A Labuan Foundation is based on civil law structure and can be described as hybrid of a trust and corporation. Foundation is a corporate body with having an independent legal entity with its legal personality, capable of entering into legal relations and holding property in its own right.

Establishment of Labuan Foundation provides more clarity on legal issues such as assigning the rights of founder, more flexibility and stronger asset protection.

Foundation is designed for people who prefer to have control of their assets, business or otherwise, and it can be very useful in tax planning as well as providing significant legal protection to their assets.

The structure of a Labuan foundation consists of the following:

1) Registered Office

A Labuan foundation must be registered with Labuan FSA. The Foundation is governed by its governing documents, i.e. the charter and articles.

2) Charter and Article

The Charter and Article is the main constituent document of Labuan Foundation. Section 8 of Labuan Foundation Act 2010 makes it compulsory for every foundation to have a Charter which must be duly signed by each founder. Through the Charter of foundation, it is therefore sets out parameters, objectives and purpose of the establishment of Labuan Foundation.

A Labuan Foundation is established when the founder subscribe his or her name to the charter of a Labuan Foundation by complying all the requirement of Labuan Foundation Act 2010 and received a certificate of registration from Labuan FSA.

The certificate of registration issued by Labuan FSA shall be the conclusive evidence that the Labuan Foundation is registered by the name specified in the certificate with the Authority.

3) Key Management

The key management of a Labuan foundation consists of a founder, council member an officer and a secretary. The council is responsible for the general supervision of the foundation’s management and ensuring that the purpose for which the foundation was established is fulfilled in accordance with the charter, articles and the governing 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 the filing and lodging of documents with Labuan FSA.

4) Initial endowment of assets

Labuan Foundation can be establish with the initial endowment of USD1.00. However, any property of a Labuan Foundation must not include any Malaysian property unless prior approval is obtained from the Authority or the Labuan Foundation is a foundation that meant for charitable purposed.

5)  Beneficiaries

Beneficiaries may include individuals or corporate entity and may be resident or a non-resident and are those who have a vested interest in the assets of the foundation. Unless specifically provided in the charter or articles, beneficiaries have no rights to the foundation’s assets and 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 or when the purpose of the foundation is fulfilled or becomes incapable of fulfillment or the charter requires such dissolution.

After the dissolution, the ownership of the remaining assets will be transferred to the beneficiary in accordance with the constituent documents, and, as for Islamic Foundation, the ownership of the remaining assets will be transferred in accordance with Shariah principal.