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Seychelles Foundations – their nature and advantages

Foundations are most easily visualised as a combination of a company and a trust. They are increasingly being used by UK citizens, particularly entrepreneurs, for wealth management purposes.

Foundations have a separate legal personality and can therefore hold their own assets, contract with third parties and sue in their own name and in their own capacity. A foundation does not have shareholders and holds its assets for the benefit of its beneficiaries.

Foundations cannot be formed in the UK but can be formed in certain jurisdictions, such as the Seychelles. UK entrepreneurs are using foundations typically to:

  • hold assets for the benefit of family members
  • preserve or retain specific assets
  • carry out charitable or philanthropic purposes
  • collect royalties and other types of return

While trusts have traditionally been used in the UK for these purposes, foundations do have several characteristics which give entrepreneurs greater confidence.

As they have a separate legal personality entrepreneurs who are familiar with companies feel comfortable using them. A Seychelles foundation will be registered in the jurisdiction and given a unique registration number. This assists in giving the perception of greater permanence than a trust.

Although a Seychelles foundation is governed by a ‘council’ (comparable to a board of directors of a company), considerable control can be reserved to the founding entrepreneur (the ‘settlor’ in trust parlance) or a ‘protector’, without the risk of the foundation being declared a ‘sham’.

Another advantage over trusts is that councillors owe their duties to the foundation itself and not to the beneficiaries and so can exercise their powers in accordance with the wishes of the founding entrepreneur. If a trust was used, the trustees would need to be attuned to the best interests of the beneficiaries.

So foundations will often be a useful alternative for those entrepreneurs who are looking to set up a trust.

For more information on setting up a foundation in the Seychelles, please contact Jason Reader.

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