Whilst Cayman has adopted the English common law relating to trusts and fiduciaries, it has bespoke legislative adjustments which have been specifically designed with international trusts and clients in mind. For example, there are no taxes or registration fees for private trusts. If you do register your trust to receive a no tax guarantee, the register is not available to the public, thus maintaining privacy. Cayman also has specific legislation protecting clients' privacy with respect to requests for information from foreign regulatory bodies and courts. In terms of asset protection it is well established that Cayman trustees will not be bound by foreign judgments provided that the trustee does not join the foreign litigation and the Cayman Courts will not order a Cayman trustee to make distributions to satisfy foreign judgments against beneficiaries unless the trust deed requires it. We also have STAR Trusts available which permit trusts for a purpose, e.g. to run a business or take care of a pet or provide funding for education etc., and which have no perpetuity period. Further, clients can also establish their own private trust company to act as trustee (registration fees apply here). This allows clients to control who sits on the board and have more control generally if they prefer not to use the many qualified professional trustees that Cayman has to offer.
2. 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?
Trusts are very popular with our international clients with the major reason being their flexibility. Bespoke trust deeds can be drafted to fit clients' exact specifications. For example they can hold static assets such as real estate (both foreign and local) as well as dynamic assets such as businesses and share portfolios. Where dynamic assets are held, trust deeds can be drafted to allow underlying companies to be fully controlled by their board of directors with no oversight or intervention by the trustees, if that is preferred. In addition, the Cayman legislation allows Settlors to retain significant power over the trust eg. approving certain actions by trustees or calling for distributions etc, without affecting the validity of the trust. Such powers must be carefully considered if asset protection is important. With the privacy and asset protection considerations mentioned above as well as the ability to create STAR Trusts and private trust companies we expect trusts to remain very popular.
3. 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?
We find that many of our Asian clients are looking for dynamic trust structures to hold family businesses located in China, which they wish to maintain control over whilst creating a succession plan and asset protection. As set out above, a Cayman trust can provide all of this. We have a vast array of options that can be tailored exactly to the clients' needs. It is just a matter of sitting with the client, gaining an understanding of their goals and working through the solutions.
4. We understand that some jurisdictions focus on asset protection, while others focus on asset succession products. Does your jurisdiction have a better solution for asset protection or asset succession?
The Cayman Islands have long been focused on international business and accordingly its trust and other business legislation has been designed with this in mind. Cayman trusts are therefore very strong in both asset protection and succession.
The Cayman trust is a very robust structure and we are not aware of any successful challenges to the validity of a properly drafted structure.
5. What are some of the major features of the law that make the trust/foundation in your jurisdiction particularly attractive to investors?
As mentioned above, Cayman trusts have a number of advantages that other jurisdictions do not necessarily have. These include the following:
Contributed by Melanie Crinis of Campbells Attorneys
