The Foundations Act, 2003, (No. 8 of 2003) was passed in September of 2003. This piece of legislation provides for the establishment of Foundations in St. Kitts.
What is a Foundation?
A founder or a person acting on behalf of the founder may, on delivering Articles of the Foundation to the Registrar and on the payment of the prescribed registration fee apply to have a foundation registered in accordance with the provisions of the Foundations Act.
The concept of a foundation consists of the endowment of a specific amount of assets for a specific purpose (object) determined in the articles of the foundation. An appointed body known as the Board of Councillors is entrusted to carry on the business and affairs of the Foundation and to pursue its objects. The person(s) who creates the endowment is known as the founder and the persons who benefit from the endowment are known as the beneficiaries.
Once the articles of the foundation are registered in the Register of Foundations, the property endowed or to be endowed becomes an estate separate and apart from that of the founder by acquiring a judicial personality of its own, thus becoming a foundation.
The information concerning the names and the rights of the beneficiaries of the foundation is usually provided to the Board of Councillors by means of a private and confidential document (which does not have to be registered) known as the By-Laws which may include regulations providing for these matters.
Unlike the traditional corporation, the foundation does not have a share capital, it does not recognize shareholders and the founder does not retain or acquire any such ownership rights in relation to the foundation’s property. The law does recognize, however, the beneficiaries or the persons in whose benefit the foundation is created, which can include the founder.
A foundation may be established for any purpose for which foundations are normally established, which purposes shall be spelt out in the articles of the foundation and are permissible under the laws of St. Christopher and Nevis.
Purpose and Objects of Foundations
St. Kitts foundations, as stipulated in section 6 of the Act, cannot be simply profit oriented or used to carry on a particular business. A foundation may be used as a holding entity for underlying companies and it can in the course of the management of its assets, do such things as are necessary for the proper administration of its assets, including but not limited to buying and selling such assets and engaging in any other acts or activities which are not prohibited under the law of the Federation, provided that such acts and activities are ancillary or incidental to its main purpose.
Foundations may be used to contribute to the costs of upbringing of children, education, aid, as well as maintenance or other similar aims of one or more members of one or several families as may be stipulated in the By-Laws or Regulations of the foundation. In addition to the members of one or several families, the foundation may be used for other philanthropic purposes and may benefit other natural or legal persons including institutions of any kind.
To achieve its objects or purpose the foundation is authorized to preserve, administer, and invest in an appropriate manner the foundation’s assets, including but not limited to buying and selling such assets and engaging in any other acts or activities which are not prohibited under any law of St. Kitts.
Articles of Foundation
In order to register a foundation, Articles of the Foundation must be delivered to the Registrar of Foundations. Upon registration of the foundation, it shall be a separate legal entity in its own right, capable of acquiring and owning assets of all kinds and capable of suing and being sued in its own name.
For the purposes of registering a foundation under the Act, the following information must be provided to the Registrar of Foundations:
(a) the foundation’s name and address of its registered office;
(b) the particulars of any initial assets to be transferred to the foundation and an understanding that the founder will transfer the said assets to the foundation immediately upon registration;
(c) whether the foundation is an ordinary or exempt foundation1;
(d) an undertaking, in case of an exempt foundation, that the councillors of the foundation shall forthwith notify the Minister, by notice in writing, if the foundation ceases to qualify as an exempt foundation.
The Articles of the foundation that are delivered to the Registrar of Foundations must be in the form of a deed and must contain:
(a) the name of the foundation;
(b) the details of the founder, that is to say,
(i) the name and address of the founder;
(ii) where the founder is a legal person, the number and place of registration of that legal person, and
(c) the purposes and objects of the foundation;
(d) the initial assets of the foundation and a statement of those assets;
(e) the manner of designation of the beneficiary or identification of a person, body or class of persons by reference to which the beneficiary is to be ascertained;
(f) whether the foundation is established for a definite or indefinite period and, where it is established for a definite period, that period;
(g) the name and address in the Federation of the secretary to the foundation and the registered address of the foundation.
Any information not required in the Articles of the Foundation and which the founder would rather keep confidential may be included in the By-laws of the Foundation. This information may:
(a) concern the distribution of assets made, or to be made by the councillors of the foundation;
(b) identify any beneficiary or additional beneficiaries of the foundation;
(c) provide for the identification of any additional beneficiaries on the dissolution of the foundation;
(d) provide for the proceedings of the councillors of the foundation.
Advantages of St. Kitts Foundations
- Anonymity and privacy of the beneficiaries is maintained, since their names are not registered in a public office.
- Full exemption from taxation for foundations that transact business with persons who are not resident in the Federation.
- Flexibility to transfer or administer assets in favour of the same founder or third parties, families, children or inheritors.
- There is no minimum capital requirement.
- Provides a fiduciary structure for the orderly transfer and disposition of the assets to the beneficiaries upon the death of the founder, keeping control of assets during lifetime.
- Inheritance laws that apply in the domicile of the founder or the beneficiaries shall not be effective against the foundation’s assets nor may these laws affect the validity or performance of the foundation’s objectives.
- A private foundation registered in other countries may be re-domiciled to St. Kitts.
- The costs for registering a St. Kitts Foundation are very competitive compared to other jurisdictions.
The fees for registration of a Foundation and for filing its annual return are as follows:
1. Exempt foundations are those that are not subject for assessment or liable to any tax in Federation, and the beneficiaries of a foundation shall similarly be exempt from all income, capital gains and withholding taxes which may arise out of their interest in the foundation so long as the foundation effects transactions exclusively with persons who are not resident in the Federation. NB. There are two types of foundations, Ordinary and Exempt. An ordinary foundation is one that is not exempt and therefore is not exempted from local taxes
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.