Foundation companies are a unique structuring option in the Cayman Islands for wealth planning and also serve as holding and special purpose vehicles for commercial transactions and cryptocurrency offerings.
Although a foundation company may be used as an alternative to a Cayman trust, a number of features specific to Cayman trust law have been incorporated into the foundation company vehicle which should prove beneficial to investors and private clients.
Foundation companies may be an attractive alternative to trusts, particularly those in civil law jurisdictions where the tax treatment of trusts is a concern. Clients from common law jurisdictions may also be attracted to a foundation company for holding higher-risk assets (eg, shares in family businesses).
The combination of traditional and innovative features in foundation companies means that the Cayman Islands has introduced a flexible vehicle that is a valuable addition to all sectors of the financial services industry.
The following aspects of foundation companies are worth noting:
- Foundation companies have separate legal personalities and will transact with third parties in their own right, rather than through their trustees.
- Foundation companies benefit from the Cayman Islands' substantial company case law history and the 'firewall' feature of its trust legislation, providing certainty as to how the courts will treat disputes.
- In contrast to trusts, duties are owed only to the foundation company itself as opposed to beneficiaries. Rights may be enforced against only the company, not the directors.
- Foundation companies are not required to have any members, if permitted by their memoranda and provided that they have a supervisor with the right to attend and vote at general meetings.
- Foundation companies whose objects are to be carried out mainly outside the Cayman Islands may be incorporated as an exempted company and not subject to any income, withholding or capital gains taxes in the Cayman Islands.
For further information on this topic please contact Anthony Partridge, Giorgio Subiotto or Fraser Allister at Ogier by telephone (+1 345 949 9876) or email ([email protected], [email protected] or [email protected]). The Ogier website can be accessed at www.ogier.com.