• The use of Foundations is common in civil law jurisdictions.
  The Gibraltar’s Private Foundations Act came into force on 11 April 2017 (“the Act”).
  Under the Act, a Gibraltar Foundation which is a legal entity may be established for any purpose or purposes which are capable of fulfilment and which are not unlawful, immoral or contrary to public policy in Gibraltar provided that it is not established to carry on any commercial activities. It can, however, carry out commercial activities that are ancillary or incidental to its purpose.

• 1. Parties to a Foundation
• 1.1 The Founder
  1.1.1. The founder can be a member of the class of beneficiaries and also a councillor or
  also a guardian.
  1.1.2 He will endow the Foundation with his initial assets which will become the
  Foundation’s property, register the Foundation and determine its purpose, constitution,
  and councillors and guardian (the latter if necessary).
  1.1.3 The founder is exclusively allowed to reserve powers to himself, on the condition
  that the following powers are specifically included in the charter:
  1.1.3.1 power to vary or amend the terms of the constitutional documents, in whole
  or in part;
  1.1.3.2 power to vary or amend the purpose of the Foundation, in whole or in part;
  1.1.3.3 power to remove or appoint councillors to the Foundation’s council; and
  1.1.3.4 power to remove or appoint a guardian to the Foundation.

• 1.2 Council and Councillors
• 1.2.1 The Foundation is managed by a council (‘the Council’) which must at all times include
  a Gibraltar resident body corporate licensed by the Gibraltar Financial Services Commission
  to provide professional trustee services. Additionally it may also comprise any number of
  additional individuals or corporates.
  1.2.2 A founder or beneficiary may be a councillor, not a guardian. A councillor of one
  Foundation may also be the councillor of another Foundation.
  1.2.3 The Council has all the powers of an absolute beneficial owner in terms of
  management, administration and investment of the property of the Foundation.
  1.2.4 The councillors have a duty to the Foundation to act in good faith with a view to the
  interests and the purposes of the Foundation, and they must discharge their duties with due
  care, diligence and skill.
  1.2.5 Where the Constitutional Documents identify enfranchised beneficiaries, the
  councillors of that Foundation have a duty to account to those enfranchised beneficiaries in
  relation to the Foundation’s property. Where the Foundation has no enfranchised
  beneficiaries, the duty to account will be owed to the Foundation guardian.

• 1.3 Beneficiaries
• 1.3.1 A Foundation can be set up with or without beneficiaries.
  1.3.2 A beneficiary of a Foundation is entitled to benefit from the Foundation and will be
  identified either in the Foundation’s Constitutional documents by name, or as a member
  of a class of beneficiaries, or by his relationship to another person.
  1.3.3 A founder, councillor or guardian of a Foundation may be a beneficiary.
  1.3.4 The enfranchised beneficiary and the disenfranchised beneficiary are the two types
  of beneficiary under the Act:
  1.3.4.1 As enfranchised beneficiary will be qualified to:
  1.3.4.1.1 get copies of the Constitutional Documents;
  1.3.4.1.2 obtain disclosure of records and accounts of the Foundation; and
  1.3.4.1.3 make an application to the Gibraltar Court to request an order to
  prevent a change to the Foundation’s purpose or for the dissolution of the
  Foundation.
• 1.3.4.2 A disenfranchised beneficiary is a beneficiary who is not entitled to all of the
  above rights, notwithstanding that he may be entitled to one or more of them.
  1.3.5 The Foundation’s constitution may provide for a disenfranchised beneficiary to
  become enfranchised in certain circumstances.

• 1.4 Guardian
• 1.4.1 Under the Act, at least one person will be appointed as a guardian whenever a
  Foundation is established for:
  1.4.1.1 any purpose in respect of which there are no designated beneficiaries;
  1.4.1.2 the benefit of a class of beneficiaries which is not sufficiently certain;
  1.4.1.3 the benefit of a large class of beneficiaries; or
  1.4.1.4 the benefit of a class of beneficiaries which includes one or more
  disenfranchised beneficiaries.
  1.4.2 The guardian has a duty to act in good faith with a view to the interests and the
  purposes of the Foundation, and discharge his duties with due care, diligence and skill.
  1.4.3 The guardian owes a fiduciary duty to the beneficiaries, and to the founder of the
  Foundation in the absence of beneficiaries to apply his powers towards the attainment of
  the purpose of the Foundation.

• 2. Constitutional documents
• 2.1 Charter
  2.1.1 The following information will be part of the Charter:
  2.1.1.1 Name of the Foundation;
  2.1.1.2 Name and address of the founder;
  2.1.1.3 Purpose of the Foundation;
  2.1.1.4 Assets which constitute the initial assets of the Foundation;
  2.1.1.5 Statement that the governing law of the Foundation shall be the law of
  Gibraltar;
  2.1.1.6 Power of the founder or any other person to amend the Charter including (if
  applicable) the power to amend the purposes of the Foundation;
  2.1.1.7 Manner in which the beneficiaries of the Foundation are to be designated;
• 2.1.1.8 Whether the Foundation is established for an indefinite period or a definite
  period and, where it is established for a definite period, that period;
  2.1.1.9 Address of the registered office in Gibraltar of the Foundation; and
  2.1.1.10 Address in Gibraltar for service of documents on the founder (if different to
  the registered office).
  2.1.2 This constitutional document can be amended on the condition that the Charter
  itself allows for such amendment, or that is it consequential to a ruling by the Supreme
  Court of Gibraltar further to an application made under the provisions of the Act.

