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Comparison of Trust Laws Bermuda, British Virgin Islands and Cayman Islands

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Comparison of Trust Laws Bermuda, British Virgin Islands and Cayman Islands Comparison of Trust Laws Bermuda, British Virgin Islands and Cayman Islands Preface This publication has been prepared for the assistance of anyone who is considering establishing a trust under the laws of Bermuda, the British Virgin Islands or the Cayman Islands. It deals in broad terms with the requirements of the respective laws. It is not intended to be exhaustive but merely to provide general information to our clients and their professional advisers. We recommend that our clients seek legal advice in Bermuda, the British Virgin Islands or the Cayman Island on their specific proposals before taking any steps to implement them. Conyers Dill & Pearman Bermuda British Virgin Islands Cayman Islands GENERAL Principal legislation Trustee Act 1975 Trustee Act (“TA”) The Trusts Law (2017 Revision). Trusts (Special Provisions) Act 1989 Virgin Islands Special Trusts Act 2003 The Fraudulent Dispositions Law (1996 (“TSPA”) (“VISTA”) Revision) Perpetuities and Accumulations Act The Perpetuities Law (1999 Revision) 1989 Perpetuities and Accumulations Act 2009 Ultimate court of Privy Council Privy Council Privy Council appeal OECD List White list White list White list Hague Convention Ratified and implemented Ratified and implemented Not ratified Perpetuity period The rule against perpetuities has been 100 years 150 years for ordinary trusts; the rule for private trusts abolished or disapplied for all trusts against perpetuities does not apply to created after 1 August 2009. STAR trusts. SETTLOR RESERVED POWERS Bermuda British Virgin Islands Cayman Islands s.2(3) TSPA: s. 2 (4) TA: The reservation by the s.14 Trusts Law: settlor of certain rights and powers … The reservation by the settlor of certain Settlor may reserve or grant power to: are not necessarily inconsistent with rights and powers … are not necessarily the existence of a trust. (a) revoke, vary or amend the trust; inconsistent with the existence of a trust. s.86 TA: (b) appoint income or capital; (Recent case of BQ v DQ confirmed validity of revocable trusts) Power may be conferred on any (c) any limited beneficial interest in the trust person, including a settlor, to: property; (a) determine the law of which (d) act as a director or officer of any jurisdiction shall be the proper law of the company wholly or partly owned by the trust; trust; (b) change the forum of administration of (e) give binding directions to the trustee in the trust; connection with the purchase, holding or sale of the trust property; (c) remove trustees; (f) appoint, add or remove a trustee, (d) appoint new or additional trustees; protector or beneficiary; (e) exclude any beneficiary as a (g) change the governing law and the forum beneficiary of the trust; for administration of the trust; or (f) include any person as a beneficiary of (h) (h) restrict the exercise of any powers or the trust in substitution for or in addition discretions of the trustee by requiring that to any existing beneficiary of the trust; they shall only be exercisable with the and consent of the settlor or any other person (g) withhold consent from specified actions specified in the trust instrument, of the trustees either conditionally or without invalidating the trust or affecting unconditionally. the [statutory] presumption that the settlor Bermuda British Virgin Islands Cayman Islands Exercising any of the powers in (a) to intended the trust to take immediate effect. (d) and (g) will not on its own cause the donee to be deemed a trustee. FIREWALL PROVISIONS No trust and no s.11 TSPA: s.83A TA ; s.91 Trusts Law: disposition of (a) the law of any other jurisdiction (a) the law of any foreign jurisdiction (a) the laws of any foreign jurisdiction property to be held prohibits or does not recognise the concept prohibits or does not recognise the concept prohibit or do not recognise the concept of a upon trusts is void, of a trust; of a trust, or trust; or voidable, liable to be set aside or defective (b) the trust or disposition avoids or (b) the Virgin Islands trust or the (b) the trust or disposition avoids or defeats in any fashion by defeats rights, claims or interests conferred disposition: rights, claims or interests conferred by by the law of another jurisdiction upon foreign law upon any person by reason of a reason that: (i) avoids or defeats any right, claim any person by reason of a personal personal relationship to the settlor or by or interest conferred by foreign law relationship to the settlor or to any way of heirship rights, or contravenes any upon any person by reason of a beneficiary or by way of heirship rights, or rule of foreign law or any foreign judicial personal relationship to the settlor contravenes the law of another jurisdiction or administrative order or action intended or by way of heirship rights; or or any foreign judicial or administrative to recognise, protect, enforce or give effect order or action intended to recognise, (ii) contravenes