Owning Private Trust Companies

The Seychelles Foundations can own private trust companies often in the case of families whose members and business interests are located in both civil and common law jurisdictions.

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Although the foundation is a rival concept to the trust, and has many advantages compared with the trust (e.g. incorporated status) it is a fact that the trust concept will continue to be widely used in international tax and wealth planning for two reasons:  


 

1. Many countries do not recognise the concept of trusts. It is often assumed that this is a disadvantage, but in fact it is an advantage as countries that do not recognise the trust concept cannot enact specific anti-avoidance legislation against trusts, and

2. Even where countries recognise and enact anti-avoidance legislation against trusts, at least one can advise with certainty in relation to such legislation and its impact on settlors and beneficiaries.

Trusts have been widely used as family succession planning vehicles, and will continue to be so used.

However, a well-known problem for would be settlors of trusts is that they must transfer ownership and control of valuable assets to third party professional trustees who they may not know well.

There are various solutions to mitigate this problem. One such solution is the concept of the family private trust company (PTC). A PTC is a company which is the sole corporate trustee of the family trust. The board of directors of the PTC will include family members, together with offshore professionals. In some PTC arrangements the Patriarch, or Head of the Family, will own all the shares of the PTC.

 
Comment
 
The Patriarch transfers valuable assets under his ownership or control to the offshore trustee, which is the PTC.  As the Patriarch ultimately owns the PTC, his concerns about transferring the assets to the trustee are greatly reduced. 
 
However, this arrangement carries risk that the Patriarch will be regarded as the focus of management and control of the trustee.
 
It is therefore preferable that the PTC is "orphaned" i.e. not owned by the Patriarch or his family.
Prior to the enactment of the Seychelles Foundations Act 2009, a solution often adopted to orphan PTCs was to have the shares of the PTC owned by a purpose trust.  However, the ownership of a trustee of a trust by another trust is conceptually complicated.  A much more convenient and logical approach is to have the PTC owned by a parent company.  The parent company role is one that a foundation can fulfil.
 
 
Comment
 
The Seychelles foundation separates the ownership and control of the PTC from the Patriarch.  However, the Patriarch is content because :
 
i)    he is a director of the PTC, and
ii)    even if he is not a beneficial owner of the Seychelles Foundation (this is a legal impossibility), he may be appointed as the foundation's Protector.  The Protector oversees the management and control of the foundation and may be given powers of veto of and consent to council decisions and powers of appointment and removal of members of the Council of the  Foundation.
 
Note also that the foundation in this case study need not even have beneficiaries, but may instead be a "purpose foundation".
 
Jordans Trust Company (Seychelles) Limited is licensed and regulated by the Seychelles Financial Services Commission.

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