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• 2.2 Rules
• 2.2.1 The Rules generally relate to the management and administration of the Foundation
  and must:
  2.2.1.1 prescribe the functions of the councillors;
  2.2.1.2 detail the procedures for the appointment, resignation and removal of
  councillors;
  2.2.1.3 detail the procedures for the appointment, resignation and removal of
  guardians where a guardian must be appointed ;
  2.2.1.4 make provision for the remuneration of councillors and any guardian;
  2.2.1.5 prescribe the manner in which property of the Foundation may be
  distributed, accumulated or applied;
  2.2.1.6 detail whether, and if so how, further property may be endowed upon the
  Foundation; and
  2.2.1.7 prescribe the manner in which property of the Foundation shall be
  distributed on a winding up of the Foundation.
  2.2.2 An amendment to the Rules is permissible if the Rules allow an amendment, or if an
  application is made to the Supreme Court of Gibraltar under the provisions of the Act.
  2.2.3 The Rules may provide the following detailed information in respect of management
  of the Foundation:
  2.2.3.1 the possibility for the addition and removal of beneficiaries, either revocably
  or irrevocably;
  2.2.3.2 some obligations imposed upon beneficiaries as a condition of a benefit;
  2.2.3.3 the interest of a beneficiary made–
  - liable to termination;
  - . subject to a restriction on alienation or dealing; and - subject to the diminution or termination in the event of the beneficiary
  becoming bankrupt or subject to a similar process of law;
  2.2.3.4 the circumstances for the appointment, removal and period of office of an
  auditor;
  2.2.3.5 the circumstances in which it may be necessary to appoint a guardian and
  the procedures for the appointment, resignation and his removal should they be
  different to the provisions of this Act in respect thereof;
  2.2.3.6 the circumstances in which the Foundation may be migrated and, if so, the
  conditions to be satisfied in respect of such a migration;
  2.2.3.7 the circumstances and manner in which the Rules may be amended; and
  2.2.3.8 any other matter that the founder deems fit to include.

• 3. Establishment and registration
• 3.1 The Establishment of a Foundation is subject to the founder:
  3.1.1 Irrevocably endowing the Foundation with its initial assets;
  3.1.2 Subscribing his name to the charter and
  3.1.3 Registering the Foundation with the Gibraltar Registrar of Foundations.
  3.2 The Foundation will:
  3.2.1 become a legal entity separate from its founder, its councillors and its beneficiaries
  (if any);
  3.2.2 be able to hold and deal with property in its own name as an absolute legal owner;
  and
  3.2.3 be able to sue and be sued in its own name.
  3.3 The Register of Foundations
  3.3.1 The Act provides for the Registrar of Foundations’ office (‘the Registrar’) as well as a
  Register of Foundations (‘the Register’).
  3.3.2 The Register records all registered Foundations and contain on each Foundation the
  following information available to the public:
  3.3.2.1 name and registered number of the Foundation;
  3.3.2.2 date of registration;
  3.3.2.3 name and address of the councillors;
• 3.3.2.4 name and address of the guardians, if any; and
  3.3.2.5 details of the registered office.
  3.3.3 The Register will also contain any further documents required to be filed with the
  Registrar under the Act, which shall not be available to the public.
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• 4. Taxation
• 4. Taxation
  4.1 A Gibraltar Foundation is always deemed to be resident in Gibraltar unless Gibraltar
  residents and the issue of Gibraltar residents have been irrevocably excluded from benefit.
  4.2 Under the Income Tax Act 2010 a Foundation is subject to tax if it is resident in Gibraltar.
  4.3 Taxation of Foundations is similar to the taxation of Gibraltar companies and trust. The rate
  of tax is 12.5% which will be charged on profits or gains accrued or derived in Gibraltar from
  any trade, profession or vocation.
  4.4 Gibraltar resident beneficiaries of a Gibraltar resident Foundation are liable to be taxed on
  income received from a Foundation which can be matched with the taxable income of the
  Foundation. For example they will be taxed on distributions received from the Foundation, the
  use of assets owned, used or leased by the Foundation, or any loan received from it.
  Such individuals would be taxed at the personal tax rates applicable to them in Gibraltar.
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• 5. Registrations with Comapnies House
• 5.1 Every Foundation must file with the Registrar successive Annual Returns, each of which is
  made up to a date not later than the anniversary of the Foundation’s registration
  5.2 Every Foundation must keep proper books of account at its registered office. A Foundation
  will have up to 18 months to prepare its first set of accounts. The following financial years will
  start on the day immediately following the end of the Foundation’s previous financial year and
  ending 12 months thereafter.
  5.3 Notice of any change in registered particulars must be delivered to the Registrar within 21
  days from the date of the change
• 5.4 An Overseas Foundation may apply to the Registrar to be registered as a Gibraltar
  Foundation.
  5.5 In accordance with the provisions of the Act a company limited by guarantee or by shares
  and guarantee that is incorporated and registered under the Companies Act 2014 may be de-
  registered from the Register of Companies and be re-registered as a Foundation.

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Please note that the information provided and the description of the Act in this summary is
intended for general guidance only. We do not assume legal responsibility for the accuracy of
the document or the consequences of relying on it. No action should be taken in reliance on it
without specific legal advice.

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