IFG International Division - English

IFG dips deeply for RNLI

11/02/2010 17:13:29

At the end of 2009, Steve Turner, Senior Manager, New Business - Isle of Man, pledged his participation in “Deeply Dippy 2010” and on Friday, January 29, 2010 - RNLI “SOS Day” - Steve, accompanied by a dozen or so other volunteers, took to the roads of the Isle of Man in a vintage bus (with no heating), stopping off at each of the 6 RNLI lifeboat stations around the island where they then proceeded to fully immerse themselves in the sea. No wet suits were permitted and with an average water temperature of 6C, this was not an easy feat for any of them.

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Steve did us proud and succeeded in dunking himself at every stop. To spur him on his way, IFG held a raffle and cake bake to help raise funds for the RNLI collecting just over £400 which, together with the money Steve raised from his sponsored dips, took the total amount over the £800 mark.

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IFG would like to thank everyone who so kindly donated to this cause and Steve Turner for his bravery!

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Note: IFG International Limited - Isle of Man is part of the International Division of IFG Group Plc. The International Division has offices in Isle of Man, Jersey, Ireland, Switzerland, UK, Cyprus, Spain and the British Virgin Islands.

IFG International Limited - 20th Anniversary - Isle of Man

17/02/2010 13:25:00

New Product Sheet - EFRBS Trustees

09/03/2010 09:26:01

Background

IFG Group PLC is a financial services business listed on the Dublin and London Stock Exchanges, with a number of institutional and private shareholders.

The international division of IFG Group Plc provides specialist trust and company management and administration services to a broad range of national and international financial institutions, corporates and high net worth individuals. These services are delivered by our team of 450 people across eight jurisdictions who manage and administer over 6,500 client structures holding assets in excess of EUR 50 billion.

A significant part of the business of the international division is the provision of bespoke employee benefits solutions including Employee Benefit Trusts (EBTs), Employer Financed Retirement Benefit Schemes (EFRBS) and Share Schemes.

Choosing an EFRBS Trustee

The increase in the volume of legislation, regulation and economic pressures in recent years has amplified the workload and responsibilities of trustees.

EFRBS are a specific type of unregistered pension arrangement which offers a wide choice of assets in which to invest and complete flexibility in how members plan for retirement. In addition the arrangements have compelling potential for tax planning.

Our EFRBS trustee solutions are tailored for each client. We are able to compile a range of agreed standard or open architecture investment propositions on a scheme by scheme basis.

From a corporate governance perspective, the corporate sponsor of an EFRBS must appoint trustees that have expertise in the management of such arrangements, that add value to the performance of the scheme and live up to member expectations.

The choice of trustee is of overwhelming importance to the running of the scheme on two levels. It is the trustee who is responsible for ensuring:

that effect is given to the beneficial terms of the scheme; and

the proper investment of contributions received and that, in particular, that the scheme strikes a balance between the interests of all the members.

In partnership with corporate sponsors and their advisors we compile solutions that best suit the scheme design, from establishing schemes that provide online administration platforms that can securely be accessed by members and the corporate sponsor to bespoke arrangements that adopt complex investment strategies.

How can IFG help?

IFG’s trustee services combine experience and understanding of clients’ needs, which allows us to construct innovative and bespoke services. We take our fiduciary responsibilities extremely seriously and, in particular, we recognise that one of the trustee’s key roles is to ensure that the investment of the scheme’s assets is managed within a risk and return controlled portfolio.

We understand that clients’ overriding expectation is the delivery of investment performance. Given the increasing complexity and range of investment solutions available, the trustee regularly monitors and appraises the investment performance of each scheme. The process typically involves the results of periodic performance updates and risk assessments being presented to the trustee and due consideration given to the portfolios’ performance versus benchmark, peer group, asset allocation bands and risk comparisons.

In cases where investment performance falls below reasonable expectation, a systematic escalation procedure is operated to examine trends rather than single time periods. This ensures that the trustee benefits by seeing the performance of the portfolio placed into context over time.

