THE NEED FOR PROTECTION
The extent of civil liability for negligence among professional persons and those in business and concern about the cost and availability of professional indemnity insurance have given rise to consideration of foreign-based trusts for the protection of assets.
In December 1990, amendments to Gibraltar's Bankruptcy Ordinance came into effect, effectively allowing protection in law that under certain circumstances a Gibraltar Trust can not be set aside by creditors of the settlor.
In order for a trust to be afforded the protection of the legislation certain criteria in relation to the settlor, the trust and the trustees must be met.
The settlor must be an individual, he must not be insolvent at the date of the disposition nor become insolvent as a consequence of the disposition and he must not be subject to any outstanding litigation.
In ascertaining whether or not a settlor is insolvent, account is to be taken of all liabilities, both actual and contingent or prospective. However, the legislation states that for a claim to be considered contingent or prospective the settlor must have had actual notice of it or of the facts or circumstances which might render him liable to it.
All Asset Protection Trusts must be registered with the Registrar of Dispositions. The application for registration is made by the Trustees and a non-refundable fee of £300 must be paid. The application must disclose the following information:
- the name and address of the Trustee;
- the name of the disposition;
- the date of making of the disposition and the duration thereof;
- the country of ordinary residence of the settlor.
In addition the Trustee must provide the following undertakings:
- that the settlor has to the satisfaction of the trustee completed the forms of enquiry administered by the Trustee;
- that the Trustee has completed all reasonable enquiries based on the information available on public record necessary to substantiate the information provided by the settlor in the forms of enquiry;
- the Trustee has obtained an affidavit duly sworn before a Commissioner for Oaths from the settlor confirming that the settlor is not insolvent.
The Registrar of Dispositions will only register a Trust as an Asset Protection Trust if the Trustee satisfies the following conditions:
- is the sole corporate Trustee of the disposition;
- is considered by the Financial and Development secretary to have adequate financial and administrative resources to act as trustee of Asset Protection Trusts
- has obtained the prior written approval of the Financial and Development Secretary in relation to the forms of enquiry administered to the settlor;
- has adequate professional indemnity insurance which must exceed at least £1,000,000.
Once registered an Asset Protection Trust pays an annual fee of £100.
The regulations contain certain secrecy provisions regarding those person involved in the administration of the Regulations. Any breach of confidentiality other than for the reasons stated in the regulations constitutes a criminal offence.
As long as the Trust Deed specifically states that Gibraltarians or residents of Gibraltar are excluded as beneficiaries, the Trust's income will not suffer any tax in Gibraltar. In addition, there is no capital gains tax in Gibraltar.
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.