s liability for committing willful misconduct or fraud or acting in bad faith; or be granted indemnity for any such liabilities.
The Register of Foundations maintained by the Registrar must include the names of every councilor.
Guardian
If a foundation holds assets for the benefit of beneficiaries a guardian must be appointed to protect their interests.
He or she will be appointed by the founder or anyone else so authorized by the foundation’s Charter which will define the powers of the guardian.
Court Involvement
A Gibraltar Court may be petitioned to amend the Foundation Charter’s purpose when it has been fulfilled, or it cannot be carried out with the prescribed directions to fulfill the spirit of the gift, or the purpose fails to provide uses for all of the foundation’s properties.
Registered Office
Every foundation must maintain a local registered office to receive all official notices.
Annual Return
Every foundation will file an annual return with the Registrar stating the registered office address and verifying the names of the councilors and the guardian.
Foundations will keep proper books in accordance to international accounting standards for at least 5 years in regards to all funds received, expended, along with receipts of expenditures. The records will provide current accounting of all assets and liabilities. All records will be kept at the registered office. Councilors will have the right to inspect all records at any time.
Taxation
Foundations will be treated the same as corporations and companies for tax purposes and will be subject to the corporate tax rate which is currently 10% of all profits.
Note: beneficiaries, members, and shareholders who are American taxpayers or residing in a country taxing world income must disclose all income to their tax authorities.
Public Records
The records of the Registrar are public records. The names of the founder, councilors, and the guardian are public records. However, unless the beneficiaries’ names are in the Charter, their names will not be part of the public records.
Conclusion
A Gibraltar Private Foundation can enjoy the following benefits: total foreign ownership, founder can retain control, privacy for the beneficiaries, asset protection, estate planning, perpetual life, and English is the official language.
