THE SCF GROUP HAS BEEN ADVISING UPON AND REGISTERING/CREATING TRUSTS AND PRIVATE INTEREST FOUNDATIONS FOR OVER 25 YEARS
SEYCHELLES PRIVATE INTEREST FOUNDATIONS
A lengthy struggle between France and Great Britain for the islands ended in 1814, when they were ceded to the latter. Independence came in 1976. Socialist rule was brought to a close with a new constitution and free elections in 1993. President of France-Albert RENE, who had served since 1977, was re-elected in 2001, but stepped down in 2004. Vice President James MICHEL took over the presidency and in July 2006 was elected to a new five-year term. A relative new player in the offshore company business but has garnered itself a major slice of the market and is now seen as a direct competitor to the British Virgin Islands.
About Seychelles Private Interest Foundations
Seychelles Private Interest Foundations (Seychelles Private Interest Foundation) were introduced under the Foundations Act 2009. In précis, a Seychelles Private Interest Foundation is a civil law construct equivalent in principle to a common law ‘trust’ in that they are a self-owning entities set-up by a ‘founder’ (settlor) or ‘originating party’ by way of an endowment in favor of the stated objects of the foundation (trust): these objects normally being to provide for a class of beneficiaries known or related to the founder. The objectives of the Seychelles Private Interest Foundation are recorded on its registered Foundation Charter but the ‘key’ to a successful Seychelles Private Interest Foundation are the non-registered Foundation Regulations, which need to be properly drafted to ensure that the Foundation Council (see below) is/are independent of the founder during its lifetime. Most well drafted Regulations will have anti-duress clauses to prevent vexatious 3rd party legal actions. However, it is important to note that Seychelles Private Interest Foundation endowments will only be valid if donated when there are, at the time of the endowment, not just no 3rd party creditors but no reasonable likelihood that such action will be commenced.
How PIFs are likely to be considered by UK courts?
Some of the potential benefits of using a Seychelles Private Interest Foundation rather than a trust, at least for our UK based clients, are that anti-avoidance provisions in the UK and Ireland are based upon the use of trusts as self-owning entities and not Seychelles Private Interest Foundations. Further, the British House of Lords case of Carl Zeiss Stiftung (Stiftung is simply the German word for a Private Interest Foundation) v. Rayner & Keeler (1967) App. Cas. 853 has supported the contention that a Seychelles Private Interest Foundation, unlike a common law trust, is to be treated as a self-owning separate legal entity i.e. in other words, akin to a limited company which provides potentially both the benefits of a trust (but with extra protection against local anti-avoidance provisions) and of a limited liability company!
The SCF Group and PIF’s
There is no doubt that the SCF Group is the most experienced tax planning and company formation agent in the UK and can ensure that a Seychelles Private Interest Foundation has been drafted in a manner that is most likely to withstand creditor ‘attack’. In particular, the SCF Group has successfully drafted Seychelles Private Interest Foundation Regulations for a significant number of clients over the years.
Basic Structure & Facts
- Seychelles Private Interest Foundations can be set-up by natural or juridical bodies or through 3rd parties – Nominee founders normally used;
- Endowments are separate from the personal estate of the founder;
- The Foundation Council must consist of at least one natural person or juridical body however if the natural person ‘councilor’ is also the founder there must be a second councilor;
- The Founder can protect and play a major role in controlling the Foundation Council (The governing body) activities and ensure that it/they adhere to the Seychelles Private Interest Foundation Charter and Regulations. Something not possible under a traditional trust;
- There is a high degree of confidentiality with only limited information being available on the public registry and then only in respect to the Foundation Charter where normally the founder is a nominee;
- There is a 2-year statute of limitations in respect of third party claims against donated Seychelles Private Interest Foundation assets further protected by a very high burden of proof laid upon claimants;
- The minimum initial contribution only shall be US$1.00 (One US Dollar) or its equivalent in any recognized currency. There are no restrictions on further endowments;
- Protectors’ and supervisory bodies can be appointed with it even being possible for a ‘protector’ to also be the founder;
- The Founder can reserve the right determine (end) the Seychelles Private Interest Foundations existence at any time;
- Foundation Regulations are not kept on public record;
- A founder may be a Foundation beneficiary provided he or she is not the sole beneficiary;
- Seychelles Private Interest Foundations are very cost efficient.
Administration & Accountancy Services
It is a requirement that a PIF maintains full and proper accounts, an asset ledger and that periodical asset valuations are carried out. Where a PIF owns an underlying separate legal entity to carry-out its investments then such legal entity must also have its accounts maintained by SCF accountants.
Domestic Corporate Tax
Double Taxation Treaty Network
In order to consolidate its position as an international financial centre the Seychelles have sought to increase their tax treaty network, which now includes some 20 nations but most importantly includes China, South Africa and interestingly Cyprus.
A PIF will require its own bank account to receive initial endowments or where an endowment constitutes shares or assets in another company or any other proprietary or intellectual rights then it is necessary that a suitable ‘transfer of assets and liability’ agreement is put in place clearly showing that ownership of the aforementioned has passed over to the PIF or its underlying investment vehicle.
For more information on our Trust & Foundation Services, please speak to one of our tax planning consultants.