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.

Conclusions

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions