Offshore Trusts and Companies and Administration

Students will be able to explain how companies are used offshore for:
• asset holding
• trading activities
• confidentiality
• tax to include IBCs and exempt regimes
• succession planning
• captive insurance
• ordinary companies
• exempt companies
• limited-duration companies (LDCs), and limited-life companies (LLCs)
• protected-cell companies (PCCs)
• variable capital companies
• international business companies (IBCs)
• companies limited by guarantee (LBGs)
• hybrid companies
• explain fundamental concepts of tax which drive offshore structures
• explain residence
• explain domicile
• distinguish between tax evasion, deferral, and avoidance
• explain resident and non-resident companies
• explain tax-exempt companies
• explain international business companies
• describe the features of single-member companies
• explain sole directors and corporate directors

FUNDING OF OFFSHORE COMPANIES
• draft and explain written resolutions
• explain the need for accounts and audit requirements
• describe the circumstances where an audit exemption is possible
• explain bearer shares and their suitability offshore
• explain the use of nominee shareholders and accompanying nominee declarations
• explain the nature of shares and the meaning of capital
• explain share allotment
• explain loans and contributions to capital
• explain dividends payment
• explain repayment of loans
• explain refund of capital contributions
• explain payment of salary
• explain payment of expenses and commissions
• describe the documentation required to record deposits and withdrawals of funds
• discuss the balance of power within a company and explain the rights of members
• explain what is meant by effective control of a company
• explain that the role of director is a “test of function and liability owed by directors”
• describe a director’s duties and powers with particular reference to their role in offshore companies
• appreciate the fiduciary nature of a director’s duty
• explain the importance of management and control vesting in the directors
• demonstrate the mechanics of board meetings and directors’ decision-making process
• explain why care is required in the use of nominee directors
• describe the use of corporate directors
• explain the role of directors provided by offshore agents

THE ROLE OF THE DIRECTOR AS AN AGENT OF THE COMPANY

• define express agency
• define implied agency
• understand the significance of the Turquand case and the ‘indoor management rule’
• outline the range of services provided by Corporate Service Providers (CSP)
• describe the documentation required to incorporate a company including company questionnaire, management agreement and client indemnity
• describe the documentation normally held at a company’s registered address
• understand the role of company officers provided by a corporate services provider including directors, company secretary, registered agent or representative and nominee shareholder
• understand the requirement for corporate records and financial statements
• discuss the regulation and licensing of corporate services providers
• discuss the criteria for choosing a corporate services provider
• explain the requirement for the annual review of company records
• explain the requirement for the annual review of company records
• demonstrate why care is needed if the beneficial owner is involved as director or exercises a power of attorney
• explain the need to ensure that management and control remain with directors
• explain potential consequences for both offshore administrators and beneficial owners if management and control are not effectively offshore
•  discuss the potential liability of directors and mechanisms to protect from breach of duty, e.g. professional liability insurance, shareholder approval, and indemnity provisions, and discuss the effectiveness thereof

 