any rule of foreign to any such rights, claims or interests. protect, enforce or give effect to any such law or any foreign judicial or s.92 Trusts Law: rights, claims or interests; or administrative order or arbitration order or action intended to recognise, An heirship right conferred by foreign law (c) the trust or disposition avoids or protect, enforce or give effect to such a in relation to the property of a living defeats rights, claims or interests conferred Bermuda British Virgin Islands Cayman Islands by the law of another jurisdiction upon right, claim or interest. person shall not be recognised as- any person in respect of the protection of Additionally, it is provided expressly (a) affecting the ownership of immovable creditors in matters of insolvency. that heirship rights conferred by property in the [Cayman] Islands or foreign law shall not constitute a moveable property wherever situate for the person a creditor for the purposes of purposes of s.90(i) Trusts Law or any other section 81 Conveyancing and Law of purpose; or Property Act. (b) constituting an obligation or liability for the purposes of the Fraudulent Dispositions Law or for any other purpose. Enforcement of Foreign judgments inconsistent with Foreign judgments inconsistent with Foreign judgments inconsistent with foreign judgments s.11 shall not be recognized or s.83A shall not be recognized or s.91 or s.92 shall not be recognized or enforced. enforced. enforced. SPECIAL TRUST LAW FEATURES − Purpose Trusts (see below) VISTA Trusts: STAR Trusts: −Hybrid purpose trusts with private The provisions of VISTA may be Special Trusts–Alternative Regime interest element permitted. applied to trusts of shares in BVI (Part VIII Trusts Law). companies with the result that the − Bi-furcation of trusteeship between The objects of a STAR trust may be management of the underlying managing, trustees and custodian persons or purposes (charitable or non- company may be carried on without trustees permitted. charitable) or both. interference from the trustee Bermuda British Virgin Islands Cayman Islands − Statutory recognition of non- (including the payment or non- A beneficiary of a STAR trust, in that interference in management of payment of dividends). capacity, has no standing to enforce the subsidiary companies (“Anti-Bartlett” trust and no right to information about provision). A VISTA trust can provide: the trust or the trust property. - that the shares shall not be sold The only persons who have standing to without the consent of a third party; enforce are the enforcers nominated in - the manner in which the trustee shall the trust deed or by order of the court. exercise its voting rights in respect of Standing to enforce may be granted or the shares; reserved as a right or a duty. Subject to - rules for the appointment and a contrary intention, an enforcer is removal of directors of an underlying deemed to have a fiduciary duty to act company. responsibly with a view to the proper execution of the trust. Every STAR The rule in Saunders v Vautier can be trust must have an enforcer; if there is dis-applied for 20 years. no enforcer, the trustee must apply to the Grand Court within thirty days for VISTA can apply to an ordinary the appointment of an enforcer. private trust or to a purpose trust. At least one trustee must be a licensed The trusteeship of a VISTA trust must Cayman Islands trustee or a registered be sole and held by a licensed BVI Cayman Islands private trust company. trust company (a PTC cannot be trustee). PURPOSE TRUSTS Non-charitable s.12A Trusts (Special Provisions) Act: s.84A TA: Part VIII Trusts Law (STAR trusts): Bermuda British Virgin Islands Cayman Islands purpose trusts - purposes must be sufficiently certain - purposes must be specific, - the objects may be persons or to allow the trust to be carried out; reasonable and possible; purposes or both; - purposes must be lawful and not - purposes must not be immoral, - purposes may be of any number or contrary to public policy; contrary to public policy or unlawful; kind, charitable or non-charitable, provided that they are lawful and not - at least one trustee must be a contrary to public policy; licensed BVI trustee or a BVI practicing lawyer or accountant; and - an enforcer must be appointed. Perpetuity period The rule against perpetuities has been The rule against perpetuities does not The rule against perpetuities does not for purpose trusts abolished for all trusts created after 1 apply to BVI purpose trusts. apply to STAR trusts. August 2009. FRAUDULENT TRANSFERS s.36C Conveyancing Act 1983: s.81 Conveyancing and Law of s. 4 The Fraudulent Dispositions Law Property Act (1996 Revision): A transfer to a Bermuda trust may be set aside if the transferor made the Every conveyance of property made (1) … every disposition of property made transfer with the requisite intention at with intent to defraud creditors shall with an intent to defraud and at an an undervalue and the obligation or be voidable at the instance of any undervalue shall be voidable at the instance cause of action arose before, or within person thereby prejudiced.
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