Briefing - 07 November 2016

Private trust companies promise Gulf Cooperation Council clients flexibility and control

The desire for flexibility

 We are seeing a growing trend in the use of private trust company structures by clients and their advisers who are seeking to maintain flexibility and mitigate against loss of control. Growth has been evidenced within Hawksford with a number of new private trust company structures being established over the past two years and several enquiries relating to the migration of structures from British Virgin Islands (BVI) or Cayman Islands to Jersey.

Case study
Hawksford was recently approached by an adviser acting on behalf of a Middle Eastern family who had an existing fiduciary structure administered through the BVI.

The structure held assets, including real estate, land, investment portfolios and works of art.

While the existing structure was ‘fit for purpose’, the client wanted to take advantage of Jersey’s regulatory environment and excellent infrastructure.

The client also wanted to maintain a degree of control over the trust affairs and understood that a private trust company enabled them to be on the board of directors, and to appoint several other trusted family members and advisers.

We created a new structure, using a Jersey Foundation to own the shares of a newly incorporated Jersey registered private trust company, which in turn acted as trustee for eight underlying Jersey proper law trusts, with the existing assets to be held through newly incorporated Jersey investment holding companies.

The previous BVI structure was then terminated on the transfer of assets to the newly established Jersey structure.

What is a Private Trust Company?

A Private Trust Company, or PTC for short, is a privately owned company incorporated specifically to act as trustee of one or more family trusts. Like any other company, a private trust company is run by its board of directors, who will be charged to make trustee decisions. Whilst run by the board of directors, private trust companies (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 board of directors of the private trust company 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 private trust company 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 private trust company, 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 private trust company.

What are the advantages for the client?
Family control
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. 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.

Ease of changing trusteeship
The relative ease with which the registered service provider can be changed. With a private trust company it is not necessary to change the trustee or to transfer the title of trust assets when the registered service provider is changed, thus avoiding the requirement for legal deeds, indemnities and other documentation. Where the underlying client wishes to change the administrator of their private trust company for any reason, all that is required is the resignation and appointment of new directors, and notification of the new registered person responsible for the administration of the private trust company to the local registry; namely the Jersey Financial Services Commission in Jersey.

Speed of decision-making
An often overlooked but important benefit of a private trust company is the ability of the private trust company 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 private trust company 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

The private trust company affords the client an additional measure of confidentiality, with the comfort that a robust corporate governance approach will be observed with a trusted partner, who is both regulated and based in a politically stable country.

Find out more about our other private client services >

Technical briefing: Understand more about the types of trusts we offer>

Contact Director Julian Hayden or Associate Director David Carswell to find out more about our services, or email to find out how we can help you.

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