The BVI has developed sophisticated and flexible tools to meet the demands of high net worth (HNW) families through its various trusts, including the Virgin Islands Special Trusts (VISTA) and private trust companies (PTCs).
Over the past five years, Asia Pacific has emerged as a leading source of wealth growth globally. In line with this immense growth, the wealth planning needs of the affluent in Asia Pacific are changing: HNWIs are becoming more sophisticated; they are looking for customised services; they are focusing on the management of family wealth and business succession. The BVI has developed the tools that best help HNWIs manage their wealth into the future.
Due to the vast number of BVI-incorporated companies in Asia, VISTA trusts have been a popular trust vehicle for family businesses.
VISTA trusts are unique to the BVI. They provide solutions for individuals and families who seek the benefits that a trust offers in succession vehicles, but who do not wish to transfer to trustees the day-to-day management responsibilities of companies owned by the trust. Instead, VISTA trusts allow directors to effectively run the company without any threat of removal by the trustee-shareholder.
By having shares of family businesses owned by a BVI trust, the control of the business can be centralised and retained indefinitely, and the board of directors can run the company without fear of shareholder interference.
Why was VISTA so groundbreaking?
Prior to VISTA, a rule of English trust law (known as the “prudent man of business rule”) seriously impeded the traditional common law trust catering for the succession of shares. This law was designed to preserve the value of trust investments, but instead frequently resulted in conflicts of interest between trustees and settlors.
Under this law, trustees were responsible for managing underlying companies, acting in the best interests of the trust’s beneficiaries and guarding against risking company assets. However, this conservative investment approach often clashed with that of the settlor, who saw risk-taking as an integral part of business practice.
This conflict was especially acute in family businesses. Trustees who managed underlying companies often spread financial risk, essentially reinvesting away from the family business, though the settlor initially set up the trust as a succession vehicle for the family business.
Moreover, the constant monitoring and intervening from trustees resulted in expensive fees and delays to the decision-making process that is critical to commercial success.
VISTA was introduced to remove these critical issues. Most importantly, VISTA returned control to the settlor. It removed the trustee’s duty to manage underlying companies and also allowed HNWIs to determine who should be the directors of the company held under the trust and the provisions for their appointment and removal.
Since the BVI introduced the VISTA legislation, VISTA trusts have achieved significant traction from Asian businesses and individuals. This innovative measure from the BVI was developed in close partnership with the private sector and exemplifies that the BVI continues to be at the forefront of international jurisdictions, understanding and meeting the fluid needs of its international clientele
Private Trust Companies
Occasionally, HNWIs prefer not to transfer control of their assets to a third-party for a number of reasons, such as confidentiality, trust and need for more sophisticated structures to manage their wealth. In response, the BVI introduced Private Trust Companies (PTCs) to help HNWIs handle these often more complex, bespoke succession structures built to protect their legacy, retain control, and manage wealth in an affordable manner.
Advantages of a PTC
- Ease of operation: BVI Business Companies (BCs) have long been popular in Asia, and PTCs utilise their framework and share key features, providing familiarity to individuals and making a PTC easy to operate.
- Confidentiality: the BVI’s well-regulated and sophisticated company and trust legislation ensures client confidentiality.
- Minimised risk: the PTC can carry out the trustee function, taking on any risk linked to the assets and managing the operations of the business.
- Flexibility: HNW families can create bespoke structures to manage their wealth using PTCs. For example, they can set up multiple trusts to keep certain assets separate from one another, holding different assets for different beneficiaries.
- Cost efficient: the PTC structure’s trustee fees are extremely competitive.
- Control: by sitting on the board of directors of the PTC, the family can make decisions quickly without having to wait on an independent trustee.
The BVI was ranked first for asset protection and estate planning in the Offshore 2020 report (2012). The BVI’s modern and progressive trust legislation provides flexible asset protection structures to help families manage their increasingly complex assets around the world. With the growth in wealth in Asia Pacific, individuals and families are increasingly seeking solutions to grow and protect their wealth. BVI Business Companies (BCs), simply referred to as “BVIs” in China, are often used as asset protection vehicles, in many cases in combination with a BVI trust that acts as a holding company.
By using BVI structures, clients also have access to the best professionals in all areas of financial services, including asset protection for private clients. The BVI financial services sector is well-established and trusted by foreign investors worldwide, including global financial institutions, and especially throughout the Asia Pacific region.
For the increasing number of wealthy families in Asia, succession planning has become a top concern. They want to make sure their businesses and wealth are passed down securely, efficiently and cost-effectively through the generations.
The BVI’s modern trust legislation provides flexible structures for wealth and succession planning. By having shares of family businesses owned by a BVI trust, the control of the business can be centralised and retained indefinitely, and the board of directors can run the company without fear of shareholder interference.
Additionally, upon the passing of the family member, BVI trusts ensure efficient distribution of assets to beneficiaries without the lengthy, complicated and costly procedures normally required for probate.
For international businesses, many clients will have operations in numerous jurisdictions and may not prefer to have the ownership centralised in one location. In this case, BVI companies are often used as a holding company for the other business interests with a BVI trust holding shares.