Jersey: Private Trust Companies

Last Updated: 10 December 2008
Article by Appleby  

In recent years Jersey has seen a steady increase in the use of the private trust company ("PTC") by wealthy families. PTC's have developed a reputation for flexibility, costs saving and privacy to name just a few of the many advantages and, in the current climate, are causing many very high net worth clients to reassess their institutional relationships. For a PTC to be truly successful, however, careful consideration will need to be given to the composition of the board of directors, the administration of the PTC and its ownership structure.

What is a private trust company?

At its most simple a PTC is a company incorporated to act as a trustee of a trust or group of trusts. A PTC, by way of exception to the usual rules, will not be required to obtain a licence to conduct trust company business as long as the PTC fulfils the following criteria:

  1. the purpose of the PTC is solely to provide trust company business services to a specific trust or group of trusts;
  2. the PTC does not solicit from or provide trust company business services to the public; and
  3. the administration of the PTC is carried out by a person registered to carry out trust company business.

Why use a private trust company?

A PTC is likely to be of considerable interest to a settlor who wishes for himself and his family members to retain involvement and decision making powers in relation to family trusts. Ongoing participation in the trusts is often achieved through the settlor populating the board of directors of the PTC with members of the family. Family members will often be co-directors along with trusted advisors and perhaps even a professional trustee.

A further advantage of a PTC is that it allows younger members of the family to become involved at all sorts of different levels depending on their age, level of expertise and interest. By keeping the trusteeship of the family trusts within the family it is also considered that costs can generally be reduced and that confidentiality can be enhanced.

Composition of the board of directors

By sitting on the board of directors of a PTC the family can actively participate in the decision making and day-to-day operation of the family trusts and can ensure that the objectives of the settlor in creating the trust are effectively realised. However, the PTC, as the trustee of the family trusts, must act in the best interests of all of the beneficiaries of the trusts and individual directors should not be placed in a position where they are able to favour their own interests or the interests of those beneficiaries who they represent. Such issues can be avoided by the appointment of wholly independent board members or for the board to appoint committees to advise them on issues such as investment and property management.

The physical location of the directors of the PTC is an important consideration not only because of the potential fiscal mind and management implications but also because of disclosure obligations that may be imposed on directors in certain jurisdictions. In addition, all PTC's should be mindful of continuity and succession planning issues at board level. Often this is best dealt with by the appointment of one or more independent, professional co-directors.

Finally, where the assets of a trust include ownership of a complex or specialist trading entity, or where there is a desire to invest trust assets in 'high risk' investments, then the directors, or at least some of them, will ideally have expert knowledge of the particular trading entity or 'high risk' investment.

Administration of the PTC

In order for a PTC to be exempt from the requirement to be registered under Jersey law to conduct trust company business, the PTC must be administered by a locally registered trust company.

Under Jersey law the administrator of the PTC will be responsible for fulfilling the anti-money laundering requirements of the PTC. This is an important role and the licensed administrator is likely to insist upon being provided with sufficient information to ensure that it has enough knowledge of the structure to be able to discharge its anti-money laundering obligations. If the family is not willing to share information with the administrator at the outset then this is likely to lead to tensions in due course. It is therefore advisable that the administrator meets and establishes a good and trusted relationship with the family at the outset.

The administrator will also need to agree the terms of its service contract with the family at the outset. Such an agreement will ideally set out the scope of the administrator's role, the extent of its liability, its fees, entitlement to information and the process for terminating the relationship.

Ownership of the PTC

The shares in a PTC may be owned in a number of different ways. The most direct and transparent form of ownership is through the family itself but depending on fiscal or confidentiality concerns this may not be the most appropriate structure.

A popular ownership structure for a PTC is via a non-charitable purpose trust. By distancing the beneficiaries from direct ownership of the PTC through this 'orphaning' arrangement, optimum protection from external intrusion can be achieved. Another possible ownership structure is for the PTC to be owned by a stand-alone entity such as a private foundation.

Flexibility is one of the huge attractions of a PTC and it is, of course, perfectly permissible to combine the above ownership structures. However, where the settlor is the sole shareholder of the PTC and one of only a small number of directors on the board of directors as well as a beneficiary of the trusts, the settlor will be in possession of largely unfettered levels of control. Therefore, the structure may risk being undermined when the settlor dies or loses capacity. Equally, dividing ownership of the PTC up between different family members may enhance the risk of internal disputes. It is therefore generally considered preferable for the PTC to be owned by a structure that is separate and distinct from the family members.


PTC's allow high net worth families to create a wholly bespoke structure within which to manage and develop family wealth. The PTC is attractive to families because it allows family members to contribute their in-depth knowledge and skill to the advantage of the family. However, the most successful PTC's will continue to utilise the skills of independent professionals who will play a significant role in the administration and ongoing management of a PTC.

This article first appeared in the autumn 2008 issue of Appleby Jersey's Finance newsletter.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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