Modeled on Austrian law, the Liberian Private Foundations law was added to the Business Corporation Act (BCA) as Chapter 60, in 2002. 

Essentially, Private Foundations act as a holding entity for assets transferred to them.  The transfer is usually in the form of a gift, by a person who the BCA refers to as “the donor”. In some jurisdictions, the term “settlor” is used.

The Private Foundation is an additional type of non-resident business entity for Liberia. Foundations have traditionally been used over the centuries for benevolent or charitable purposes, often being associated with pieces of art or other valuable collections.

The Liberian Foundation works well for individuals desiring a straight forward asset holding/protection structure designed to provide beneficiaries with an asset-derived income.

Foundations cannot be used for trading activities or for conducting financial service business activities.  However, the buying and selling of assets (real estate, shares in trading companies, investments etc.) is not considered a trading activity. Foundations can act as a shareholder but not a director or officer, in a trading entity like a Liberian corporation.

In Liberia, there is no gift tax to pay at the time a Foundation is established, and earnings generated by the Foundation are tax exempt in Liberia. However, incomes paid by Foundations to its beneficiaries, once declared by beneficiaries, might be subject to local taxation at their place of domicile.

Because the Foundation’s assets are gifted, the donor receives no payment in return. The Foundation becomes the owner of the assets endowed to it and, as such, the entity has a separate legal personality. It is in this area that Foundations fundamentally differ from trusts, since trusts are not considered to be legal entities.  In the case of a trust, legal title of its assets is held in the name of the trustee.

In order for the Foundation to function, the assets need to have been endowed and placed at the disposal of the Foundation and its officers.  This endowment satisfies the tax inspector's question "has the property ceased to be the asset of the tax-payer (donor)".

One of the documents required by Liberia at the time of registration of a Foundation is a Certificate of Initial Assets signed by its officers. This declaration must confirm that assets of not less than US$10,000 in value have been endowed to the Foundation.

Upon receipt of the Certificate of Initial Assets, the Registry will issue a ‘Certificate of Endorsement of Statement of Value of Initial Assets’.  The specific assets endowed at the time of registration need not be named and additional assets can be gifted at anytime, again without any public record of their value or their source.

Unlike trusts, once assets are placed in a Foundation, they cannot be withdrawn at will by the donor.  A statement relating to the endowed assets also needs to be included in the Memorandum of Endowment signed by the donor and submitted with the application to register. The Memorandum is not filed, but is returned to the Foundation attached to a Certificate of Endorsement of Documents issued by the Registry. An ‘Extract of Particulars of the Memorandum of Endowment’, signed by the Secretary of the Foundation is filed in the Registry. The names, addresses and specimen signatures of the appointed officers and the Secretary, and details of the address to be used for the service of documents to the donor are included in this Extract.

The name of the donor does not appear in the Extract and, therefore, need not become public information. In addition, more than one donor is permissible, and there are no restrictions on residency or nationality of the donor.  However, a donor cannot act as an officer or be appointed as the Secretary of the Foundation, but can participate in its supervisory board, if one is appointed.  Moreover, the donor can be one of the beneficiaries.

Management responsibility of a Liberian Foundation sits with its officers who are usually professional administrators.  Officers determine the distribution of income and capital in accordance with the donor's instructions.

A minimum of three officers need to be appointed, and at least two officers must be physical persons. One of the officers can also act as the Secretary, and a corporate Secretary is permitted. Consent to Act declarations for each officer and the Secretary need to be submitted with the application to register the Foundation, and these are filed in the Registry together with the Extract.

As with the donor, there are no restrictions on residency or nationality for the officers and/or the Secretary. Officers can delegate their powers to one another.

To assist in the management of a Foundation, the officers may decide to appoint a Supervisory Board comprised of at least three physical persons.  Liberian Foundation Law permits a donor to participate on the Supervisory Board.

The Supervisory Board must be established as a body that is independent of its officers and beneficiaries. The Board acts like the Protector of a trust. Similarly, auditors may also be appointed. The procedural rules for running a Foundation are set out in the Management Articles, a document that is very similar in scope to the bylaws of a corporation. The Articles are signed by the donor and submitted with the application to register the Foundation. Like the Memorandum, the Management Articles are not filed, but returned to the Foundation attached to a Certificate of Endorsement of Documents issued by the Registry.

A typical function of a Liberian Foundation is to provide beneficiaries with an income derived from an asset(s) endowed to it from a donor(s). As has been outlined above, the donor provides guidelines as to how the Foundation is to be managed and also defines who the beneficiaries will be, what payments should be paid to the beneficiaries, and when payments should occur.

While the officers of the Foundation need to know the names of the beneficiaries, such information is not required to be filed in the Registry. A donor can also provide further guidance to assist officers to manage the Foundation in the form of a Letter of Wishes and, from time to time, change the beneficiaries.

The Letter of Wishes is an internal document and not, therefore, filed in the Registry. As with all Liberian entities, formation instructions will only be accepted from professional intermediaries such as established trading businesses, company and trust managers, lawyers, banks and accountancy firms.  An instruction sheet with model forms ‘Registration of a Private Foundation’ is available for clients to use upon request.   Foundation formation instructions can be submitted through any LISCR office, and the filing of the Certificate of Registration in the Registry can be done on the same day.  

Once formed, a mandatory annual return for the Foundation, signed by the Secretary must be submitted to the Registry.  The annual return must confirm that the information filed in the Extract remains correct and that proper accounts have been maintained.  Annual returns are not publicly filed.

The Liberian Private Foundation provides a perfect holding structure for emerging financial and asset empires, while distancing the donor from otherwise taxable events.  The Foundation permits income generated from assets held by the Foundation to be available to the donor and subsequently his heirs in accordance with the (changing) wishes of the donor/settlor.   At the same time, the Foundation keeps intact the wealth-generating activities of a family (shipping operation, hotels, property, licenses, royalties, manufacturing or service activities).

Model Foundation documents, copies of the law and formation instructions can be obtained from any registry office.