• explore the idea and nature of equity
• review the early history of deficiencies in the writ system and beginnings of the
• Courts of Chancery
• describe the origin of the trust and the Statute of Uses 1535
• distinguish between equitable interest and legal interest
• differentiate between trusts and other vehicles such as a company, agency, and foundation
• discuss different methods of trust creation (namely, express, implied, resulting, and constructive trusts)
• identify that a constructive trust is a trust created by equity institutions where equity believes that the owner of property should ‘in conscience’ hold it on trust for another
• describe the rule in Keech v Sandford
• outline the position where a stranger meddles with trust property
• review the requirements of a valid trust
• review residence and domicile status of potential settlors
• Identify the proper law to govern trusts and be able to advice on changing the proper law, to include flee clauses and when and how they should be utilised
•  Identify how the Hague Convention on the Law Applicable to Trusts and on their Recognition supports trusts
•  describe the features and potential uses of a variety of trusts in modern usage to include the following:
• • tax planning,
• • confidentiality,
• • succession planning,
• • avoiding or reducing probate problems,
• • protection from creditors
• • protection from forced heirship
• • pre-emigration
• ?? describe various types of trusts including:
• • discretionary trusts,
• • life-interest trusts,
• • accumulation-and-maintenance trusts,
• • purpose trusts,
• • trusts engaging in trading activities,
• • secret/half-secret trusts/mutual wills
• ?? discuss the concept of asset protection
• ?? outline provisions of creditor protection trusts
• ?? outline provisions of trust established to avoid forced-heirship claims
• ?? advise on the format of a trust instrument
• ?? describe the framework and contents of a typical trust instrument
• ?? identify key provisions regarding
• • type of instrument,
• • distributions,
• • excluded parties,
• • exculpation clauses,
• • the care needed with reservation-of power clauses
• ?? outline who the parties are in connection with the trust instrument:
• • The settlor(s), including any dummy settlors
• • The trustee
• • The protector (if applicable)
• ?? advise who should sign the instrument
• ?? evaluate the practice of using dummy
• ?? explain the use of declarations of trust
• ?? understand the good practice of obtaining
• ?? specialist taxation and legal advice
• ?? advice on the implications to the settlor and trustee of revocable versus irrevocable trusts
• ?? explain a range of situations where a trust may be set aside
• ?? explain the circumstances where trusts may be deemed voidable
• ?? outline the grounds on which a trust might be deemed illegal
• ?? explore the significance of incompletely constituted trusts
• ?? explain the maxim ‘equity will not assist a volunteer’
• ?? discuss how trust may be varied after they have been established
• ?? explain when resort to the courts may be required to bring about a change
• ?? discuss the remedies available in equity to beneficiaries where the trustee is guilty of a breach of trust
• ?? explain who can act as trustee
• ?? outline how they are appointed
• ?? discuss the duties of trustees and the standard of care expected
• ?? outline the duties of a trustee on the acceptance of a new or existing trust
• ?? discuss the ongoing administrative duties including the duty to
• • invest appropriately
• • provide information to beneficiaries
• • distribute trust funds
• • not profit personally from the trust
• • follow the trust deed
• • act unanimously
• ?? discuss the powers of trustees as in the trust instrument and under local statutes
• ?? explain the restriction on the trustees’ power to delegate, and recent Developments
• ?? discuss specific powers of trustees including powers of
• • maintenance and advancement
• • appointment of capital
• • investment
• ?? understand that the fiduciary nature of the role of trustee can lead to personal liability for breach of trust
• ?? discuss the role of the trustee services provider
• ?? outline the rules relating to the licensing and regulation of trustee services providers
• ?? discuss the historical development of the powers of investment of trustees under English law and offshore
• ?? understand the prudent investor rules
• ?? outline the provisions of the Trustee Act 2000 in relation to investment
• ?? discuss the rules relating to the appointment of an investment
• advisor/manager
• ?? discuss the specific problems relating to investment in family companies
• ?? discuss the specific responsibilities of trustees in relation to the administration of discretionary trusts
• ?? explain why such trusts are popular because of the flexibility they offer
• ?? explain ‘blind trusts’ and discuss their advantages and potential problems
• ?? discuss the use of the letter of wishes
• ?? outline the role of trust protector
• ?? discuss the decision-making process and the need to record trustees’ decisions
• ?? discuss ‘sham trusts’ and how they should be avoided
• ?? explain the importance of preparing accounts and carrying out a regular review
• of the trust administration
• ?? outline the reasons for the preparation of trust accounts
• ?? outline the structure to be adopted in the preparation of accounts, and understand the importance of the audit of trust accounts
• ?? discuss the purpose of trust reviews and the procedure to be adopted for reviews
•  

• Describe the risks associated with the provision of offshore financial services
• Economic and political
• Regulatory and legal
• Operational
• Identify the principal risk issues
• Discuss how such risks may be controlled and managed
• Understand the specific risks associated with the provision of offshore financial
• services: in particular, risks associated with the acceptance of the business, and
• the administration of the business
• Understand the purpose of a Risk Management Action Plan
• Understand the role of compliance and audit
•  Outline the compliance reports which should be available and their purpose
•  Discuss the implementation of a Risk Management Action Plan