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Labuan Foundations

A Labuan foundation is a corporate body with a separate legal entity, established to manage its own property for any lawful purpose which may be charitable or non-charitable. 

In the case of a Labuan Islamic foundation, its aims and operations shall be in compliance with Shariah principles.
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.

Specifically for a Labuan Islamic foundation, its operations shall be in accordance with Shariah principles and other requirements as stipulated in paragraph 10.0 of the Guidelines on the Establishment of Labuan Foundation Including Islamic Foundation.
The structure of a Labuan foundation consists of the following:
1. Registered Office
A Labuan foundation must be registered and have a registered office. The administration and operations of a foundation are carried out in accordance with contractual rather than fiduciary principles. Similarly, all relationships within a foundation are contractual and are governed by its governing documents, ie the charter and articles.
2. Charter
The charter sets out the parameters within which the Labuan foundation is to be managed and governed.
3. Key Management
The key management of a Labuan foundation consists of a council, 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 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. Assets
Assets placed in the Labuan foundation are owned by the foundation and are to be applied only for the benefit of the identified purpose. However, these assets must be non-Malaysian properties unless it is a charitable foundation or as approved by Labuan FSA.
5. Beneficiaries
Beneficiaries may include individuals, corporate entities or charities 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 are 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 
  • when the purpose of the foundation is fulfilled or becomes incapable of fulfilment; or 
  • when the charter requires such dissolution.
After the dissolution, the ownership of the remaining assets will be transferred to the beneficiaries.
  • Application for registration of the foundation can be submitted to the Registrar of Company using the following forms: 

    1.Labuan Foundations Act 2010 (LFA)  
    • Form 1 – Application for Registration of a Labuan Foundation.  
    • Form 2 – Declaration by a Labuan Trust Company as Secretary.  
    2.Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA)  
    • Form 8 – Application for Registration of a Labuan Islamic Foundation.  
    • Form 9 – Declaration by a Labuan Trust Company as Secretary.
  • 1. The officer of a Labuan foundation who is duly appointed by the founder shall be responsible for the administration of the Labuan foundation.

    2. The officer may also be the founder or beneficiary of the Labuan foundation provided that he is not a council member and must not be disqualified pursuant to Section 37 of the LFA. 

    3. The founder may also appoint a council for the Labuan foundation:
    • To ensure compliance by the Labuan foundation and its officer with the charter of the foundation and provisions of the LFA; and 
    • To be responsible for the general supervision of the management of the foundation by its officer. 
    4. If appointed, the council must comply with the meeting requirements as required under Section 26 of the LFA. 

    5. All submissions must be filed through the secretary of the Labuan foundation who is duty bound under Section 43(3) of the LFA to ensure the validity, veracity and authenticity of all submissions to the authority.

    6. The accounting records and other records shall be kept at the registered office of the Labuan foundation or at such other place in Labuan as the officers think fit and shall at all times be open to inspection by the council members, supervisory person, officers, and the approved auditor, if appointed. 

    7. A Labuan foundation shall ensure that its founder, council member, officer, and secretary remain as fit and proper persons throughout their appointment with the foundation as may be prescribed in the Guidelines on Fit and Proper Person Requirements issued by Labuan FSA. 

    8. A Labuan foundation shall ensure compliance with the Anti-Money Laundering and Anti-Terrorism Financing Act 2001.
  • Specific Requirements for Labuan Charitable Foundations
    1. If the endowment of property(ies) is from a corporation, the Labuan charitable foundation is required to submit a copy of the certified resolution from the corporation approving the endowment of the property(ies) to the foundation. 

    2. If the endowment of property(ies) is from an individual, the Labuan charitable foundation is required to submit a copy of an undertaking to endow the property(ies) to the foundation. 

    3. A Labuan charitable foundation that solicits donations from the public shall comply with the following:
    a. Appoint a council of at least three (3) fit and proper persons;

    b. The founder may be a council member. However, the majority of the council members shall be independent of the founder;

    c. Appointment of a supervisory person for the foundation who is fit and proper in accordance with the Guidelines on Fit and Proper Person Requirements issued by Labuan FSA;

    d. Provide an information memorandum or such other information document for the public which shall include, but not limited, to the following minimum information:
    • Name of the foundation; 
    • Purpose and object of the foundation; 
    • List of its founder, council members, supervisory person, officer and secretary, where applicable; 
    • Statement of its establishment under the LFA or LIFSSA; 
    • Whether it has been accorded the status of an “approved institution or organisation” under the Income Tax Act 1967 for donations made to the foundation to be tax deductible, where applicable;
    e. Submit a proposed general operating plan, which include the management of the property with regard to the utilisation and distribution of the property, the strategy of the foundation including its investments and other related information; and

    f.Submit annual audited accounts to Labuan FSA within six (6) months after the close of each financial year of the foundation.

    4. All Labuan charitable foundations are required to comply with the legal requirement(s) of the jurisdiction they intend to operate in.

  • 1. All Labuan non-charitable foundations including foundations established for the benefits of family members that intend to include Malaysian property(ies), must seek prior approval from Labuan FSA. This does not apply to Labuan charitable foundations. 

    2. The qualifying criteria for approval shall include, but not limited to, the following:
    a.Obtain all necessary approvals from the relevant authorities in relation to the endowment of property(ies) to the foundation; 

    b. Property(ies) to be endowed shall be unencumbered. For encumbered property(ies), consent should be obtained from the person(s) who encumbers the property(ies); and 

    c.Property(ies) to be endowed shall be obtained through lawful means.


    3. The property(ies) endowed or to be endowed to the Labuan foundation must include consent letters from relevant authorities (where necessary) to be submitted with the application or within 60 days from the registration date of the endowment of the property(ies).

    4. The relevant authority(ies) referred in paragraph 9.3 may include the respective land office or local authority such as Bank Negara Malaysia, Companies Commission of Malaysia and Securities Commission of Malaysia.

    5. Malaysian founders are free to endow Malaysian property to a Labuan foundation as permitted by the Foreign Exchange Administration (FEA). However, Labuan non-charitable foundations are required to provide in the charter that any subsequent conversion or transfer of the endowed property for investment abroad would need to comply with FEA rules.

  • All licensees are required to pay to Labuan FSA annual licence fees on or before 15 January of each year:
    Type of Fees
    Amount
    Registration fee
    RM750
    USD200
    Annual Fee 
    RM750
    USD200
    Redomiciliation 
    RM750
    USD200

Labuan Islamic Foundations

  • A Labuan Islamic foundation can be established under Section 107 of the LIFSSA and all the provisions of the LFA shall apply to the Labuan Islamic foundation unless specifically provided. The object, purpose and activity of the Labuan Islamic foundation must be in compliance with Shariah principles. 
  • The officer of a Labuan Islamic foundation is required to appoint or consult a Shariah adviser to advise on matters relating to the operations of the Islamic foundation to ensure its compliance with Shariah principles. 
  • The Labuan Islamic foundation must have a clearly executed legal transfer of ownership of the property(ies) from the founder to the foundation. 
  • The endowment of property(ies) into the Labuan Islamic foundation can be done through hibah or hadiah.

Fees
Type of Fees
Amount
Registration fee
RM750
USD200
Annual Fee 
RM750
USD200
Redomiciliation 
RM750
USD200
Governing Legislation
Related Guidelines and Directives
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