Many “Onshore” jurisdictions have passed laws requiring that local Companies file a register of beneficial owners with the local Corporate registry.
For those interested in Corporate Privacy this would be of some concern. There are good reasons as to why one might not want “onshore” authorities to know who is ultimately behind a particular company.
If you are the controller of a Company and don’t want your name to be placed on record as BO there is a solution that may work to protect your privacy…
The solution here would be to register (as your ultimately holding entity) a Foundation, (ideally)in Seychelles, and have that Foundation set up as a Purpose Foundation.
Why Seychelles?
Well, a Foundation is presumed at common law to be both the legal owner AND the beneficial owner of any asset it holds. BUT Seychelles, uniquely, has taken this aspect of Common Law and enshrined it in legislation; In section 71 of the Seychelles Foundations Act it clearly provides that the legal owner AND BENEFICIAL OWNER of any asset held by a Seychelles Foundation is the Foundation itself.. (you can access a copy of the Legislation here – refer page 36: https://www.dropbox.com/scl/fi/3mhhpbszei8mahuxpbqfg/Consolidated-Foundations-Act-2009-to-20th-December-2021.pdf?rlkey=29uzvfy7tmimyqxvmg74o59u0&st=wmybuvq3&dl=0 )
But there’s more you can do to protect yourself from being considered potentially as the beneficial owner of any Company/Asset owned by the Foundation…
You see, a Foundation is a 3 headed creature.
Typically a Foundation..
- Has a Founder: https://offshoreincorporate.com/faq/what-is-a-founder/
- Has a Councillor (or board of Councillors): https://offshoreincorporate.com/faq/what-is-a-council/
- Has beneficiaries ie persons (who are nominated in the Foundation’s regulations) who are designed to benefit financially from the set up of the Foundation
But…
A Foundation in Seychelles can be established as either a Foundation with beneficiaries or as a Purpose Foundation.
A Purpose Foundation is a particular type of Private Foundation which, unlike a conventional Foundation (ie which has certain person/s or a category of person/s nominated to be beneficiary/s), can be formed to hold assets for a purpose without conferring a benefit on any specific person. An example of such a purpose is to hold shares in a company.
Purpose Foundations are currently used, among other things, in conjunction with asset financing transactions and securitisations.
They are also sometimes used to hold the shares in a Private Trust company (PTC) structure, where confidentiality and control issues are important. A key advantage of using a Purpose Foundation in such a scenario is that there are no registration or disclosure requirements of such trusts at law generally speaking. Therefore the ownership of the PTC will be confidential, and the shares in the PTC will be immune from an attack on the Settlor (ie the person who sets up the Trust).
Generally speaking, there are two types of Foundations ie Foundation with beneficiaries and Foundations which are set up to fulfil a specific purpose. A Foundation set up to fulfil a specific purpose does NOT need to name any person or class of person as a beneficiary. Hence, because there are no beneficiaries attached to the Foundation (a) it’s impossible to argue that any particular person has a legal or beneficial interest in Foundation assets and (b) it’s impossible to argue that any particular person is entitled to receive income from the Foundation.
Recently a lawyer friend succeeded in registering a Purpose Foundation in Seychelles where the sole stated purpose of the Foundation was to own 2 Mauritius Companies.
The nett result of deploying a Purpose Foundation in such a scenario?
- Assets held by the Foundation should be safe from attack by creditor of the Foundation’s creator; and
- If the Foundation is set up in a nil tax jurisdiction, and say it owns a Company incorporated in a nil tax jurisdiction – which Mauritius is – (and provided the Foundation and any Companies it owns are not seen to be controlled from onshore) you may potentially end up with a scenario whereby income streams owned by the Foundation avoid falling into the net of the onshore taxman
In the case of a Purpose Foundation the specific Purpose or Purpose for which the Foundation is being formed will appear in the Foundation Charter.
In the above case in the Foundation’s Charter it will have stated “The purpose of this Foundation is to hold the shares of 2 Mauritius Companies”.
Here ‘s an example of some Charitable purposes taken from a previously formed/registered Seychelles Charitable Purpose Foundation:
(a) To provide assistance and relief for children in ill-health;
(b) To raise funds for, and to financially assist, children in ill-health;
(c) To promote the health and wellbeing of children, including promotion of the provision of proper health care and treatment for children;
(d) To make distributions to non-U.S. entities and institutions that are organized and operated exclusively for charitable purposes and which further the purposes referred to in sub-paragraphs (a) to (c) above.
Flexibility is everything. No doubt you’ll be pleased to hear that a Purpose Foundation does not have to remain a Purpose Foundation for life; A Purpose Foundation (by amending its Charter) can, later on down the track, morph into a Foundation with beneficiaries!
Would you like to know more? Then please Contact Us:
info@offshorecompaniesinternational.com
DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.
