Private Trust Companies: How to Obtain the Best of all Worlds - BVI
Private trust companies (PTCs) have become increasingly popular offshore in the last 20–25 years. A PTC may be defined as a company which is incorporated with its main function being to act as the trustee of a specific trust or a number of ‘related’ trusts.1 It should be contrasted with a professional corporate trustee, bank, or financial institution which offers its services to the general public for a fee. In contrast, PTCs tend to be less regulated.
PTCs operate within the framework of general company law and trust law, but they may also be subject to regulatory requirements.
Clearly when setting up a PTC, one of the most basic points to consider is that the company’s memorandum (or constitution) must give it the power to act as trustee of the particular trust or trusts of the kind intended.
In addition, when structuring the company, it is always sensible to obtain advice from lawyers from the jurisdiction in which the company is incorporated, from where the trust is to be administered and from those from the jurisdiction the proper law of which is to govern the trust (or trusts). Tax advice on structuring issues should always be taken from qualified advisers in the relevant jurisdictions.
Disadvantages of individuals acting as trustees
Traditionally it was customary for trustees to be individuals who were generally unpaid.
It is often inappropriate for the settlor or members of a family to act as trustees of offshore trusts in view of tax concerns (which might arise, for example, because the trust fund or its income is taxed on the basis of the trustees’ residence or the place from which the trust is administered).
Should one or more individuals in an offshore jurisdiction (such as a lawyer or accountant from the trust jurisdiction) therefore act as trustees?
In an article which appeared in The Times some time ago, a partner of one of the large accounting firms is quoted as saying, ‘the one thing that I am not prepared to do in retirement is to be a trustee of anything: the risks are too awful’ and in a well-known English decision2 Brightman J said, ‘trustees are above ordinary mortals’. Understandably, particularly in the offshore context, there is an increasing reluctance for individuals to take on trusteeships, since the values of trust funds tend to be very significant. In today’s climate of increased trust litigation, times have changed from the days when the family’s lawyers or accountants were prepared to be trustees.