CIB can meet all of your trust needs by acting as the trustee to common trust structures, such as charitable and STAR trusts, as well acting as the administrator of Private Trust Companies (PTCs) and Enforcer to STAR trusts.
CIB understands the importance of compliance and acts in accordance with the latest anti-money laundering laws and regulations. This legislation is an integral part of the Cayman Islands 'Know Your Client’ culture and enhances its reputation as a leading offshore financial jurisdiction of the highest integrity.
Introduction to Trusts Put simply, a trust is a legal arrangement whereby a person (the trustee) holds and deals with property (the trust fund) on behalf of other persons (the beneficiaries). The trust is created when a person (the settlor) transfers property to the trustee who is then legally obligated to administer that property for the benefit of the beneficiaries.
STAR Trusts STAR trusts, established in 1997, are typically purpose trusts established for non-charitable purposes. A STAR trust can be established to meet the specific requirements of a particular transaction and is proving increasingly popular for mutual funds and structured finance transactions. No beneficiary under a STAR trust has any right to take court proceedings to enforce the trust, these rights are the exclusive concern of an Enforcer. Unlike other trusts that have a maximum perpetuity period of 150 years, a STAR trust can have an unlimited duration or perpetuity period.
Charitable Trusts Charitable trusts are those with charitable objects, or beneficiaries. Cayman Islands Law adopts the English Common Law definition of charitable objects, and it is important to ensure that the charitable trust complies with the definitions or it could be held to be void. In contrast to STAR trusts, the Cayman Islands Attorney General has the right to enforce the trust and will initiate proceedings on behalf of and to protect charities. Like STAR trusts, charitable trusts can have an unlimited duration or perpetuity period.
Uses of Trusts STAR trusts or the more traditional charitable trusts may be used to enable an independent trustee to hold a fund’s management (voting, non-participating) shares where the promoter of the fund does not wish to hold such shares; investors in these funds are generally issued with non-voting, or limited-voting, participating shares.
Placing the management shares with an independent trustee allows the fund’s promoter to avoid retaining direct control over the fund, whilst not handing control to the fund’s investors; potentially avoiding onshore issues, such as tax, for the fund’s promoter. Investors may, however, insist that they have voting rights, but where this is the case, potential control of the structure is passed to the investors, allowing them to change the fund’s directors, investment manager and formation documents, for example.
STAR and charitable trusts have also become a common feature of structured finance transactions, whereby assets are settled into trust so that the assets will no longer be owned by the settlor and are deemed to be off-balance sheet. Trusts can also play a part in the liquidation of funds, especially those that hold illiquid assets and where the fund’s directors wish to wind up the fund in advance of liquidating all its positions.
Private Trust Companies (PTCs) The rules around PTCs were revised in 2008, making the Cayman Islands more aligned with other jurisdictions. PTCs can be used to establish sophisticated trust structures or commercial trusts by persons not wanting to use the services of a professional trust company.
The main advantage of a PTC is that it provides the settlor with an increased level of control. The settlor may act as a director to the PTC or at least choose the directors of the PTC – this being in contrast to usual trust arrangements where assets are transferred to a trustee who is remote from the settlor and with whom the settlor does not typically have a personal relationship.
A PTC can be established by registering it with the CIMA, provided it only conducts 'connected trust business'. Connected trust business refers to all persons who contribute assets to the trust that the PTC acts as trustee to, and these are to be connected, either through a defined family relationship or by groups of companies and associated beneficial owners.
The PTC must maintain its registered office with a Cayman Islands trust company that holds an unrestricted trust licence issued by CIMA, such as CIB. Whilst anyone can act as a director of the PTC, to ensure there are no adverse tax consequences or other issues encountered, the majority of directors should be resident offshore, and although anyone may act as a shareholder of the PTC, it is generally recommended that ownership is settled into trust; a STAR trust for example.
Enforcer An Enforcer is a person or corporate body chosen by the settlor, who can, but need not, be a beneficiary. CIB can act as an independent Enforcer to that of the trustee in order to further enhance corporate governance systems.