Through understanding the dynamics of portfolio performance and adopting a highly pro-active approach to the ongoing monitoring of performance, the trustee is able to protect the best interests of scheme members.

Our fee structures recognise:

the role and responsibilities undertaken by the board of the corporate trustee and the time required in fulfilling their responsibilities; and

the scheme’s administration and record keeping, which will vary subject to the chosen investment solution.

Summary

As part of a quoted PLC with substantial expertise and years of experience of acting as corporate trustee, we are entirely free of conflicts of interest unlike many of our competitors who are owned by financial institutions that are driven to increase assets under management rather than focused on the provision of trustee services as the core business.

Our philosophy is to maintain the highest professional standards and to deliver a high calibre service without distinguishing between large and small clients.

Despite the fact that EFRBS are relatively new, IFG Trust (Jersey) has already been appointed to act as trustee of a number of EFRBS.

IFG does not provide taxation, legal or investment advice. The information and expression of opinion expressed in this briefing note are not intended to be a comprehensive study or to provide taxation or legal advice. Specific advice concerning individual situations should be taken and IFG can provide introductions to advisers who specialise in this area.

Team Member - Jennifer Le Chevalier - Director - IFG Trust (Jersey) Limited

16/03/2010 16:38:10

Director - IFG Trust (Jersey) Limited
Jennifer has sixteen years experience in the private client trust and corporate administration sectors. She spent the last seven years with a leading Swiss private bank and has significant experience providing support to high net worth families. Jennifer joined IFG in November 2008 as Client Services Director and was appointed to the Board in March 2010. Jennifer is responsible for a number of high net worth private client and corporate relationships. She holds a diploma from the Institute of Chartered Secretaries and Administrators.

New Product Sheet - Property Investment through the Isle of Man

25/03/2010 11:04:19

The Isle of Man can offer clients an efficient and cost effective route to the establishment and operation of tax efficient property holding structures. Property holding structures can vary from the simple single shareholder Isle of Man Company acting as a special purpose vehicle to more complex collective investment schemes structured as Limited Partnerships, Property Unit Trusts, AIM listed companies and Open Ended Companies. The benefits of using Isle of Man companies and partnerships for property funds and structures include:

no need to obtain time consuming and costly prior local regulatory approval for the establishment of closed-ended investment companies, or for open-ended property funds that are to be offered to fewer than 50 investors and that will not be the subject of a public offering;

as the Isle of Man has its own VAT office, it is possible for Isle of Man property holding vehicles to complete VAT registration within seven days and for Isle of Man entities to VAT group with other Isle of Man entities, UK companies or Channel Islands’ companies and obtain Transfer of Going Concern rulings within such expedited time frames;

a zero per cent tax rate and no capital gains tax or inheritance tax in certain circumstances;

the fact that English law advisers are comfortable dealing with Isle of Man companies, trusts and partnerships, and global capital markets accept Isle of Man entities as listing vehicles, because the Island’s law (including its new flexible and modern company law) is very similar to English law;

no Stamp Duty is payable on Isle of Man share transfers and possibilities may arise to mitigate Stamp Duty Land Tax (“SDLT”) on purchase;

the Island is a leading listings jurisdiction for international companies admitted to trade on AIM and other markets;

the ability of an Isle of Man company to have its shares denominated in any currency;

knowledgeable and expert professional advisers on the Island (lawyers, accountants and bankers) who are able to service the needs of sophisticated investment entities and financial institutions. Where necessary, we are in touch with external tax professionals that can advise on all aspects of tax including Income tax, Capital Gains Tax, Inheritance tax and the implementation of SDLT mitigation schemes if appropriate to the circumstances.

