Trustees are duty-bound to monitor the activities of any company comprised in a trust fund and the actions of its directors. The trustee must act as a "prudent investor" in respect of the trust assets and is obliged to monitor the performance of the assets, maximise the asset value and diversify risk.
However, where a trust fund specifically consists of high-risk assets or includes a controlling interest in a family company the imposition of the "prudent man of business" rule raises significant obstacles for both trustees and a settlor to overcome. Professional trustees may also be unlikely to be the best people to run an active trading business or family business where an understanding of the market and an ability to react quickly is essential.
BVI VISTA (Virgin Islands Special Trusts Act 2003, (amended in 2013) Trusts provides specific statutory provisions to allow a solution to these drawbacks.
The trustee of a BVI VISTA Trust is not obliged to intervene, diversify, monitor, and undertake management responsibilities for the underlying company, thereby eliminating the requirements of the "prudent man of business" rule.
• A BVI VISTA Trust must only hold shares ("designated shares") in a BVI company/companies although assets below the BVI company can be situated elsewhere
• The trustee's duty to retain the designated shares has precedence over any duty to preserve or enhance their value. The trustee is obliged to retain the shares indefinitely and only to dispose of them with the consent of the directors of the company or other persons named in the trust deed
• At least one of the trustees must be either a BVI Trust Company licenced by the British Virgin Islands Financial Services Commission or a BVI Private Trust Company
• The trustee cannot be a director of the underlying BVI company or intervene in the management of the company except to resolve specific problems and then only in a prescribed number of circumstances, which need to be outlined in the Trust Deed
• The trustee cannot appoint directors of their own choosing therefore reducing their ability to influence the management of the company except in accordance with the terms laid down by the Trust Deed
• The trustee has no fiduciary duty in relation to the affairs of the company unless there is an "intervention call".
Asset protection without relinquishing control – A BVI VISTA Trust allow individuals to take advantage of the classic benefits of a trust vehicle, such as effective succession planning and holding assets in a confidential manner, without having to give up effective management and control of the assets held in a BVI company.
Family Wealth Planning – A BVI VISTA Trust is particularly beneficial where the underlying assets to be held by a BVI company are of significance and are important to the family. This may apply to family heirlooms or shares in long established, family companies.
Risk Management - Where the assets or asset classes held are viewed as risky or unconventional, a BVI VISTA Trust can provide comfort to trustees by altering their fiduciary responsibility and duty of care in relation to the BVI company shares. This can also be an invaluable tool for a settlor who does not wish to have trust assets diversified and desires to be free to speculate in ventures which would generally be regarded as inappropriate by trustees of a traditional trust.
Commercial Purposes – More sophisticated applications of a BVI VISTA Trust could be for commercial purposes such as holding voting shares of mutual funds, special purpose vehicles and other structured finance vehicles.
Strategic Planning - A BVI trust which combines a Purpose Trust (i.e., a trust for non-charitable purposes) and a BVI VISTA Trust is considered an ideal holding vehicle for certain strategic assets, such as holding shares in a Private Trust Company.
Matrimonial Settlements – A BVI VISTA Trust serve to protect the family business from being exploited by an ex-spouse or their family, as the settlor can retain absolute control over the company without any danger of interference.
ILS World is proud to have been operating in the BVI for more than 25 years and ILS Fiduciary (BVI) Limited is licenced by the British Virgin Islands Financial Services Commission.
The team has a considerable amount of experience and expertise in assisting clients with trusts and our comprehensive service includes drafting the trust deed, providing a corporate or individual trustee, establishing relating structures, maintaining trust accounts, arranging banking facilities and administration. Where necessary we liaise with specialist lawyers to ensure our drafting is bespoke and precise.
For further information on BVI VISTA Trusts please contact our head of private clients Gemma Davies at email@example.com
Please note: ILS World does not offer tax advice and would therefore recommend you obtain your own tax advice. If you require an introduction to a tax adviser, we would be happy to assist.