• Gibraltar Non-Resident Company
• Private Company Limited by Shares
• Company Limited by Guarantee
• The Gibraltar Tax Exempt Company
• The Gibraltar 1992 Company
• Public Company Limited by Shares
• Branch of Overseas Company
• The Qualifying Company
• Protected Cell Company
• Insurance companies
• General Partnership
• Limited Partnership
• Investment Funds
• Foundations
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GIBRALTAR FOUNDATIONS & TRUSTS
Advantages and disadvantages in the use of Trust and Foundations
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From an operational point of view there are neither pros nor cons in either the use of trust or foundations. They can be administered in a similar way and the duties and powers of the trustee or the board of foundation contain the same fiduciary elements. It is only in borderline situations where the one or the other has a specific advantage or disadvantage. This may be highlighted here.
- The foundation is well understood by professionals and clients alike in civil law countries. It is easier to run a family foundation in this context;
- Where assets are held in civil law countries it may be safer to use a foundation since the legal personality of a foundation is clearly recognised and there is not doubt about foundation property being separate property as far as creditors are concerned. If trust property is located in such jurisdictions there is a slight danger that under specific circumstances a segregation of such property is not possible.
Summary
- Foundations and trusts are almost identical and serve the same purposes;
- Careful attention must be given to the drafting of both trusts and foundations;
- Consideration must be given when choosing a trust or a foundation to the legal environment in which the client will operate.
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A common practice nowadays is for a “Foundation” to hold a fund not for its members but it holds the funds under its bye laws (trust declaration) for a group of beneficiaries. Such a use begs the question, why bother with a “Foundation” why not use a simple trust? The reasons for this are the following.
- Instead of trust, the “Foundation” has legal personality;
- Each customer has his own “Foundation” as opposed to a corporate professional trustee, which he may not feel comfortable with;
- The Foundation Charter allows greater flexibility to benefit beneficiaries who may not be members of the “Foundation";
- The fund does not belong to the “Foundation” but is held on trust and, therefore, does not form part of the Foundation’s balance sheet. This makes it simple for the “Foundation” to file accounts, if necessary, under the 4th Directive of the E.U.;
- As the “Foundation” holds assets on trust for persons who are non-resident of Gibraltar, such assets are not liable for tax in Gibraltar and, therefore, the “Foundation” does not need to apply for exempt status;
- It allows the fund assets to be transferred to the control of the “Foundation” without having to worry about what method to use to increase the capital of the “Foundation”. The capital of the “Foundation” and the fund it administrates are two separate and distinct matters.
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