How can IFG Help

IFG holds all requisite licences and has significant experience in assisting clients to select the right vehicle to suit their requirements. We can deal with the establishment of the relevant vehicles including VAT registration, registration under the Non Resident Landlord Scheme together with all ongoing administration. Furthermore we are in touch with external tax professionals that can advise on all aspects of tax including Income tax, Capital Gains Tax, Inheritance tax and the implementation of SDLT mitigation schemes if appropriate to the circumstances.

New Product Sheet - Tax Exemption for Start Up Companies in Ireland

31/03/2010 17:19:33

Background

A corporation tax exemption was previously announced in the 2009 Budget in respect of new start up companies.

The 2010 Financial Bill confirms that start up companies which commenced to trade in 2010 will be exempt from corporation tax and capital gains tax in each of the first three years. This exemption will apply to the extent that the entities tax liability for each of the three years does not exceed €40,000.

Benefits

Very broadly, new companies that have commenced to trade in 2009/2010 are exempt from corporation tax and capital gains tax until 2011/2012 provided that their tax liability in the year does not exceed €40,000. This represents the potential to shelter taxable profits of €320,000 per year or €960,000 over the three year period.

There is also a form of marginal relief where the tax liability in the year is between €40,000 and €60,000.

The relief applies to tax arising on trading profits, including capital gains tax arising on the disposal of assets used in the trade. The relief applies for three years from the date that the company commences to trade, so that it will expire in either 2011 or 2012 depending on when the company commenced trading.

When calculating the relief available the first step is to ensure the total corporation tax payable is under €40,000. It is important to note that total corporation tax includes corporation tax on investment income or close company surcharges, that is, tax that cannot be relieved under the new provisions.

Anti-avoidance Provisions

If a trade previously carried on by the owner of the business is transferred into the company, this trade will not qualify for start up company relief. Only the portion of the corporation tax relating to the new trade will qualify for the relief.

A further anti avoidance provision to consider is where a company realises that the corporation tax liability for the year will exceed €40,000 and consequently transfers a portion of the trade to another company. The result of this situation is that neither the original company carrying on the trade nor the company the trade was transferred into will qualify for the relief under Section 486C TCA 1997.

How can IFG Help?

IFG has substantial experience in the establishment and ongoing management of Irish companies, including the fulfilment of key roles of commercial and financial management.

Summary

This exemption represents a significant opportunity for start-up ventures in a well regarded EU location with the benefit of a strong network of double tax treaties.

IFG does not provide taxation or legal advice. The information and expression of opinion expressed in this briefing note are not intended to be a comprehensive study or to provide taxation or legal advice. Specific advice concerning individual situations should be taken and IFG can provide introductions to advisers who specialise in this area.

Team Member - Celia Pourgoura - Manager, Corporate and Secretarial Services

14/04/2010 08:42:42

Manager, Corporate and Secretarial Services
Celia graduated from the University of Southampton after successfully being awarded a Bachelor of Laws (LLB), and then became a member of the Middle Temple in London as Barrister. She continued her studies by obtaining a Master of Laws (LLM) at Kings College London on the subject of Commercial and Corporate Law.

In 2003 she returned to Cyprus were she completed her training as a junior lawyer and became a member of the Cyprus Bar Association. She also worked as an internal house lawyer for an accountancy office for a year and as a civil lawyer in the Insurance section of a large bank in Cyprus for two years. She joined the company in 2008.

IFG expands Specialist Fund Administration Team

20/04/2010 17:10:06

IFG Fund Administration has strengthened its team which targets the alternative investment industry, as it seeks to grow its business.

Colin Stott has recently been appointed as Manager, Business Development with primary responsibility to develop the business in London, the Channel Islands, Isle of Man and Continental Europe.

Colin has worked in financial services for over 20 years, the last 14 of which were with Bank of Bermuda / HSBC Securities Services.

Commenting on the appointment he said: ‘This is a very exciting opportunity, joining IFG Fund Administration at a time when it seeks to build on the first-class operational and technology platforms that it has in place.

IFG is fully committed to the provision of services to the alternative fund management industry, and its expansion is a clear demonstration of its long-term investment.’

