For the increasing number of wealthy families in Asia--a leading source of wealth growth globally, wealth management has become a top concern. They are becoming more sophisticated and want to make sure their businesses and wealth are properly managed and passed down securely, efficiently and cost-effectively through the generations.
The BVI, regarded as one of the world’s premier jurisdictions for wealth management, has introduced modern legislation providing sophisticated and flexible structures for wealth management through various trusts, including the Virgin Islands Special Trusts (VISTA) and private trust companies (PTCs), which have positioned the BVI as the jurisdiction of choice for wealth management.
The BVI’s resourceful pool of trust experts can provide unique solutions and practical advice based on decades of specialization and experience to best help clients manage their wealth into the future.
The Virgin Islands Special Trust Act, 2003 (VISTA) was enacted to solve the formerly prohibitive ‘prudent man of business rule’ in relation to the investment and management of trust assets and to provide solutions for individuals and families who seek the benefits that a trust offers in succession vehicles, but who do not wish to transfer to trustees the day-to-day management responsibilities of companies owned by the trust.
Unique to the BVI, the innovative VISTA trusts allow directors to effectively run the company without any threat of removal by the trustee-shareholder and have gained great popularity among Asian businesses. It has been described by global practitioners as a ground breaking development in the area of trusts.
Why is VISTA so popular?
Prior to VISTA, a rule of English trust law (known as the “prudent man of business rule”) seriously impeded the traditional common law trust catering for the succession of shares. This law was designed to preserve the value of trust investments, but instead frequently resulted in conflicts of interest between trustees and settlors.
Under this law, trustees were responsible for managing underlying companies, acting in the best interests of the trust’s beneficiaries and guarding against risking company assets. However, this conservative investment approach often clashed with that of the settlor, who saw risk-taking as an integral part of business practice.
This conflict was especially acute in family businesses. Trustees who managed underlying companies often spread financial risk, essentially reinvesting away from the family business, though the settlor initially set up the trust as a succession vehicle for the family business.
Moreover, the constant monitoring and intervening from trustees resulted in expensive fees and delays to the decision-making process that is critical to commercial success.
VISTA was introduced to remove these critical issues. Most importantly, VISTA returned control to the settlor. It removed the trustee’s duty to manage underlying companies and also allowed settlors to determine who should be the directors of the company held under the trust and the provisions for their appointment and removal.
BVI trusts are, in general, exempt from registration and filing requirements and there are broad exemptions from taxation in the Trustee Ordinance. Trustee (Amendment) Acts, 1993, 2003 and 2013.
Why BVI for Trust?
- The BVI’s UK-based trust law has an advantage over jurisdictions without UK-based laws.
- Unique products give the BVI an advantage over competing jurisdictions with UK-based laws.
- Low operating costs - the BVI is often less expensive than other UK-based law jurisdictions.
- It is often advantageous to have the trust and the underlying entity governed by the same law; given the success of BVI companies, that sits well with BVI trusts Flexible and innovative legislation.
- Well established trust industry with access to high level professionals qualified in law, accountancy and trust and estate planning
More information about BVI Trust Regime
An Overview of Trust Law & Trustee Services in the British Virgin Islands by O’Neal Webster
Private Trust Companies
The BVI has continues as a popular jurisdiction for Trusts. The jurisdiction’s trust industry continues to meet the needs of the client by being up-to-date, user friendly and relevant. The BVI’s Private Trust Company (PTC) provides for the establishment of BVI companies which can act as trustees of a single trust or a number of related trusts.
Clients may not prefer to transfer control of their assets to a third-party for a number of reasons such as confidentiality, trust, and the need for more sophisticated structures to manage their wealth. In response, the BVI introduced the Private Trust Company (PTC). PTCs help clients handle the more complex, bespoke succession structures built to protect their legacy, retain control, and manage wealth in an affordable manner.
Advantages of a PTC
Ease of operation: BVI Business Companies (BCs) have long been popular in Asia, and PTCs utilize their framework and share key features, providing familiarity to individuals and making a PTC easy to operate.
Confidentiality: the BVI’s well-regulated and sophisticated company and trust legislation ensures client confidentiality.
Minimized risk: the PTC can carry out the trustee function, taking on any risk linked to the assets and managing the operations of the business.
Flexibility: High-Net-Worth families can create bespoke structures to manage their wealth using PTCs. For example, they can set up multiple trusts to keep certain assets separate from one another, holding different assets for different beneficiaries.
Cost efficient: the PTC structure’s trustee fees are extremely competitive.
Control: by sitting on the board of directors of the PTC, the family can make decisions quickly without having to wait on an independent trustee.
With the growth in wealth in Asia Pacific, individuals and families are increasingly seeking solutions to grow and protect their wealth. The BVI was ranked first for asset protection and estate planning in the Offshore 2020 report. The BVI’s modern and progressive trust legislation provides flexible asset protection structures to help families manage their increasingly complex assets around the world.
BVI Business Companies (BCs), simply referred to as “BVIs” in China, are often used as asset protection vehicles commonly in combination with a BVI trust that acts as a holding company. The combination of the trust and company make it possible for trust assets to be held in a jurisdiction which does not recognize the trust concept.
Additionally, the combination safeguards assets against political risks: (example - a modern trust instrument can provide for the proper law of settlement, or provide for its administration to be moved to another jurisdiction in the event of political or strategic emergency in the country of the trustee's residence (Fraser Allister, Managing Associate, Ogier).
By having shares of family businesses owned by a BVI trust, the control of the business can be centralized and retained indefinitely, and the board of directors can run the company without fear of shareholder interference.
Additionally, upon the passing of the family member, BVI trusts ensure efficient distribution of assets to beneficiaries without the lengthy, complicated and costly procedures normally required for probate.
For international businesses, many clients will have operations in numerous jurisdictions and may not prefer to have the ownership centralised in one location. In this case, BVI companies are often used as a holding company for the other business interests with a BVI trust holding shares.
By using BVI structures, clients also have access to the best professionals in all areas of financial services, including asset protection for private clients. The BVI financial services sector is well-established and trusted by foreign investors worldwide, including global financial institutions, and especially throughout the Asia Pacific region.
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