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A Labuan Foundation is a corporate body with a separate legal entity, usually established to hold assets with the objective of managing the assets for the benefit of a class of persons on a contractual basis. A separate legal entity from its managers (i.e. its officers and its council), it is typically used for private wealth management and charitable purposes.

In the case of an Islamic Foundation, the foundation's aims and operations shall be in compliance with Shariah principles.

The structure of a Labuan Foundation consists of the following:

  1. Registered office A Labuan Foundation must be registered and have a registered office. The administration and operations of a foundation are carried out in accordance with contractual rather than fiduciary principles. Similarly, all relationships within a foundation are contractual and are governed by its governing documents, i.e. the charter and articles.
  2. Charter The charter sets out the parameters within which the Labuan Foundation is to be managed and governed.
  3. Key Management The key management of a Labuan Foundation consists of a council, an officer and a secretary. The council is responsible for the general supervision of the foundation management and ensuring that the purpose for which the foundation was established is fulfilled in accordance with the charter, articles and the law. In effect, the council is similar to the Board of Directors of a company. The duties of the officer are primarily administrative as the officer is responsible for ensuring the proper administration of the foundation. The secretary acts as the service provider to the foundation and performs all secretarial functions including filing and lodging of documents with Labuan FSA.
  4. Assets Assets placed in the Labuan Foundation are owned by the foundation and are to be applied only for the benefit of the identified purpose. However, these assets must be non-Malaysian properties unless it is a charitable foundation or as approved by Labuan FSA.
  5. Beneficiaries This may include individuals, corporate entities or charities and are those who have vested interest in the assets of the foundation. Unless specifically provided in the charter or articles, beneficiaries have no rights to the foundations assets and are not owed any fiduciary duties.
  6. Dissolution 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 that period has expired; the purpose of the foundation is fulfilled or becomes incapable of fulfilment; or the charter requires such dissolution. After the dissolution, the ownership of the remaining assets will be transferred to the beneficiary
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