Al Patterson has also been appointed as the Director responsible for the Investor Services and Transfer Agency team. Al joined in January 2010 after spending 18 years with Bank of Bermuda / HSBC Securities Services based in Bermuda, Grand Cayman and the Isle of Man.

In addition, Paul Connolly and Jenny Gordon have joined as Managers of Corporate Secretarial and Compliance, respectively. Paul previously spent seven years in a similar role with Credit Suisse Fund Administration in Guernsey, and is an Associate of the Institute of Chartered Secretaries and Administrators and a Member of the International Compliance Association. Jenny joined in mid-March after almost three years in a senior compliance role with HSBC Securities Services. Prior to that Jenny was at the Isle of Man Financial Supervision Commission as a Manager in the Supervision area of the Collective Investment Schemes team.

Managing Director, Marie du Feu commented ‘The appointment of these four experienced fund professionals reflects our commitment to providing a high quality service to our existing and potential clients.’

New Vacancy - Accountant, Trust & Corporate Services

14/06/2010 10:03:00

Full TIme

IFG scores with Isle of Man Schools

22/06/2010 09:31:52

With the advent of the 2010 World Cup in South Africa, IFG International Limited thought it would be great fun (as well as educational!) to create a competition in which all Isle of Man state school students would be able to participate, using the World Cup as a theme and putting to use their Geography, Sport, General Knowledge and ITC skills. (See attached poster in Related Media below).

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IFG will be presenting two winning prizes, one for primary and the other for secondary school entries once the competition has closed and been judged in mid-July 2010.

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In addition to the competition, IFG also had 300 bespoke footballs made especially for the occasion of the 2010 World Cup and each school has also received a quantity of these balls for their Sports departments.

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IFG would like to take this opportunity to thank the Department of Education and Children who gave them full support with this initiative and kindly assisted in the distribution not only of most of the competition material but also of the bespoke IFG footballs. Eddie Teare MHK, Minister for Education and Children, stated “Exercise forms a major part of our schools’ activities and the support of IFG will undoubtedly encourage more young people to participate in sport. The competition will generate more interest among pupils in the World Cup, too. Team games also involve thinking of others and working with them, which is an essential skill if we are to progress in our careers.”

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Note: IFG International Limited - Isle of Man is part of the International Division of IFG Group Plc. The International Division has offices in Isle of Man, Jersey, Ireland, Switzerland, UK, Cyprus, Spain and the British Virgin Islands.

Team Member - Rodney O'Rourke - Director, Financial Services

24/06/2010 17:17:25

Director, Financial Services
Rodney holds a Law Degree from University College Cork and was admitted to the Roll of Solicitors in Ireland in 2006. Rodney has previously worked in the corporate banking and finance law arenas in Dublin, and also in the financial services group of a Big 4 accountancy firm, in both London and Dublin.
During his time working with a leading Irish law firm, Rodney worked within the Capital Markets Group and advised domestic clients and international investment banks on numerous structured finance and securitisation transactions of differing asset classes involving a range of Irish and International originators, trustees, administrators and issuers.
Rodney brings a wealth of financial and legal experience to his new role of Director of Financial Services with IFG Managed Services Limited and is ideally suited to leading the Company’s continued expansion into the domestic and international financial services sector.

Team Member - Marilyn Conolly - Head of Central Services Group

28/06/2010 14:40:08

Head of Central Services Group
Marilyn holds a Chartered Institute of Secretaries and Administrators (ICSA) diploma in Offshore Finance and Administration and part one ICSA Professional. She is currently studying for her part two ICSA Professional. Marilyn has worked in the finance industry for 35 years, during which time she worked for three major international banks in a senior capacity. She specialises in risk, compliance, audit and internal controls.

Team Member - Joanne Burchell - Manager - Client Services

15/07/2010 15:51:13

Manager - Client Services
Joanne heads up a team of experienced client administrators who look after a diverse portfolio of private wealth entities, specialising in wealth preservation and the implementation of a variety of tax advised structures, including trusts, foundations and various corporate structures.

