If you’re looking to form an Offshore Trust as part of an Asset Protection and or Succession Planning strategy Nevis (alongside Belize and the Cook Islands) is one jurisdiction that is worthy of close consideration…
Formation of a Nevis Trust is governed by the Nevis International Exempt Trust Ordinance of 1994, as amended.
The Ordinance includes special provisions to enhance the use of Nevis as a preferred jurisdiction for the establishment of Asset Protection Trusts.
Highlights of the Nevis Trust Ordinance include:
- Exemption from all forms of Nevis taxation and exchange controls provided that transactions take place only with non-residents;
- The trustee may be either a trust company licensed to do business in Nevis or a company incorporated under the Corporation Ordinance;
- The proper law may be the law of Nevis or the law of another jurisdiction;
- The rule against perpetuities does not apply;
- Forced heirship rules are specifically excluded;
- Spendthrift and charitable trusts are permitted;
- There is no registration requirement other than for the Trust’s name, name of Trustee and the registered office address;
- Settlor and Beneficiary must be non-residents and may be the same person;
- One trustee must be a Nevis offshore company or a trust licensed company;
- Protectors are allowed for and may be the same person as the Settlor and Beneficiary of the Trust;
- An IET is valid and enforceable notwithstanding that it may be invalid according to the law of the Settlor’s domicile or residence or place of current incorporation;
- The Trust is not considered fraudulent if settled up to 2 years after the date of the creditor’s cause of action;
- The creditor must prove the intent of the debtor to defraud with “clear and convincing” evidence;
- The Statute of Queen Elizabeth is excluded.
The trustee may be either a trust company licensed to do business in Nevis or a company incorporated under the Corporation Ordinance (ie an International Business Company). There is no registration requirement other than for the Trust’s name, name of the Trustee and the registered office address.
A US$25,000 bond requirement prior to the commencement of an action or proceeding against trust property in the 1994 Act was increased to US$100,000 under the Nevis International Exempt Trust (Amendment) Ordinance 2009.
Nevis trusts are exempt from all forms of taxation and exchange controls provided that transactions take place only with non-residents.
2015 Amendments
Key Amendments
- § 23(4) – Transfers made in trust before a creditor’s cause of action accrues are deemed not to be fraudulent transfers.
Perhaps no other provision of the NIETO has drawn more attention than § 23, intended to deal with fraudulent transfers. The original text was modeled after the Cook Islands International Trust Act (“ITA”), which underwent significant revision after the NIETO had been enacted.
Subsection (3) of the ITA deems a transfer in trust to be not fraudulent as against a creditor if the transfer takes place two years from when the creditor’s cause of action accrues. If the transfer takes place within two years of the cause of action accruing, the ITA nevertheless deems the transfer to be not fraudulent if the creditor fails to commence a court action within one year. The public policy justification for these two rules is that a creditor should only have a limited period of time within which to bring a claim. If the creditor fails to diligently pursue the claim in a timely manner, the settlor should later be able to transfer assets in trust free of creditor claims.
Similarly, subsection (4) of the ITA deems a transfer in trust to be not fraudulent as against a creditor if the transfer takes place before the creditor’s cause of action accrues. This is a codification of the principle, first arising in the courts of the Isle of Man, that a transfer cannot be fraudulent as against a creditor unless there is a “present debt” at the time of the transfer. See Corlett v. Radcliffe, 14 Moo PCC 121, 15 ER 251 (1859); see also Re the Petition of Christopher Jollian Heginbotham, 2 ITELR 95 (1999) (“present debt” in Corlett v. Radcliffe refers to creditors whose claims exist at the time of the transfer).
In what appeared to be a substantial scrivener’s error, subsections (3) and (4) of § 23 of the NIETO were originally drafted to the exact opposite effect. The Nevis island government concurred with the committee’s recommendation and amended § 23 of the NIETO. Specifically, subsection (3) was reworded (and more detail is provided on this point below). Meanwhile, subsection (4) was changed to make clear that transfers in trust before a creditor’s cause of action accrues cannot be set aside as fraudulent transfers.
