Special trusts of company shares (STOCS trusts), purpose trusts, and enhanced creditor protection provisions all included in a wholesale and exciting revamp of TCI’s trusts statute
Owen Foley of Misick & Stanbrook looks at TCI’s new Trusts Ordinance.
As a British Overseas Territory with no direct taxes, the Turks and Caicos Islands (TCI) has been an attractive domicile for trust establishment by high-net-worth individuals and their advisers for many years. However, in the recent past, with the Government’s focus firmly on developing TCI’s enormously successful luxury tourism industry, the updating of TCI’s non-regulatory legislation in the field of financial services had been a little neglected. The Government has now turned its attention to modernising TCI’s financial services offering, and as a first step has introduced a new trusts statute, the Trusts Ordinance 2016.
Features of the new Trusts Ordinance
Features of the new law include:
- The ability on the part of the settlor to reserve significant listed powers for himself without affecting the validity of the trust.
- Provisions to allow for trusts for purposes (rather than merely to benefit individuals).
- The reservation to the law of TCI of questions affecting the settlor’s capacity, questions concerning the validity or interpretation of the trust, the validity of dispositions made under it, its administration and the validity of the exercise or purported exercise by a foreign court of any power to vary the terms of the trust.
- Lifetime trusts (those not made by will or testament) may defeat foreign forced heirship provisions.
- Trusts of indefinite duration are permitted.
- Protective trusts are permitted which may provide for the diminution or termination of the rights of a beneficiary upon his becoming insolvent or upon any of his property becoming liable to the attached by his creditors.
- As it is customary in international trusts, the terms of the trust may provide for the governing law, or the governing law of a particular aspect, of the trust to be changed from the law of TCI to the law of any other jurisdiction.
- Purpose trusts require an enforcer (who may be the settlor or a beneficiary) and the purposes may include acquiring or holding shares in a company.
- There are provisions allowing the establishment of special trusts of company shares (STOCS trusts), similar to the VISTA trust provisions of the equivalent BVI statute, and is designed to allow STOCS trusts to hold shares in companies indefinitely and to permit the management of those companies to be carried out by the directors without any power of intervention being exercised by the trustees of the STOCS trust.
- The long-established rule in Saunders v. Vautier, allowing all the beneficiaries of a trust, if they are of age and legally competent, to terminate a trust, may be excluded from a STOCS trust for a period of up to twenty years.
- The creditor protection provisions of the old law have been beefed up such that a disposition of property to a TCI trust by a solvent settlor is not voidable at the instance of any creditor of the settlor, and any court proceedings to set aside such a disposition on the grounds of insolvency must be commenced no later than four years after the date of the disposition.
- Moreover the definition of insolvency is much clearer in the new law: a person is insolvent if he is unable to pay his debts as they fall due or if the value of his liabilities exceeds his assets.
- A revised trustees licensing regime, brought into force at the same time as the new trusts ordinance, allows the forum of administration of a TCI trust to be anywhere in the world, and so a non-TCI trust company can manage and administer a TCI trust from outside TCI without any TCI licensing requirement.
- The new law significantly modernises TCI’s trusts offering such that it is in every respect as attractive as the law in competing jurisdictions like Cayman, BVI or Jersey.
- TCI is a British Overseas Territory with no direct taxes, no exchange control, US dollar as currency, and a British-style legal and courts system with the Privy Council in London as the final court of appeal.
- TCI has a significant cadre of quality legal, accounting and trust professionals catering to the needs of high-net-worth individuals who have been flocking to TCI’s attractive shores in recent years.
- Though a long-standing player in the offshore financial services field, TCI has a low international profile in the area and so does not attract the “red flag” notoriety of its better-known competitors.
- Outside trustee providers can administer a TCI trust outside TCI, without any TCI licensing requirement.
- Professional fees in TCI are typically a deal more reasonable than in competing jurisdictions.
MISICK & STANBROOK
The above is not intended to be a full and thorough description of the law: these are imprecise guidelines only. They ought not to be relied upon in the absence of detailed written advice from your Misick & Stanbrook professional on your particular development and circumstances. This memorandum refers to the laws of the Turks and Caicos Islands only: to the extent that the laws of any other country may have a bearing on your proposed development or scheme, you ought to take expert advice in that country.