Joanne holds a Diploma in Offshore Finance and Administration from the Institute of Chartered Secretaries and Administrators and a BA (Honours) Degree from the University of Central Lancashire.

Team Member - Paula MacCarthy - Manager – Client Services

15/07/2010 15:53:07

Manager – Client Services
In her role with IFG, Paula is responsible for a team of administrators, all with corporate portfolios under administration including a number of collective investment schemes. Paula has a wide-ranging knowledge of corporate structures and has been involved in the establishment and administration of various structures including unregulated and expert funds, unit trusts and protected cell companies.

Paula holds a Bachelor of Civil Law Degree (BCL) and LLM Masters from University College Cork. She was also awarded the Diploma in Offshore Finance and Administration from the Institute of Chartered Secretaries and Administrators.

New Vacancy - Administrator, Investor Services, Fund Administration

06/09/2010 10:21:23

Full Time

New Product Sheet - Foundations in Jersey I - General Guide

06/09/2010 11:32:02

Background

The draft Foundations (Jersey) Law (“the law”) was approved by the Island’s parliament on 22 October 2008 and became law in Summer 2009.

This is a “first” for a common law jurisdiction such as Jersey to introduce what is in essence a civil law concept. The law is important for the private wealth management industry in Jersey in that it opens up new opportunities with clients in geographical locations where the trust concept is not well known or understood. It is also important for general commercial transactions such as orphaned special purpose vehicles.

What is a Jersey Foundation?

A Jersey Foundation is in essence a hybrid of a trust and a company. Like a company, it is a body corporate (but without shareholders) and will act through its council, which will be the body charged with the administration of the foundation’s assets and the attainment of its objects. It is akin to a trust in that a foundation must have one or more objects which may be a purpose (charitable or non-charitable) and/or be for the benefit of one or more beneficiaries.

A Jersey foundation is therefore capable of exercising all the functions of an unincorporated body, save that it is not directly able to hold Jersey immovable property nor engage in commercial trading activities unless such activities are incidental to the attainment of its objects.

Every Jersey Foundation is obliged to have a “qualified member” which must be a person licensed to act as a council member of foundations under the relevant provisions applying to trust company business pursuant to the Financial Services (Jersey) Law 1998 (“the 1998 law).

Moreover, every Foundation is required to have a guardian to oversee the carrying out of the functions of the council. This is to ensure that there is always a person who can call the council to account. The guardian is not required to be a licensed person.

Incorporation

The person who calls for the foundation to be incorporated is known as the "founder" who may be (but does not have to be) a council member and/or a beneficiary under the foundation.

However, only a person who is licensed under the 1998 law can apply for the incorporation of a foundation.

The application for incorporation should be accompanied by a copy of the proposed charter of the foundation (but none of the regulations), together with a certificate signed by the applicant. This certificate identifies the initial qualified member of the council and gives the business address in Jersey of that person. The certificate must also confirm that (i) regulations for the foundation are held by the applicant which have been approved by the founder and the first qualified member of the council, and (ii) a guardian has been selected for the foundation.

The Charter

The Charter will be filed with the Registrar and will be available for public inspection at the Registry. It is a mandatory requirement of the law that a foundation shall have a valid charter at all times.

The charter must contain the following:

the name of the foundation (which must end with the word "Foundation" or its equivalent in a different language);
the lawful object(s) of the foundation. These must be lawful and can be charitable or non-charitable or both. If the objects are to benefit a person or class of persons, it will be sufficient for the charter to state that such person or class is to be determined in accordance with provisions found in the regulations;
information regarding winding up, dissolution and the term of the foundation; and
details of the initial endowment (if there is one) and if appropriate a statement that it may be endowed further.

The charter may state:

the name(s) of the members of the first council members;
any provisions regarding the amendment of the charter; and
anything which must or may appear in the regulations

As can be seen from the above, there is considerable flexibility as to the contents of both the charter and the regulations.

