VISTA Trusts (BVI)

What is a VISTA Trust?

Whilst the British Virgin Islands is extremely well known for its international business companies, BVI trusts, although widely used, have not historically enjoyed the same level of name recognition as their corporate counterparts. This has changed in recent times following the introduction of the Virgin Islands Special Trusts Act, 2003 ("VISTA").

The VISTA trust is a form of purpose trust. It is intended as an entity to own BVI companies and to eliminate the conflict between decisions of the trustees and the needs of operating a business.

Modus Operandi of a VISTA Trust

Under existing trust legislation prudence is required of trustees, this may often conflict with the decision making process required of the directors to run a successful business. Moreover, what the trustees consider as in the best interest of the company may not be what the settlor had in mind when the trust was established. Monitoring the activities of directors is a trustees obligation where they hold shares in a company, and this could inhibit the company from entering into any speculative venture.

The key features of a VISTA trust are as follows:-

1. The trust property may be retained indefinitely (the rule against perpetuities does not relate to VISTA trusts);

2. The trustee’s primary duty is to retain the shares as part of the trust fund. This duty has precedence over any duty to preserve or enhance their value. The trustee is not liable for a decrease in the value of the shares or the liquidation of the underlying company;

3. The voting powers of the trustee are restricted by statute, so that the management or conduct of the company’s business is left to the directors, whose fiduciary duties to the company remain intact;

4. The trust instrument may include “office of director” rules specifying how the trustee must exercise its voting powers in relation to the appointment, removal and remuneration of directors, and the trustee is generally obliged to follow these rules;

5. VISTA also permits the trust instrument to exclude the Rule in Saunders v. Vautier which permits adult beneficiaries to set aside a trust. However, the exclusion cannot exist for more than 20 years;

6. The Act is confined to shares in BVI Companies Act companies.

7. Only a trustee licensed in the BVI can act as trustee of a VISTA trust. IFG (BVI) Inc. is licensed to act as trustee.

Advantages of a VISTA Trust

The VISTA trust is ideal for people with family owned businesses who want the benefits of estate planning conferred by a trust but who want to make their own decisions. The settlor can prescribe in the trust instrument who will be the directors of the company on his death, whilst at the same time ensuring that the effective management of the company will not vest with the trustees but with his successor.

It is worth noting that the trustee may still have a supervisory role to play as the trust deed may specify certain circumstances in which a beneficiary or other named people may require the trustee to intervene in the management of the company under an “intervention call”. This mechanism gives the settlor comfort that the trustee can intervene in certain circumstances, but once the specific situation to which the intervention call related has passed, the trustee must return to his role of non-intervention.

Summary

IFG has considerable experience in the establishment and ongoing administration of VISTA Trusts.

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.