Interview - Seychelles Trusts And Foundations

1. What are the key advantages of your jurisdiction in terms of privacy & asset protection for a Chinese HNWI or Family (etc.) looking to succeed their assets to the next generation?

Whether it is a Seychelles trust or Seychelles foundation, the relevant laws provide for a great deal of privacy and asset protection. In the case of a trust, there is no public record of the settlor, trustees or beneficiaries. The trust deed and any other documents relating to the trust are also not publicly filed. Upon registering a trust, the trustee must simply file a declaration confirming that all of the requirements of the International Trusts Act have been met. In the case of a foundation, the only publicly filed document is the “Charter” which contains the identity of the Founder(s). However a nominee Founder is allowed and is common practice. 

Access to information or documents relating to a Seychelles trust or foundation is then only possible for local regulatory bodies or upon an order by the Supreme Court. Trustees are bound by law to maintain confidentiality in all other cases as are councilors and other persons associated with a Seychelles foundation.

Various clauses in each of the foundation and trust laws provide for asset protection. Protective trusts are expressly allowed. In the case of foundations, a beneficiary is expressly deemed not to have any beneficial interest or otherwise in the assets of a foundation nor any say over the administration of the foundation.  Both foundations and trusts also enjoy express anti-forced heirship provisions providing protection against foreign judgments or administrative orders if intended to enforce any such provisions of a foreign law as regards an individual who is a founder of a Seychelles foundation or settlor of a Seychelles trust. 

2. In terms of cost, how is the cost of a setting up a trust/foundation in your jurisdiction compare to other jurisdictions? If it’s more expensive, what is the additional value that a client receives for this?

Seychelles has traditionally been a cost effective jurisdiction in terms of International Business Companies which are amongst the most competitively priced in the world and very popular in China as well. Services around trusts and foundations are also typically competitively priced with other comparable markets. This should not be confused with a low level of service however as many Seychelles firms are associated with international trust services providers, law firms and otherwise have highly competent and trained professional staff who are members of the Society of Trust and Estate Practitioners for example.  Seychelles Foundations in particular are a good value when factoring the quality of the law, low government fees and typically competitive fees from the services providers.

3. Are trusts or foundations in your jurisdiction the preferred structure for clients? Why do you believe that is? Do you expect any changes in that preference in the future?

Seychelles has a hybrid civil/common law legal system which in part made it necessary to enact trust legislation in order to bring certainty within the law as regards trust.  The International Trusts Act was enacted in 1994 and to date 606 trusts have been registered under the law. Seychelles passed an International Foundations Act in 2009 and has 421 foundation registered. The trends seem to show a preference toward foundations. This may in part be due to the fact that our trust law needs to be updated to allow for popular structures such as “private trust companies”, but also that foundations are growing in popularity in general and because Seychelles has an excellent foundation law. Seychelles is planning to introduce an updated trust law in the near future (a draft has been completed) which includes modern provisions and implements important changes brought about due to recent trust cases along with popular new trends in trust laws found in competing jurisdictions.

4. What are some of the biggest issues & challenges you come across when planning for Chinese or Asian clients in general? What are the solutions that your jurisdiction provides for these issues?

As with most jurisdictions, language is sometimes a hurdle if the firm does not have native language speakers or the client does not. Many firms in Seychelles have ties with China and as such the language barrier is not always an issue.  Furthermore, China and Asian based intermediaries are often able to bridge the language gap and Seychelles has a relatively strong network of such intermediaries. 

The other main issue would likely be mostly related to trusts in that Chinese clients often desire to maintain a level of control and involvement with the trust that makes the job of the trustee difficult and can further add risk to the trust in terms of validity and tax residency. These issues are not necessarily isolated to Chinese nationals as this is often a struggle with trustees in offshore locales.  Foundations provide a structure that can allow for a higher level of involvement from the client without the “sham trust” risk given that a foundation is an incorporated body and as such cannot be a sham. Private trust companies are also an alternative where the client can have a higher level of involvement. Lastly, often times a foundation or trust is often structures with one or more subsidiary companies where the client can fill certain roles including being a director. 

5. What are some of the major features of the law that make the trust/foundation in your jurisdiction particularly attractive to investors?
   

Seychelles Foundations are governed under a modern legal framework that offers several beneficial provisions.

• Founders – the law provides that the founder is the subscriber to the Charter and allows for “nominee” founders to protect the privacy of the trust founder given that the Charter is the only publicly filed document. The Founder may reserve various rights of oversight and to direct certain matters such as appointment/removal of beneficiaries, investments and similar. The Founder can also assign any of these reserved rights to another party (i.e. an “Assignee Founder”). The Founder may be a beneficiary, but not the sole beneficiary. The Founder may be a natural or legal person and there may one or even multiple co-Founders.
• Assets – minimum assets are US$1.00 and may be contributed by the Founder or any other third party at the time of registration or at a later date. Additional assets may be contributed later.  If the assets are contributed by a third party, that party does not automatically acquire the role, rights or obligations of a Founder. Assets can include any international asset including a beneficiary interest of another foundation or trust. A Seychelles Foundation may also own shares in a Seychelles IBC, CSL or be a partner in a Seychelles Limited Partnership.
• Tax – a Seychelles Foundation is 100% exempt from any form of taxation in Seychelles on any of its income or gains of any kind.
• Types – private foundations, charitable foundations, foundations with a specific purpose (“purpose foundations”) or any combination of these are allowed.

Contributed by Bobby Brantley TEP, Sterling Offshore Limited