Transfer of Title vs Transfer of Vision: ADGM Foundations and Loans
- Jiaxin Zhao
- Feb 14
- 4 min read
Updated: Feb 19
Art is timeless, ownership is not. In a world where collectors are global, mobile, and strategic, legacy planning and art ownership structuring have evolved far beyond the Pang family’s 1950s dilemma.
If you are still dwelling on the Nanjing Museum saga [1] from the previous article, it is worth examining more deeply donor intent and, in particular, whether the preservation of legacy can be realised without inadvertently losing control over it. Further, how can modern legal structures, such as the ADGM Foundations regime, provide alternatives for collectors with cross-border assets?
I. Historical Context – the Short Version
The Pang donation was the result of historical constraints and political motivation. At the risk of over-simplifying history: when the donation was made in the 1950s, China was undergoing sweeping socialist reforms of private property where prominent families holding valuable cultural assets faced significant political and social pressure.
The Pangs wished to preserve their splendid collection without being framed as hoarding national heritage or exhibiting bourgeois individualism, or worse, engaging in counter-revolutionary concealment. Therefore, the Pangs were faced with essentially two choices: either they relocate, with the entire collection, to the Republic of China (aka Taiwan); or they stay and donate the works to a state institution of prestige.
They chose the latter and donated (or “entrusted”, as some put it) 137 ancient Chinese paintings and calligraphy to the Nanjing Museum. The donation was seen as a patriotic act of cultural preservation and the Pangs believed that their family treasures (which became national treasures) was in safe hands -- as indeed they were, for decades, even during the most turbulent times. The Pangs held dear their forefathers’ collection and wanted to preserve it, even at the expense of relinquishing control.
II. Preservation without transferring Ownership
Today, without those historical constraints (or with significantly fewer of them), a collector may choose to retain ownership while having the collection exhibited at public institutions, for example, by way of a long-term loan agreement with a museum of his choosing.
This practice is adopted by many Mainland Chinese collectors. After acquiring artworks at auction in Hong Kong or overseas, the collector first stores them in secure free-trade facilities (e.g. bonded warehouse in Hong Kong ) instead of shipping the artworks to his home in Mainland China. Then, he enters into loan agreements with museums in Mainland China (or abroad) to have the artworks exhibited. Under this model, the collector retains ownership and control over his collection while exhibiting his cultural influence.
In addition, when structured carefully according to the applicable laws of the museum's jurisdiction, the collector may benefit from the temporary import/re-export fiscal regime that facilitate loans and exhibitions without triggering customs duties or taxes.
III. An ADGM Foundation as a Structural Solution
(i) ADGM Foundations Regime
The Abu Dhabi Global Market (ADGM) is an international financial centre in Abu Dhabi, United Arab Emirates. ADGM applies English common law, equity and certain statutes. It is a common law island within a civil law country.
An ADGM Foundation is a separate legal person set up by a Founder, governed by a Council and operating pursuant to its constitutional charter and by-laws. It offers an asset protection mechanism with high client confidentiality standards and serves as an alternative to a trust for long-term asset preservation and wealth planning. Successive governance continues after the Founder’s death so as to perpetuate the Founder’s vision.
Like a trust under English law (which is unavailable in many major civil law jurisdictions), an ADGM Foundation allows assets to be administered in accordance with the Founder’s wishes beyond his lifetime.
Unlike a trust, however, an ADGM Foundation is more like a private company and has a distinct legal personality to enter into contracts with third parties, such as loan agreements, sales agreements, royalties arrangments, etc. The Founder also generally retains more control over the Foundation (subject to proper structuring) whilst the settlor in a trust typically assumes a more limited role after settlement.
(ii) Settling an Art Collection into an ADGM Foundation
A collector may settle his art collection into an ADGM Foundation. For collectors in civil law jurisdictions who seek trust-like functionality without the doctrinal difficulties of split legal and beneficial ownership, the Foundation structure can be more practical.
The Foundation, by itself or via an SPV, would hold legal title to the collection and receive proceeds arising from loans, royalties or disposal of artworks (without engaging in commercial activities). The collector could gain access to UAE double taxation avoidance treaties concluded with the overseas government [2]. Moreover, the Foundation will not only ring-fence the collection from the collector’s personal liabilities, but also it will separate the collection from the rest of the collector’s estate, facilitating succession planning.
The collection may be located overseas due to logistical considerations, current engagement with foreign institutions or other reasons. This does not affect the Foundation structure, provided title transfer and applicable foreign law requirements are properly addressed.
In practice, the circumstances can become more complicated. At Gouchault & Zhao, we assist collectors in preserving their artwork, for themselves and/or for future generations. We apply our cross-border legal and financial expertise to structure preservation frameworks with precision. We believe that preserving artwork is not merely about safeguarding objects. It is about preserving aesthetic philosophy, intellectual heritage, and family narrative.
[1] By the time this article is published, Chinese authorities have already taken action against a few dozen individuals involved, including Xu Huping, former director of the Nanjing Museum.
[2] It should be noted that access to UAE double taxation treaties is not automatic. Whether a Foundation may benefit from treaty relief depends on tax residence, domestic tax treatment, and the specific wording of the relevant treaty. Proper tax analysis is therefore required.
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