The Regulations

Every foundation must have regulations, unless all of its governing provisions are contained in its charter. The regulations will not be filed with the Registrar and accordingly will not be available for public inspection.

The Law provides that regulations of a foundation must:

establish a council;
provide for the retirement, appointment, removal and remuneration of council members;
set out how decisions are to be made by the council;
set out what decisions (if any) need approval from a separate person and the identity of that person;
include provisions relating to the appointment of a guardian; and
include provisions relating to the retirement, appointment and remuneration of the guardian.

As with the charter, the regulations will be able to contain any other matters beyond those which are prescribed by the Law.

The Founder

The founder is defined as the person who instructs the qualified member to apply for the incorporation of a foundation, together with any person who subsequently becomes a founder under Article 19 of the law. The latter article provides that the endowment of a foundation by a person does not make that person a founder or confer founder’s rights upon that person unless the regulations stipulate otherwise. The founder is not therefore required to provide any endowment or financial contribution to a foundation, and the regulations need to provide for a person who does make such a contribution to be treated as a founder.

The founder can be given such rights (if any) as are provided by the charter and if permitted by the charter or regulations, those rights can be assigned to other persons. Where the current holder of such rights (including the founder) dies or ceases to exist, the rights will vest in the guardian unless the charter or regulations provide otherwise.

The Council

A foundation must have a council to administer the affairs of the foundation and to carry out its objects. The council must at all times include a member who is a qualified member. The qualified member who applied for the incorporation of the foundation automatically becomes the qualified member of the council on incorporation but a subsequent one can be appointed at a later date. Although the Council may include more than one qualified member it may not have more than one qualified member at any one time. Any removal or retirement of the qualified member will not be effective unless and until the appointment of a replacement qualified member has taken place. Every qualified member must inform the Jersey Financial Services Commission of its appointment and, on an ongoing basis, its business address in Jersey.

The council members are required to act honestly and in good faith with a view to the best interests of the foundation, and to exercise the care, diligence and skill of reasonably prudent persons in similar circumstances. It is not possible for the charter or regulations to relieve the members of the council from liability for fraud, wilful misconduct or gross negligence.

One of the unique features of a foundation is that it and any persons appointed under the regulations do not owe any form of fiduciary duty to the beneficiaries. It is generally thought therefore that the courts will interpret and construe the provisions of the charter and regulations as if they were a form of contract.

The Beneficiaries

A foundation has beneficiaries to the extent that the foundation's objects provide a benefit to a person and/or class of persons. The Law expressly provides that a beneficiary under a foundation has no interest (whether legal or beneficial) in the foundation's assets or in the foundation itself. This provision effectively means that foundations are "ownerless" structures. However the Law does permit a beneficiary under a foundation to seek an order from the Royal Court ordering the foundation to provide a benefit but this right may only be exercised whenever a particular beneficiary has become entitled to receive a benefit under the foundation in accordance with the charter or regulations but the beneficiary has not received that benefit.

Furthermore and except as specifically required by the Law, a court order, or by its charter or regulations, a foundation is under no obligation to disclose any information relating to the administration of the foundation, the assets of the foundation or the way in which the foundation is carrying out its objects, to any person (whether or not a beneficiary). This is in marked contrast to a trust arrangement where ordinarily a trustee is under a statutory duty to produce documents relating to a forming part of the trusts accounts to a beneficiary on request.

The Guardian

All Jersey foundations are required to have a guardian, and the initial guardian will be identified in the regulations, which also provides for matters of succession and remuneration (if any).

The guardian's role is roughly equivalent to the role of an enforcer of a non charitable purpose trust in that it must take "such steps as are reasonable in all the circumstances to ensure that the foundation carries out its functions". Accordingly the Law envisages that the council will account to the guardian for the way in which the council has administered the foundation's assets and acted further to the foundation's objects.

