Offshore trusts continue to be a popular vehicle to hold and consolidate family wealth for future generations. However, in the current economic climate clients have become increasingly concerned to exercise personal control over the administration of their family trusts typically by using a private trust company to act as trustee of their family trust.
The BVI recently enacted legislation that permits a client to set up a BVI private trust company, without the need to obtain any regulatory approval or a trust licence; an unlicensed private trust company.
However, if not correctly structured, use of a private trust company can pose significant risks. The provisions of a typical family trust will usually provide the trustee with very wide powers to administer the trust fund; a client will understandably wish as much flexibility as possible, not only to ease day to day administration of the trust, but also to meet future contingencies.
However, this flexibility also gives rise to significant risks as the directors of the private trust company will in effect have unfettered power to administer the trust, perhaps in a way in which the client would not have intended. It is therefore critical to provide some form of “corporate governance” structure to control the directors of the private trust company.
Traditional offshore private trust company structures would usually only address “ownership” of a private trust company and not “control”, hence the prevalence of charitable and non-charitable purpose trusts to hold shares of a private trust company.
In order to address the above “governance” issues it is becoming increasingly popular to structure the ownership and “control” of a BVI private trust company through use of a trust governed by the Virgin Islands Special Trusts Act, 2003 (VISTA). VISTA is able to provide a fully range of corporate governance options.