- § 23(3) – The Cook Islands 3-Year “Sliding Window” of vulnerability has been replaced with a fixed 1-year window for fraudulent transfers in Nevis.
In conjunction with the technical corrections described above, the committee recommended that subsection (3) of § 23 be further revised to eliminate what was a three-year window for a creditor to bring a claim against an international trust. This “sliding window” was first introduced in § 13B(3) of the Cook Islands ITA, after which subsection (3) of § 23 of the NIETO was modeled.
While paragraph (a) was intended to protect a transfer in trust made more than two years after a creditor’s cause of action accrues, paragraph (b) gave the creditor up to one more year to bring a claim if the creditor’s claim happened to arise before the expiration of the two year period referenced in paragraph (a).
This “sliding window” had been misconstrued by many experienced practitioners and remains widely misunderstood by the public at large. Even the most experienced asset protection lawyers are surprised to learn that a Cook Islands trust gives a creditor three years to bring a claim.
The revision to subsection (3) of § 23 proposed by the committee, and approved by the Nevis island government, now calls for a fixed one-year window beginning with the date on which the creditor’s cause of action accrues. Instead of a “sliding window,” subsection (3) is a “fixed window.” Transfers made after one year from when the creditor’s cause of action accrues are now protected under the NIETO.
- § 55 – Creditors must post a bond of EC $270,000 (US $100,000) before bringing a claim against a Nevis trust.
The NIETO has enjoyed a favorable reputation for its bond requirement imposed on claimants. The public policy aim of this particular statute is to deter a prospective creditor from bringing litigation in the Nevis court absent a firm belief in the merits of a claim, lest the bond proceeds be used to award fees and costs to the trustee-defendant.
Since the bond requirement was first introduced in 1996, the legal climate concerning international trusts has evolved. The committee found that the bond requirement had been rendered inadequate with time and needed to be increased. However, the committee identified two competing concerns: (i) providing an effective barrier to specious litigation where the amount at stake is significant while (ii) not foreclosing court access to meritorious claims.
The committee recommended that the bond requirement be changed to a sliding scale formula, with a minimum bond amount of EC $100,000. However, the Nevis island government chose to go with a flat amount that was significantly higher. § 55 of the NIETO now requires that EC $270,000 be posted as bond with the Nevis court before the creditor may bring a claim against a trust registered in Nevis.
- § 23(9) – Mareva Injunctions and Anton Piller orders are not available remedies under the NIETO.
Earlier proposals recommended a number of useful amendments to further clarify creditor remedies under the NIETO, including a provision that would limit the availability of Mareva injunctions in the Nevis court. See Mareva Compania Naviera S.A. v. International Bulkcarriers S.A., 2 Lloyd’s Rep 509 (CA) (9175).
The advisery committee agreed that the Nevis court should not entertain or issue Mareva injunctions in respect of international trusts so as to sidestep the limits on creditor remedies under § 23 of the NIETO. That said many cases in which a Mareva injunction is sought also involve the issuance of an Anton Piller order or similar interim measures. See Anton Piller v. Manufacturing Processes, Ch. 55 (1976). The advisery committee recommended that the prohibition on Mareva injunctions be expanded to more comprehensively proscribe similar and complementary forms of interim measures.
The Nevis island government concurred with this approach, opting for a narrow statement of principle in subsection (9) of § 23 of the NIETO. The statute now provides that: “The remedy conferred by subsection (1) [of § 23 of the NIETO, which does not void a fraudulent transfer but permits a recovery against available trust property] shall be the sole remedy available in such an action or proceedings to the exclusion of any other relief or remedy against any party to the action or proceeding.”
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OCI offers the following Nevis Trust Formation & Administration Services:
OCI Nevis Trust Package
At OCI we believe in giving you more for your money than would the average Trust formation service. Hence included in the registration package for your Nevis Trust is the following:
Services:
Documents included in your Incorp pack:
Price (all inclusive): $US3,500 From 2nd year $US2,500
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.
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