The regulations of a foundation may give the guardian the power to approve or disapprove any specified actions of the council.

Administrative Matters

A foundation is obliged to include its name and business address on all written communications and to keep certain records (the charter, regulations (if any), register of council members, financial records and the names and addresses of those who have endowed the foundation) at the qualified member's business address. Documents may be served by leaving them at or posting them to the business address.

The foundation will be required to keep certain records at its business address, namely:-

A copy of the current charter and regulations
A register of the names and addresses of the members of its council
Records sufficient to show and explain its transactions
Records to disclose with reasonable accuracy its financial position
A record of the appointment of the guardian showing his/her name, address and the effective date of appointment
A register of the names and addresses of all the persons who have endowed the foundation.

There is an annual administration fee payable to the Registrar in respect of every foundation before the end of February.

The Registrar will supply (upon payment of a fee) a certificate of the incorporation and status of a foundation and a certified copy of its charter.

Judicial supervision

The Royal Court has been given extensive powers by the Law to ensure that a foundation complies with all and any requirements and obligations found in the Law, its charter or its regulations. Those powers include:

the power to order amendment of a charter or regulations;
the power to give directions;
the power to protect the interest of minors and unborn beneficiaries under a foundation; and
the power to dismiss and appoint a qualified member.

How can IFG help?

IFG has a significant presence in Jersey, and has already had substantial experience in administering private foundations incorporated in a number of other jurisdictions. This experience, together with a detailed understanding of the provisions of the Jersey Foundations Law (which does not in some ways replicate the foundation model in other jurisdictions) means that IFG is well positioned to assist clients with both the establishment and provision of ongoing services for such an arrangement.

Summary

The new Jersey Foundation appeals to high net worth private clients and corporates seeking an effective planning tool which offers flexibility and simplicity from both an establishment and ongoing administration perspective.

IFG does not provide taxation or legal advice. The information and expression of opinion expressed in this briefing note are not intended to be a comprehensive study or to provide taxation or legal advice. Specific active concerning individual situations should be taken and IFG can provide introductions to advisers who specialise in this area.

New Product Sheet - Foundations in Jersey II - Potential Uses

06/09/2010 11:43:06

Jersey Foundations became available in Jersey in 2009 alongside existing vehicles such as companies, trusts and limited partnerships.

The Foundation vehicle:

appeals to clients based in civil law territories where they are less familiar with the trust concept; and

is an effective financial planning tool for those clients who want to maintain more personal control of the assets.

Foundations have some of the attractions of a trust vehicle and some of the benefits of a company structure, including separate legal status.

THE KEY CHARACTERISTICS

The Founder

Is the person or corporate body specified as such by the Foundation’s Charter or Regulations? It is not necessarily the person providing the assets; an initial endowment is not essential.

Council – similar to a Company’s Board of Directors

Unlike a trust a Foundation is a distinct legal entity similar to a company, although it has no shareholders.

The Council is the body that administers the Foundation’s assets in accordance with the terms of the Charter and Regulations. At least one Council member must be registered under the Financial Services (Jersey) Law 1998 to conduct Foundation services business of this type (the “Qualified Member”).

Charter and Regulations

The foundation’s charter will be required to contain certain minimal information about the foundation and like a Company’s Memorandum and Articles of association will be a publicly available document.

The regulations however, will generally remain private unless, in the case of a foundation established for wholly charitable purposes, there is a desire to make the regulations available to the public.

Guardian

A Jersey Foundation must also have a Guardian. The main job of the Guardian is to oversee the work of the Council and to ensure that the Council carries out its functions.

It will be possible for a Founder or the Qualified Member to be both a Council Member and the Guardian.

Beneficiaries

Foundations are vehicles for holding assets, as such they must be established with one or more objects. The objects can be charitable, non-charitable or a mixture of both.

Permissible objects might include, benefiting a particular person or class of persons or carrying out a specific purpose or holding a particular asset.

