This technical briefing paper summarises the main characteristics of an Isle of Man foundation under the Foundations Act 2011. This paper relates to the Act; the rules of the foundation may make different or additional provision in most areas.
It is likely that foundations will be used mainly for private wealth and charitable purposes, although there is no reason why they could not be used in a commercial context also. A foundation can be the equivalent of a family trust, used to benefit successive generations of family members; or as a charitable foundation operating in a similar way to a charitable trust. Or a foundation could be the equivalent of a purpose trust and could have as its objects the ownership of assets. A foundation might for example be preferred instead of a trust (a) to own assets which are wasting or risky (b) to hold “orphan” assets, for example the shares in an SPV in a financing structure or in a private trust company or (c) where the client is more familiar with civil than common law jurisdictions and thus understands a foundation better than a trust.
Foundations have long existed in the law of continental jurisdictions, but common law jurisdictions are increasingly legislating to introduce the concept. The Explanatory Notes to the Foundations Bill 2010 state that foundations will add to the number and range of products available to the financial services sector in the Isle of Man; and that foundations will provide a new vehicle which may permit entry by the Isle of Man into new markets in an increasingly competitive environment.
Read the full article here: A foundation for the future?