A common concern when creating such structures for clients within the Gulf Cooperation Council ("GCC"), which are generally established to provide an efficient means of succession planning, is that of control. The concept of trust is, for many, a monumental decision to bestow control of the family assets and/or wealth to a relatively unknown third party.
A growing trend
There is a growing trend in the use of Private Trust Company ("PTC") structures to mitigate this loss of control, with Jersey rapidly becoming the jurisdiction of choice, and particularly for GCC based clients, which we will discuss in more detail. The growth has been evidenced within Hawksford with a number of new PTC structures being established over the past two years and existing structures being migrated from, for example, Cayman to Jersey.
What is a PTC structure
In order to understand the trend in the use of PTC structures by clients based in the GCC, it is first important to understand what a PTC structure is, the benefits afforded to clients, and why Jersey is considered a jurisdiction of choice.
A PTC is a privately owned company incorporated specifically to act as trustee of one or more family trusts. Like any other company, a PTC is run by its board of directors, who will be charged to make trustee decisions. Whilst run by the board of directors, PTCs (and the underlying trusts for which they act as trustee) are usually administered by a professional trustee who is experienced in carrying out trust and corporate administration. The PTC thus provides an overview of segregated trusts for specific family members, or trusts established to own particular asset classes.
The PTC board of directors
The board of directors of the PTC generally include family members who can ensure that the wishes of the founder of the trust (often the patriarch and/or matriarch of the family) are given proper consideration and to enable them to become familiar with, and participate in, decisions affecting the family assets. These assets may include the family business interests and the PTC can be used to provide the next generation with training and instruction for their future role in the business. In circumstances where it is impractical or undesirable for family members to be in direct control of the PTC, trusted advisers of the settlor can be appointed to the board. In most cases, at least one member of the management team of the Jersey regulated company providing the administration services would also be a director of the PTC.
The main advantage
The main advantage of a PTC is that PTCs provide a means by which the client, or their wider family, can retain a greater degree of control over the trust affairs without compromising the validity of the family trusts, something that clients based in the GCC have demonstrated a keenness to maintain.
The client can compose the board of directors with themselves included, and further include family members and trusted advisers who have a heightened knowledge of the family's business and financial affairs and are empathetic to the needs of the beneficiaries.
The ease of changing provider
A further advantage is the relative ease with which the registered service provider can be changed. With a PTC it will not be necessary to change the trustee or to transfer the title of trust assets, thus avoiding the requirement for legal deeds, indemnities and other documentation. Where the underlying client wishes to change the administrator of their PTC for any reason, all that will be required is the resignation and appointment of new directors, and notification of the new registered person responsible for the administration of the PTC to the local registry; namely the Jersey Financial Services Commission in Jersey. The use of an emergency trustee is also possible whereby, upon a trigger event such as an act of war, the jurisdiction of the trust can be moved from Jersey to New Zealand or the BVI, for example. Given the potential political instability within certain areas of the GCC, this consideration appears to be a live issue for clients in the region.
The ability to react quickly
An often overlooked but important benefit of a PTC is the ability of the PTC to react quickly to changing circumstances. This is particularly relevant where a family trust owns the shares of an active trading company. Decisions often need to be taken quickly and the board of a PTC will often be more familiar with the transactions of the underlying company than a corporate trustee, and therefore more capable of reacting quickly to changing circumstances.
Given Jersey's well-respected courts, the time zones under which it operates being almost equidistant between the GCC and the US and its highly regarded regulatory regime, Jersey is becoming the preferred jurisdiction for GCC based clients establishing PTC structures.
Moreover clients based in the GCC are vertically integrating their PTC structures in Jersey using a Jersey Foundation or Jersey Purpose Trust, a Jersey PTC, one or more Jersey Trust(s) and Jersey registered investment holding companies, thus minimising foreign law paths to attack.
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