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ADGM Trust Law

The constitution of the United Arab Emirates under article 121 has provided the legislation domain for both the Federation and the States. The Constitution of UAE has extended the Federation Jurisdiction of Legislation including Financial Free Zones and exempted them from the application of federal laws and regulation. Federal Law No. 8 of 2004 allows establishing Free zones for business and financial activities. Abu Dhabi Global Market (hereafter called ADGM) was issued pursuant to Federal Legislation and Abu Dhabi FREEZONE Legislation LAW NO.4 OF 2013 providing for Civil and Commercial Laws.

The ADGM Trust

The ADGM trust accumulates the financial institutions, corporations, and organizations for their engagement, development, and prosperity under a global legal regime that is based on the preliminary Common law of the United Arab Emirates. Through ADGM, a distinctive, striking and unwavering podium for the management of family wealth is possible in the UAE. It recommends an ample space for business and related solutions to grant the flexibility required to preserve and manage family assets, business and wealth.

Limitations in Foreign Laws

No trust and disposition of property is declared valid unless governed and recognized by the law of the Abu Dhabi Global Market. The capacity of any settlor in relation to the trust may be questioned if the trustee, beneficiary or any other person is subjected to deprivation of rights. The law of any foreign jurisdiction prohibits the trust or defeats any rights, claim interest conferred by foreign law upon any person due to the personal relationship with the settlor.

Heir-Ship Rights

An heir-ship right conferred by foreign law is linked to the property of a living person not being allowed by affecting the ownership of real property and any property other than real property wherever it is situated.

Non-Charitable Purpose Trusts

In a non-charitable trust, there is no beneficiary but rather it resides for some purposes, it is not precisely giving benefit to an individual and is enforced by not some specific persons. A non-charitable purpose trust is enforced by the enforcer to carry it out.

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Invalid Non-Charitable Purpose Trust

A non-charitable purpose Trust is only allowed to carry out if it is lawful and according to the Public policy of ADGM. A non-charitable purpose will be invalid if it is immoral or contrary to the Public Policy in the Abu Dhabi Global Market.

1.  Trust instrument

A non-charitable purpose trust may be declared by the trust instrument including the purpose of holding or investing in shares in a company or person or any other assets constituting the trust property subject to the lawful moral purpose and should be according to the law and policy of the ADGM. The trust instrument stipulates how to deal with the termination, the procedure for the disposition of additional property of the trust upon the event of termination.

2. Enforcer and ADGM Trust

The enforcer of the ADGM Trust implements the trust related to all kinds of obligations in a non-charitable rationale.

  • The person working as enforcer may be a trustee as well, having no conflict of interest. The enforcer shall not take any profit directly or indirectly from his appointment or for any other person for such a purpose. The enforcer cannot make any transaction related to trust property that may profit him or the trustee.
  • The enforcer may resign from his office by giving written notice to the trustee which shall take effect upon delivery of notice.
  • If the court orders the removal of an enforcer, he shall be ceased immediately from the office. The removal of the Enforcer also effected immediately, if there is any specific provision in the terms and conditions of the trust deed.
  • A trustee of a trust can take steps by applying to the Court to appoint or replace an enforcer to secure the non-charitable purposes trust if there is reason to believe that the enforcer is unwilling, refusing to act, unfit to act, incapable of acting.
  • The Court may make, rescind or vary an order concerning the appointment or removal of an enforcer concerning any non-charitable purposes of the trust.

3. Termination of Non-Charitable Purpose Trust

The non-charitable purpose trust is carried out if there is an adequate purpose. If it is legal, follow the public policy. A non-charitable purpose trust is considered to be invalid if,

  • It is immoral and unlawful
  • It is contrary to public policy in the Abu Dhabi Global Market
  • No purpose of the trust remains to be achieved

Enforceability of a Foreign Trust

A foreign trust is actable unless it follows the rules and regulations that are authorized by ADGM law. A foreign trust is unenforceable in the Abu Dhabi Global Market if it supports anything contrary to law in the Abu Dhabi Global Market and to bestow any right or impose any obligation, the exercise of which is distracting to any law in force in the UAE.

Conclusion

ADGM Laws have an imperative role in the escalation and advancement of the business community in the UAE. These laws are direct and appropriate ways to guard the assets, properties and business. The trustee gives his property to settlers to create a trust. The trustee ought to have legal possession on the trust property. The terms and conditions are decided earlier to govern a trust vide trust deed.

Hazim Darwish

Hazim Darwish, is a Senior Partner of HHS Lawyers in UAE. Practicing law for almost a decade, he has in-depth knowledge on UAE legislation with particular expertise on legal drafting, contract drafting, labor disputes, family law, and regulatory compliance for business organizations. Hazim Darwish also provides counsel on legal rights and obligations in the UAE to clients, including individuals and businesses subject to investigation or prosecution under Criminal Law by major regulators.