Guide to Register Labuan Private Foundation
Labuan Private Foundation is a registered body corporate with a separate legal entity, it is commonly used for private wealth management, business succession and asset preservation.
Advantages of Registering Labuan Private Foundation:
- It is a legal entity with the ability to -enter into contracts or any other lawful dealings on its own
- Protection from creditors’ claims and against claims or intent to defraud with regards to the act of establishing the foundation, the disposing property and founder as beneficiary
- Protected from foreign claims and cannot be forcefully liquidated to satisfy other obligations such as claims arising from divorce, lawsuit or creditors
- All Malaysia assets and investment can be endowed
- Protection against forced heir ship
- Not subject to compulsory perpetuity period
- Confidentiality and anonymity. Information are not searchable publicly
- Simple and straight forward tax systems in Labuan with zero tax for investment holding
- Distributions to its beneficiaries are tax-exempted
- No foreign exchange controls
- No withholding tax /capital gain tax / inheritance tax
- No stamp duty on all instruments relating to offshore business activities
What happens to the Foundation after the Founder death
The officers managing the foundation can continue to administer the foundation based on the requirements of the Charter and the Articles. The administrator will be not personal liable of the debts of the Foundation. The liability of a Foundation is limited to the value of its net assets. For succession planning, the formalities need not conform to making a will and there is no probate proceedings required for distributions of the wealth and to disband the Foundation. After the initial 2 years of the crawl back period is over, the assets of the Foundations are protected against enforcement of foreign claims. Judgments cannot be enforced with regards to succession rights, claims of creditor in event of solvency and also with regards to the personal or proprietary consequences of marriage.
Key Features and Operation Requirement of Labuan Private Foundation
1. To maintain a Registered Office in Labuan, which can be the Trust Company’s office
2. No capital requirements as Labuan Private Foundation with only a minimum endowment of USD 1.00 as an initial asset at time of establishment
3. Legal Status
*It is a legal entity with rights and status of a separate and independent person
*It can be shareholder of a company
*It can enter into contracts, buy and sell properties, own bank accounts or own shares or interest in other corporations
*For purposes of minimizing risk, it is encouraged that all trade activities (if any) should be carried out through an underlying company or partnership. Trade or commercial activities are incidentals or ancillary to its main purpose which is the management of its property
4. Duration of the Labuan Private Foundation may be fixed or infinite life span
5. Currency-to carry on business in any currency other than the Malaysian currency except as permitted by the relevant authorities
6. Types of Property, Assets permissible to be endowed to Labuan Private Foundation
a. Assets of every kind whether corporeal or incorporeal, tangible or intangible, movable or immovable, however acquired may be endowed to a Labuan Private foundation; and
b. Legal documents or instruments in any form, including electronic or digital, evidencing title to or interest in, such assets as described in the above (a) including bank cheques, money orders, shares, securities, bonds, bank drafts and letters of credit.
c. 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.
d. Property of the Labuan Foundation can be Malaysian and/or non-Malaysian property.
7. Malaysian Property endowed to Labuan Private Foundation must seek prior approval from Labuan FSA. The qualifying criteria for approval shall include the Malaysian property(ies) but not limited to the following:
a. To obtain all necessary approvals from the relevant authorities in relation to the endowment of property(ies) to the foundation;
b. Property(ies) to be endowed shall be obtained through lawful means.
c. Property(ies) endowed or to be endowed to the Labuan foundation must include consent letters from relevant authorities, where necessary, to be submitted with the application or within 60 days from the registration date of the endowment of the property(ies). The relevant authority(ies) in this context may include the respective land office or local authority such as Bank Negara Malaysia, Companies Commission of Malaysia and Securities Commission of Malaysia.
Malaysian founders are free to endow Malaysian property to the foundation as permitted by Foreign Exchange Administration (FEA). However, it is required to provide in the charter that any subsequent conversion or transfer of the endowed property for investment abroad would need to comply with FEA rules.
8. Creditors’ claims
Being a separate legal entity, if the transfer of assets was completed prior to the claim arising, the assets are beyond the reach of a creditor’s claim against the Founder. it is important that the transfer of assets:
a. takes place before the creditor’s cause of action accrued
b. takes place two (2) years from date of registration
c. must not render the Founder’s insolvent; andClick here for FAQ on Labuan Private Foundation
d. must be made without any intent to defraud the creditor
9. Accounts of Labuan Private Foundation
All accounting records and other records shall be maintained in Labuan. They must be made available for inspection by the council members, supervisory person, officers and the approved auditor, if appointed.
Below is the table for your better understanding of different features offered by Labuan Foundation, Labuan Trusts and Labuan Company:
Redomiciliation of Labuan Private Foundation
A foundation established in another jurisdiction may be legally redomiciled to Labuan and vice versa, provided that the other corresponding jurisdiction permits.
Dissolution of Labuan Private Foundation
The foundation may be dissolved upon the passing of a resolution by the officer on the basis that:
A. the foundation is established for a definite period and that period has expired
B. the purpose of the foundation is fulfilled or becomes incapable of fulfillment; or
C. the charter stated the dissolution termsn. After the dissolution, the ownership of the remaining assets will be transferred to the beneficiary.
6 Key Personnel for Labuan Private Foundation
The Founder – person who establishes the foundation
a. The main controller retain all power of the Foundation, reserves the right to change the Charter of the foundation
b. Minimum one, either natural person or corporate entity
c. Subscriber to the Charter
d. May be residents or non-residents of Malaysia
e. May also be a council member and one of the beneficiaries
a. May include individuals, corporate entities or charities and are those who have vested interest in assets of the foundation
b. May be residents or non-residents of Malaysia
c. Unless specifically provided in the charter or articles, beneficiaries have no rights to the foundation’s assets and are not owed any fiduciary duties
a. Compulsory appointment
b. One or more must be appointed by Founder prior to registration of the foundation
c. May be either natural person or corporate entity
d. May be residents or non-residents of Malaysia
e. Founder or Beneficiary may be appointed as Officer (but not be a council member at the same time)
f. Duties are inter alia to ensure proper administration of the foundation and to carry out decisions of the Council
The Council Members
a. Not a compulsory appointment, at the discretion of the Founder
b. If appointed, one or more, either natural person or corporate entity
c. May be residents or non-residents of Malaysia
d. Cannot act as Officer at the same time
e. 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 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 LFSA.
f. Council members supervise Officers of the foundation. The council’s decision must be in line with the objectives and purposes for which the foundation was established
g. Council members do not owe fiduciary duty to beneficiaries and hence, this eliminates competing beneficiaries interests
a.A compulsory appointment, must be a licensed Labuan Trust Company
b.Acts as service provider to the foundation and performs a compliant agent function and acts as a conduit between foundation and Labuan FSA
The Protector / Supervisory Person
A protector or supervisory person may be appointed by the founders. These parties may monitor the Council’s decision, power to add or remove Officers, Council members etc.
Fees payable to Labuan FSA annual fee for Labuan Foundation is RM750 payable by 15th January each year. Application to register a Labuan Foundation : 1- to 2 months.
Please contact us at +603-2161 0354 or email your enquiry form to set up an appointment. We “simplify the complexities” of your Labuan investment.