The TCI Trust - A Private Relationship Between Settlor And Trustee

The trust industry in TCI has its beginnings in the mid-198os. By this time, the principals of several of the existing professional offices in the Islands had become closely involved in the personal affairs of various of their private clients, to the point where the element of trust essential to that special relationship which subsists between Settlor and Trustee had become firmly established. As these clients came to be the Settlors of TCI trusts, so resident professionals began to assume the role of Trustee, in many instances with persons included in classes of discretionary beneficiary of such Trusts being individuals well known to the Trustee.

At that time, TCI's trusts law was a matter of the principles laid down over the years by the English courts. This was complicated somewhat by the fact that since the Trusts Act 1925 did not apply to TCI, those English court decisions which involved consideration of that Act were of limited relevance. All this changed in early 1991 with the coming into force of the trusts Ordinance 1991. Based on the widely respected Jersey legislation but with additional features, some original and some gleaned from other jurisdictions, the new law contained some interesting features for practitioners, not least of which was the abrogation of the old Rule against Perpetuities. This was not the first time that TICI had broken new ground with its international financial services legislation; in the area of corporate law, for example, some ten years earlier TCI was among the first jurisdictions to effectively dispense with the doctrine of ultra vires in its revised Companies Ordinance, which also introduced such other innovations as the availability of single shareholder, single corporate director companies, and the concept of inward and outward transfer of corporate domicile.

Some of the other features of a TCI Trust include its severable aspects, whereby the validity of the trust, -the interpretation of its terms and administration of the trust assets can each be regarded as separate and distinct, such that the laws of different countries can be specified to apply to each aspect. Also, in the, absence of an express term of the trust to the contrary, TCI law will apply in all cases to the exclusion of the law of any other. jurisdiction with which the trust or disposition may be connected. To conclude this non-exhaustive summary of features of the TCI trust, a brief. mention should be made in the matter of confidentiality. Since by its nature a trust is a private relationship, between Settlor and Trustee" there is no legislative requirement for the instrument creating the trust to be registered in TCI.

A further stage in the development of TCI's trusts industry came with the passage of the Trustees (Licensing) Ordinance i992. This law and its attendant regulations introduced a strict regulatory regime for companies which offer. their services as trustees of TCI trusts.

Whist the Permanent Secretary, Finance is the ultimate regulatory authority, most functions under the Ordinance are the responsibility of the Superintendent of Trustees based in the I'CI Government's Financial Services Commission.

In addition to having the power to extend the requirement to be licensed to such persons or categories of persons as he sees fit, the Permanent Secretary can also exempt certain companies or categories of companies from' the requirement to be licensed. In the case of family trusts, especially where the settlor, concerned may be from a civil law jurisdiction and not completely comfortable with the trust concept or where the trust property may be an active business, it is becoming more common to have as the trustee a company closely held by the settler himself or members of the family, often with an institution being engaged to provide management services. In instances such as this where the private trustee company is the trustee of a single trust only and has the settlor or a beneficiary of the trust as a shareholder, the specific exemption afforded by the Trustees (Licensing) Exemption Order 1992 would apply and the trustee company, in these circumstances, would not require a licence.

A resurgent interest in these entities which do not offer trustee service's to the general public and, as such, may be termed "private trustee company " is reflected by increasing rate at which they are being incorporated in TCI.

As well as the lower set-up and annual administration costs which would generally attach to a private trustee company as compared with a full professional trustee relationship, the added- flexibility afforded by the effective self-management of the trust and the scope for more limited circulation of information regarding family affairs represent other tangible advantages for this alternative , to the traditional settlor/professional trustee relationship. Finally, a word regarding TCI's position with respect to so-called Asset Protection Trusts. Whilst the settling of such trusts in TCI is contemplated by Section 6i of the Trusts Ordinance, TCI practitioners have been seeking a more comprehensive, stand-alone approach to this important area of trust business; it is intended therefore to introduce new legislation in the near future to provide a modern and clear statement, of the law for the benefit of creditors, trustees and beneficiaries alike.

Peter Savory, is the founder and Managing Director of The Chartered Trust Company which, as one of the longest-established trustee companies in the jurisdiction, is fully licensed by the TCI Government in the conduct of trust business. Mr. Savory is a New Zealand-qualified Chartered Accountant with Belonger status and has been resident in TCI since 1977. He has sat on numerous government/private sector liaison committees and statutory boards in TCI, including as a founding Director of the National Insurance Board and is a member of several international professional bodies, including the Society of Trust & Estate Practitioners.

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.