If there are beneficiaries, those beneficiaries are not owed duties either by the Council or the Foundation itself. The protection for beneficiaries provided by the Jersey Law comes through the requirement for a Qualified Member and the role of the Guardian.

POTENTIAL USES

The holding of assets which are “wasting” or subject to volatility in value

In traditional trust structures, careful drafting of the trust instrument is often necessary where the purpose of the trust is to hold a single asset such as a business, artwork, an aeroplane or a boat. Given the trustee’s duty to diversify, act prudently, and in the best (financial) interests of the beneficiaries, trustees are often nervous about holding such assets. Foundations may become the preferred vehicle for such assets. It will be possible to establish a Foundation specifically to hold such an asset and the Council will not be subject to the same duties as trustees.

The Council’s duty (and ultimately the Guardian’s) will be to ensure the object of the Foundation (namely the holding of the asset) is achieved.

Discrete structures for high net worth clients

Currently where a family establishes a private trust company (“PTC”) to act as trustee to a number of trusts, the shares of the PTC will typically be owned by a non charitable purpose trust or by a company limited by guarantee. It will be possible for a Foundation to be the owner of the PTC shares.

Subject to the creation of a new exemption under the Financial Services (Jersey) Law 1998, it will also be possible for the Foundation to replace the PTC and to act as trustee of the underlying trusts.

Just as Foundations could be used to own PTC shares, the Foundation could be equally useful to own shares of any corporate protector or enforcer. The attraction of the PTC is that family members or family advisers are able to be directors of the PTC. Equally those individuals will be able to be Council Members of a Foundation.

A Foundation for Discretionary Distributions

Clients may want to incorporate the type of appointment and advancement provisions which are typically found in discretionary trusts into a Foundation. Accordingly, the Regulations would be drafted on the basis that the Foundation’s assets were to be held for the benefit of a class of beneficiaries, with the Council (or the Guardian or some other third party such as the Founder) having the power to select from within the class (or indeed to add to or exclude from the class) who and when benefits might be provided.

A Foundation for Charitable and Non-Charitable Purposes

In certain jurisdictions, it is common for high net worth clients to use Foundations for their charitable giving. Given that Foundations under Jersey law can be created for both charitable and non-charitable purposes (and the flexibility the Law allows in respect of the drafting of the Charter and Regulations), it is apparent that Jersey has the opportunity to market its Foundation to clients in a wide variety of jurisdictions.

Reservation of Powers

Frequently trust deeds will be drafted with an express reservation of powers in the hands of the settlor of the Trust (or a third party of his choice), the most common power to be reserved being that of investment. It will be possible for powers to be reserved to a Founder of a Foundation as well. Alternatively, powers can be reserved to the Guardian or indeed any other person depending on the Founder’s preference. The attraction to using a Foundation as opposed to a trust where the power to direct investments is to be reserved is that the overriding duty to monitor the performance of the investment to which a trustee is subject is not one to which the Council of a Foundation will be subject.

An Executive or Supervisory Role for the Guardian

As stated, each Foundation must have a Council containing a Qualified Member and a Guardian. The Guardian’s role is to ensure that the Council is carrying out the objects of the Foundation. However, it would be possible to limit the powers of the Council and to reserve to the Guardian the most significant powers. In this way, the Guardian would have an executive role. An attraction for potential clients is that the Founder (or his appointee) could be the Guardian. Alternatively, the Foundation can be structured in a way in which the family, through a corporate Guardian, would have a supervisory role only, whereby they can oversee the actions of the Council; this could be achieved by requiring the Council to obtain the Guardian’s consent before exercising a particular power.

IFG does not provide taxation or legal advice. The information and expression of opinion expressed in this briefing note are not intended to be a comprehensive study or to provide taxation or legal advice. Specific active concerning individual situations should be taken and IFG can provide introductions to advisers who specialise in this area.

New Vacancy - Senior Administrator, Trust & Corporate

06/09/2010 14:41:33

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