In the non-profit world, one often hears of “setting up a
foundation”.
But what does that actually mean and how does one do it?
Well, there is more than one type of foundation, and each
has its own set of rules and requirements.
Let’s look at one you may not have heard of before, called a
Labuan foundation. The Labuan Foundations Act 2010 (Act 706) (“the Act”) is the governing statute in question.
According to an article in the popular magazine Smart
Investor [Issue 01.2015], foundations set up in Labuan can also include
charitable foundations.
A Labuan foundation is a corporate body and a separate legal
entity. In addition to non-charitable purposes, a Labuan foundation can also be
established for a charitable purpose (provided such purpose is lawful). A Labuan foundation can also be an Islamic
foundation, if its aims and objectives comply with Shariah principles.
What are the benefits of setting up a
Labuan charitable foundation?
It’s relatively cost-effective to set up (approximately RM
750), and the annual renewal fees are not that prohibitive either (a recurrent
fee of RM 750). The founder of the Labuan charitable foundation can also
exercise a degree of control over the management and direction of the
foundation’s activities, use of assets etc, if he is appointed to the council.
Next, we look at what constitutes a
charitable purpose.
The Labuan International Business and Financial Sector
Malaysia’s website at http://labuanibfc.com/areas-of-business/89-150/financial-services/labuan-foundations.html
offers a concise overview of the detailed provisions of the Act as well as how
to apply for registration, eligibility criteria, set up and management of the
foundation, fees, etc.
A
charitable purpose means and includes any of the following description of
purposes:
- The prevention and relief of
poverty;
- The advancement of religion,
profession or education;
- The advancement of health
including the prevention and relief of sickness, disease or of human
suffering;
- Social and community advancement
including the care, support and protection of the aged, people with a
disability, children and young people;
- The advancement of culture, arts
and heritage;
- The advancement of amateur sports,
which promote health by involving physical or mental exertion;
- The promotion of human rights,
conflict resolution and reconciliation;
- The advancement of environmental
protection and improvement;
- The advancement of animal welfare;
or
- The advancement of facilities for
recreation or other leisure-time occupation in the interest of social
welfare.
A
Labuan charitable foundation is allowed to own Malaysian assets and properties
(while there are some restrictions on this governing foundations set up for
non-charitable purposes).
As always, you are advised to contact a
company secretary or lawyer for advice before opting to use this vehicle for
your non-profit organisation.
Other useful links:
