Legislation Details
- Full Title: Federal Decree by Law Concerning Trust
- Law Type: Federal Decree-Law
- Law Number: [no number] of 2023
- Issued Date: 25 Sep 2023
- Effective Date: 30 Sep 2023
- Official Gazette: No. 760
- Sector: Finance and Banking
- Status: Active
- Number of Articles: 131
- Chapters/Parts: 11
- Amendments: 0
Summary
This Federal Decree-Law regulates the creation and management of trusts in the United Arab Emirates. It establishes the legal framework for setting up trusts, defining the roles and responsibilities of settlors, trustees, beneficiaries, and trust protectors. The law aims to provide a comprehensive legal structure for trusts to facilitate wealth management, asset protection, and succession planning for individuals and businesses in the UAE. It is an important piece of legislation for the finance and banking sector, as it introduces a new legal vehicle for investment and wealth preservation. (Federal Decree by Law Concerning Trust, 2023, Arts. 1-3)
What is the scope and purpose of this law?
The Federal Decree-Law applies to all trusts created in accordance with its provisions, except for those established in the UAE's Financial Free Zones which have their own trust legislation. The law grants trusts legal personality, financial and administrative independence, and the right to litigation, with the trustee representing the trust. The trust property and its dividends are not considered part of the estate of the settlor, trustee, or their heirs in the event of death, bankruptcy, or liquidation. (Federal Decree by Law Concerning Trust, 2023, Art. 2-3)
What are the key definitions under this law?
The law provides the following key definitions:
- Trust: The legal person established by virtue of the Trust Instrument to achieve the purpose of the trust.
- Settlor: A natural or legal person who creates the trust and transfers its property to it.
- Trustee: A natural person, including a professional trustee, or a professional legal person appointed to hold the authorities and powers identified in the Trust Instrument.
- Beneficiary: The person entitled to a personal right by virtue of the Trust Instrument, including the person entitled to or may be entitled to the trust's dividends or property.
- Trust Protector: A person appointed by the settlor to protect the trust.
- Competent Authority: The local authority in the concerned Emirate responsible for verifying the validity of the Trust Instrument and registering it.
(Federal Decree by Law Concerning Trust, 2023, Art. 1)
What are the main obligations and requirements?
The key obligations under this law include: 1. The trust property must be owned by the settlor and free of any third-party rights. (Federal Decree by Law Concerning Trust, 2023, Art. 4) 2. The trust instrument must be approved by the Competent Authority and registered in the official record. (Federal Decree by Law Concerning Trust, 2023, Art. 5) 3. The purpose of the trust must be clearly defined, legitimate, and achievable. (Federal Decree by Law Concerning Trust, 2023, Art. 6) 4. The settlor must meet certain eligibility conditions, and legal persons must obtain approval to dispose of their property. (Federal Decree by Law Concerning Trust, 2023, Art. 9) 5. Trustees must fulfill various obligations, including reporting, record-keeping, and acting in the best interests of the beneficiaries. (Federal Decree by Law Concerning Trust, 2023, Arts. 23-28)
What licensing, registration, or approval requirements exist?
The law requires the following approvals and registrations: 1. The trust instrument must be approved by the Competent Authority. (Federal Decree by Law Concerning Trust, 2023, Art. 5) 2. The trust instrument must be registered in the official record maintained by the Competent Authority. (Federal Decree by Law Concerning Trust, 2023, Art. 44) 3. The trust property must also be registered with the Competent Authority. (Federal Decree by Law Concerning Trust, 2023, Art. 45) 4. Professional trustees must be licensed to carry out their duties according to the provisions of this law or other applicable legislation in the UAE. (Federal Decree by Law Concerning Trust, 2023, Art. 1)
What rights and protections does this law provide?
The law grants the following rights and protections: 1. The trust acquires legal personality, financial and administrative independence, and the right to litigation. (Federal Decree by Law Concerning Trust, 2023, Art. 3) 2. The trust property and its dividends are not considered part of the estate of the settlor, trustee, or their heirs in the event of death, bankruptcy, or liquidation. (Federal Decree by Law Concerning Trust, 2023, Art. 3) 3. Beneficiaries have the right to trust dividends as specified in the trust instrument. (Federal Decree by Law Concerning Trust, 2023, Art. 31) 4. Beneficiaries can assign their right to trust dividends. (Federal Decree by Law Concerning Trust, 2023, Art. 32) 5. The law provides for the appointment of a trust protector to protect the trust. (Federal Decree by Law Concerning Trust, 2023, Arts. 34-36)
Which authorities or bodies are responsible for enforcement?
The key authorities and bodies responsible for the enforcement of this law are: 1. The Competent Authority in each Emirate, which is responsible for verifying the validity of the trust instrument and registering it. (Federal Decree by Law Concerning Trust, 2023, Arts. 1, 42, 44) 2. The Competent Court, which has the authority to issue decisions related to the trust, such as the distribution of trust property at the end of the trust period. (Federal Decree by Law Concerning Trust, 2023, Art. 37)
What are the penalties for non-compliance?
The law specifies the following penalties for non-compliance: 1. Penalty for harming the trust or settlor and violating certain provisions of this law: imprisonment for a period not exceeding 5 years and/or a fine not exceeding AED 5 million. (Federal Decree by Law Concerning Trust, 2023, Art. 50) 2. Penalty for impersonating the trustee: imprisonment for a period not exceeding 3 years and/or a fine not exceeding AED 1 million. (Federal Decree by Law Concerning Trust, 2023, Art. 51)
When did this law come into effect?
This Federal Decree-Law came into effect on 30 September 2023, as stated in the Effective Date section. It was published in the Official Gazette No. 760. (Federal Decree by Law Concerning Trust, 2023, Art. 55)
Source Documents
This article analyses Federal Decree by Law Concerning Trust for legal research and educational purposes. For the purpose of interpretation and application, reference must be made to the original Arabic text. In case of conflict, the Arabic text prevails. This does not constitute legal advice.