Disclaimer: This article is provided for general information purposes only and does not constitute legal, tax, or professional advice.
Readers should seek independent advice before acting on any information contained herein.

20 June 2025 — Labuan

The Labuan Financial Services Authority (Labuan FSA) has released updated Guidelines on the Establishment of Labuan Foundations, including Islamic Foundations, providing greater clarity on registration procedures, operational requirements, and compliance obligations for entities set up under the Labuan Foundations Act 2010 (LFA) and Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA).

---

Key Highlights of the Updated Guidelines

1. Broader Scope of Purpose
Labuan foundations may be established for charitable or non-charitable purposes. Charitable purposes include poverty relief, education, healthcare, environmental protection, human rights promotion, amateur sports, and more. Importantly, Labuan Islamic foundations must operate in accordance with Shariah principles, supported by a Shariah adviser.

2. Clear Distinction Between Charitable and Non-Charitable Foundations

• Non-charitable foundations can only be funded through the founder or an assignee. They are not permitted to solicit donations unless reclassified as charitable.
• Charitable foundations that solicit public donations must meet stricter governance standards, including appointing at least three independent council members, a supervisory person, and submitting annual audited accounts.

3. Founder and Nominee Founder Rules
Founders must be clearly identified at registration, and nominee founders acting on behalf of ultimate owners must disclose beneficial ownership and asset details. Trust companies acting as secretaries are tasked with maintaining accurate and updated records for regulatory review.

4. Ownership and Use of Property
Assets endowed to a Labuan foundation become irrevocable property of the foundation and cannot be withdrawn. Special provisions apply for foundations holding Malaysian property, requiring prior Labuan FSA approval and compliance with Foreign Exchange Administration (FEA) rules.

5. Governance and Record-Keeping
Foundations must ensure that founders, council members, and officers remain “fit and proper” in accordance with Labuan FSA standards. Records must be properly kept in Labuan and be readily available for inspection. All foundations are also subject to Anti-Money Laundering (AML/CFT) obligations.

6. Labuan Islamic Foundations
These entities may endow assets through hibah or hadiah (gifts) and must ensure all activities and asset utilisation comply with Shariah. The updated guidelines further emphasise the requirement of Shariah advisory oversight.

7. Fees and Compliance Timeline
Annual fees are payable under the Labuan Foundation (Amendment) Regulations 2022, due each anniversary of registration. All existing foundations remain valid under the new guidelines unless revoked.

---

 

What Has Changed Compared to Previous Guidelines?

 

---

What This Means for Clients

The 2025 update reflects Labuan FSA’s commitment to enhancing transparency, governance, and Shariah compliance in line with international best practices. For clients, this means:

• Stricter Compliance – Foundations must now meet higher disclosure and governance standards, particularly in relation to beneficial ownership, charitable fundraising, and overseas representation.
• Clearer Rules for Islamic Foundations – Greater certainty for Shariah-compliant structures, which is especially relevant for clients engaging in Islamic philanthropy or wealth management.
• Closer Regulatory Scrutiny – Labuan FSA has strengthened monitoring of foundations holding Malaysian property or raising funds from the public, ensuring assets are lawfully managed and documented.
• Ongoing Obligations – Continuous “fit and proper” standards and annual fee requirements highlight the importance of engaging professional secretarial support to stay compliant.

At Law & Commerce Trust Limited, we guide clients through every stage — from foundation establishment and registration to ongoing compliance with the new 2025 requirements. Whether you are planning for family succession, wealth preservation, or charitable giving, our experienced team ensures that your foundation remains compliant and effective.

📩 Contact us today to explore how a Labuan foundation can meet your succession, wealth preservation, or charitable objectives.

The information on this website is provided for general purposes only. While we strive to keep it accurate and up to date, we make no guarantees. By using our site, services, or applications, you agree that we and our authorised providers may use cookies and similar technologies to enhance your experience and support advertising efforts.