Compliance Alert: The UAE’s New Onshore Trust Law
The Ministry of Finance in the UAE has recently issued Decree-Law No (19) of 2020 regarding Trusts (Trust Law).
According to Younis Haji Al Khoori, Undersecretary of the UAE’s Ministry of Finance, “the Trust Law was issued to create legal tools to enable companies or people owning capital and financial rights to hand over their wealth and rights to a Trustee, who is entrusted with managing and developing the funds. This is done through a special document called a Trust Deed, and it is recorded electronically to reflect the assets – whether movable or property. After that, the existence of trust rights is indicated in the official records of those assets”.
How is the Onshore Trust Law different from the financial free zones?
- This new regime is unique as it has been established within a Civil Law Market;
- It differs from the Trust Law issued in the two financial free zones (the Dubai International Financial Centre and the Abu Dhabi Global Market) as these jurisdictions are based on Common Law; and
- Unlike the financial free zones, the new Trust Law requires the trust and assets to be registered with the Regulator.
The Onshore Trust Law is an important shift for the UAE as the trustee concept was not previously recognised in the jurisdiction. This meant local families and expats alike may have been required to set up such legal structures offshore or set-up a commercial company onshore, which was not particularly designed for this purpose.
The new Trust Law:
- Offers individuals and companies the right to transfer assets to a trustee to manage and grow.
- Allows for the creation of an investment fund. The Trust Law contains a section on private trust which permits security trading and dealing in financial markets;
- Similar to a UK structure, it can be used to accumulate pension funds;
- Encourages charitable trusts;
- Specifies that a trust must be managed by a qualified and experienced person or institution.
Why is the new regime important?
The new regime:
- Is a great vehicle for protecting family-owned assets and corporate structuring;
- Enhances the efficiency of financial legislation and policies in the country;
- Protects capital and allows a range of assets including real estate;
- increases foreign investments;
- Encourages long term succession planning in the region and perhaps an opportunity for individuals to consider their retirement in the region.
- The new Trust Law provides a new mechanism for the management of wealth and funds by establishing to a safe, developed business and investment environment in the region; and
- Creates a competitive and attractive advantage for the UAE’s financial sector. According to Reuters, the UAE is now recognised as the 10th largest jurisdiction in the world and the establishment of such laws will inevitably continue to position the UAE as a leading global financial hub.
How can we help?
We are a team of highly skilled and qualified professionals, with specialised expertise and experience across the financial services industry including FinTech and digital assets, wealth management, banking, fund management and others and multiple related fields from reputable jurisdictions.
We assist in understanding and meeting the regulatory obligations and compliance in the UAE (including DIFC/DFSA, ADGM/FSRA, SCA and Central Bank) for a new or existing business.
We can assist if you wish to set up and conduct the following regulated activities:
- Acting as the Trustee of an Investment Trust;
- Providing Trust Services (where it is acting as trustee in respect of at least one express trust); and
- Providing Trust Administrative services (where it is not acting as trustee in respect of an express trust)
Our comprehensive regulatory and compliance service offerings include:
- Preparation of application for authorization
- Preparation of Regulatory Business Plan
- Drafting of policies and procedures aligned to the relevant regulatory obligations as per the rulebooks
- Liaising with UAE Regulators for financial services permission and company set-up
Providing compliance advisory on an ad-hoc basis or even act as the compliance officer on an outsourced basis
Partner & Head – Regulatory & Compliance Services