Existing legislation to be amended to attract wealthy private clients
The Bahamas is to add private client trust companies (PTCs) to the range of structures it offers wealthy investors and their advisers. It is expected that existing legislation will be amended later this year to cover PTCs, although no final decision has been made on the legislative process.
This is the latest stage in a legislative programme to try to make the jurisdiction more attractive to wealthy private clients. In the past year, the Bahamas has passed the Purpose Trust Act, legislation enabling the formation of foundations and protected cell companies (PCCs) as well as extending the period of perpetuity to 150 years.
The offshore centre believes that PTCs will appeal especially to clients in civil law countries such as Latin America and continental Europe who are not familiar with trusts or live in countries that do not recognise trusts.
A PTC is a company whose purpose is to act as a trustee for a specific trust or a related group of trusts. They can be established in the Bahamas but are subject to the same level of regulation as other trust structures. The trust industry is arguing that there should be a lighter touch for PTCs under the expected legislative change.
One of the attractions of PTCs is the fact that settlors can appoint their own directors or family members as trustees of the company.
Among the reasons given for establishing a PTC include a reluctance on the part of settlors to relinquish complete control over and involvement with the assets settled into trust.
It is suggested that PTCs allow a greater degree of flexibility and involvement for the settlor and their family. The settlor, for example, can have a role as director of the PTC and influence the trust structure without prejudicing its legal validity, like having a company with directors.
Ian Fair, director of the Bank of Nova Scotia Trust Company, said: "Trustees like PTCs because it takes away their liability for companies placed in a trust. This is an onerous responsibility for trustees.
"Families often put companies within a trust in advance of a flotation or a trade sell. The other problem with this trust arrangement is that settlors often find it hard to accept that they must give up control of the company."
Robert Drysdale, an associate in the trust and private client department at Conyers Dill & Pearman, said: "A PTC can be tailor-made to serve the settlor's intentions and the scope of its role and powers as trustee adjusted accordingly. Use of a PTC can be designed to co-ordinate administration with the family's investment advisers and any family office, which can help streamline and simplify administration."
Another advantage of PTCs, said Drysdale, is that the cost may be lower than when using institutional trustees.
"The costs of incorporating and running a PTC can be subject to client control and should be less expensive for large trusts," he said.
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