A Jersey incorporated and/or administered PTC is exempt from the licensing requirements under the Financial Services (Jersey) Law 1998 so long as it does not solicit from or offer services to the public. The administration of the PTC must be conducted by a regulated trust company business (TCB) such as JTC.
The name of the PTC is a matter of choice and it is possible to use words such as ‘Trustees’ or ‘Trust Company Limited’ within it which serves to give the PTC a proper identity from the perspective of third parties.
Ownership of the PTC by either a Jersey foundation or a Jersey purpose trust is strongly recommended. A purpose trust (which exists to fulfil a purpose rather than benefit a class of beneficiaries) falls under the supervision of the ‘enforcer’ whose role it is to ensure that the purpose is fulfilled. In this case, the purpose is to hold shares in the PTC and ensure the provision of trustee services to one or more family trusts (known as the ‘designated trusts’). It is possible, although usually impractical, for the settlor or his family to own the shares in the PTC.
The appointment of directors for the PTC will normally be made by the foundation or purpose trust (as shareholder) and there is no requirement for a director of the TCB to be appointed (although this may well be preferable in practice).
Tax, local legal considerations and each director’s residence and domicile (especially if they are a beneficiary of any of the Designated Trusts) should be carefully considered.
Depending on the nature and underlying assets of the designated trusts, directors of a PTC should also consider whether director and officer insurance cover is desirable.
Administration is conducted by the TCB and an administration agreement between the PTC and the TCB is required which covers the maintenance of books and records, provision of secretarial and registered office facilities, and general administration of the PTC.
Importantly, it should also cover the provision of administration services for the designated trusts and subsidiary companies for matters such as record keeping, maintenance of bank and investment accounts and accounting services.
Provided JTC has the client due diligence it requires, and advice has been obtained on the most appropriate constitution for the PTC, the PTC can normally be incorporated in Jersey within five business days. The only formal requirement is for the TCB to notify the Jersey regulator of the name of the PTC and its beneficial owner.
The PTC can be highly effective when consolidating the administration of various family trusts and the structuring of interests in private family mutual funds or private equity investments.
A settlor can, subject to tax advice, be involved with the ongoing management of the designated trusts in a number of ways:
- As protector of the designated trusts.
- As a member of the board of the PTC or as a member of a subcommittee of the board.
- As protector or enforcer of the purpose trust or guardian of the foundation (thereby retaining the ultimate power to remove and/or appoint officer(s) of the PTC).
- The assets are in the name of the PTC rather than a third party TCB.
PTC arrangements significantly increase the family’s influence and, to some extent, control over the destiny of assets placed in trust for both present and future generations without prejudicing the validity of the designated trusts. The family can be an integral part of the fiduciary decision making process.
Family members may potentially sit on sub-committees of the PTC to become familiar with the management of the family’s financial assets and, where appropriate, contribute to deliberations underlying the exercise of the trustee’s dispositive and other powers.
The PTC can negate the need for ‘policing’ the trustee by appointing one or more protectors. Also, while it is acknowledged that a letter of wishes issued to a third party trustee is often useful as guidance for the settlor’s wishes, it is no substitute for the thorough and sometimes complex understanding of the needs and wishes of the settlor and beneficiaries which family members and trusted advisers can apply to the decision making process.
PTCs could contemplate higher risk commercial transactions than would normally be expected within a traditional trust arrangement. Being more familiar with the underlying assets of the designated trusts, the directors of a PTC are often better positioned to react more quickly to major transactions than an institutional third party trustee which will often seek to examine the transaction in detail and may require additional legal advice or seek indemnities before giving its approval.
Depending upon the requirements of a particular PTC, JTC can provide the systems and resources to support the work of the PTC’s directors.
There is no ongoing requirement to submit any financial statements to the local authorities in respect of the PTC or any of the designated trusts. Although accountancy records must be maintained by the PTC.
Services provided by JTC
- Trustees of the purpose trust/qualified member or directors of the foundation.
- Act as the TCB providing administrative and accountancy services to the PTC under an administration agreement.
- Provision of one or more professional directors to the board of the PTC.
The PTC is yet another offering of Jersey’s finance industry which complements the diverse range of vehicles for international wealth planning.
This publication is intended to provide an overview of the subject matter and is not comprehensive in nature or to be construed as legal or tax advice. We recommend that clients seek professional advice on any particular matter.