At OCI we’ve spent a lot of time trying to make the process of ordering a Private Interest Foundation (“PIF”) as simple (and as painless) as possible!
Assuming you’ve worked out where you want to register your Foundation and who the Founder should be the next step is to download complete and sign an order form.
If you’ve not already done so please download and print the OCI Foundation Order Form. It may be a good idea to keep it close by whilst you browse this page as it will make it easier to understand what you are about to read.
As you will see there are a number of details that we need in order to establish a PIF. Unlike a lot of Offshore Practitioners our approach is to obtain detailed instructions from the outset in order to maximize the chances of the PIF withstanding a legal challenge should that unlikely possibility ever occur.
Miscellaneous
A person who forms (or who passes assets to) a PIF is called a “Founder”. At the beginning of the Form the Founder’s details need to be clearly set out. Only one Founder is required although if assets being transferred to the Foundation are (at present) jointly owned by you and a partner it may prudent for legal reasons to nominate both persons as Founders.
You will need to give the PIF a name. In the event that your first preferred name is not available you may wish to provide us with two names, a first choice and second choice.
Question 4 asks you to set out the purpose of the PIF. A general answer here will suffice. Commonly PIFs are established for the purpose of asset holding or estate planning purposes.
Beneficiaries
Persons who are to receive a benefit from the PIF are called Beneficiaries. You as the Founder may be a beneficiary though not the sole beneficiary. There must be at least one beneficiary nominated from the outset.
There are essentially two ways that you can approach the issue of who to name as Beneficiaries (and when). The first (more traditional) method is to clearly set out in the Order Form the names of the persons (which may include you and eg your partner) that are to ultimately benefit from the PIF. Some people feel more comfortable if they can see, from the outset, their names appearing as beneficiaries.
Discretionary or Potential Beneficiaries
The second, more creative approach is to set up a Discretionary Foundation and to maximize the “Discretionary” nature of the structure to avoid any person’s names appearing anywhere eg in the Regulations or Order form.
One of the key features of Discretionary Foundations is that the Council/lor retains the power to add or substitute further beneficiaries after the PIF has been formed. What you can do in this instance is nominate (in the section of the Form asking for details as to beneficiaries) an internationally recognized charity such as Oxfam or Unicef or The Red Cross to be the primary beneficiary from the outset. (This means that in the Order Form the name of the Beneficiary would read Oxfam or Unicef or The Red Cross or etc).
Switching Beneficiaries
If your wish is for the Council/lor to add or substitute beneficiaries at a later time all that needs to be done is to tell us the names of those persons and when, (after formation of the PIF) you would like us to add those persons as primary beneficiaries. Please see the example set out in the attached Order Form in terms of how you might go about wording such a request. By taking this approach (unless your becoming appointed as a beneficiary is referable to an event) if the document were accidentally found by persons acting on behalf of your creditors (or the Revenue Authorities) they should still be unable to establish whether you (or your partner or family members) are presently entitled to any income or capital from the PIF.
Finally if it is your wish that certain persons (egg a “Prodigal Son) never receive a benefit from the PIF you can set out that person/s details towards the end of the Order Form in the section headed “Excluded Persons”.
How is the Council to pass on Income and Property?
Obviously, so far as it is possible to do so at this time, if a PIF is to be set up, we would like you to let us know your wishes, as to how and when we are to pass on an income from the PIF. You can be as general or as specific as you like, bearing in mind that you can always change your mind and express contrary (or further/other) wishes at a later time. Question 5 sets out some detailed guidelines in this regard and beneath the explanations we have set out an example as to how you may wish to set out your wishes.
Another factor that you may wish to keep in mind is that you can pass on income from the PIF to some beneficiaries whilst leaving capital assets of the PIF to others. If the PIF owns a property for example you may wish for the rent to be paid to a spouse during his/her lifetime with the ownership of the property to be passed on to a child/children upon his/her/them attaining the age of (eg/say) 30 years.
Protectors
A detailed explanation as to what a Protector is appears towards the end of the Order Form. Rather than repeating what is set out there we will simply point out that it is not mandatory to appoint a Protector. Also if one is appointed the matters in respect of which the Protector’s permission are required should be limited and specific otherwise there is a risk that the Protector may be deemed to be controlling the PIF from onshore (which could result in the PIF becoming liable to local taxes).
Councillors’ Powers and Special Provisions
In terms of setting out what Powers the Council/lor is/are to have, there are essentially two ways that such an issue can be approached. You may wish to specifically and in detail set out or limit what their powers are to be. The downside of this is that if the Councillors’ powers are seen to be limited then the PIF may leave itself open to challenge as a sham (for being allowed to be controlled by someone else).
Alternatively you may wish to take the more cautious and conventional route which is to allow the Councillors to have standard Discretionary Powers. Even if they take this approach the Discretionary Powers will be clearly set out in the Charter (a draft copy of which will be provided to you after we have had the chance to convert your wishes, as set out in the order form, into a Draft Charter) and/or the Regulations.
Control
For legal reasons it is extremely important that the Council/Councillor be (and be seen to be) in control of the PIF. If a PIF is seen to be controlled from Onshore there is a risk that the PIF may be challenged as a sham or deemed by the authorities to be a local resident for tax purposes. Please keep this in mind in communicating with us as you will need to be seen to be “informing us as to your wishes” rather than “instructing us what to do”.
Also, you will need to consider who should be the signatory on any PIF Bank accounts. So as to ensure that the PIF is seen to be controlled by the Councillors it may not be advisable for either the Founder or a Beneficiary to be the sole signatory on the account. Whilst the most cautious approach is to appoint the Councillor/s as the sole signatory/s another option would be to nominate you and the Councillor as co – signatories meaning that two signatures would be required to move funds.
Other Practical issues
Whilst Tax haven IBCs have some of the most extensive privacy features of any Offshore Companies in the world if an IBC alone is established to do business abroad, (and underlying legal ownership of the IBC were ever discovered) you may leave yourself vulnerable to attack by Creditors, Lawyers or Revenue Collectors.
On the other hand a Foundation alone can be an awkward structure with which to do business and invest as everything has to be handled by the board of Councillors, there are limits as to the extent of active business a PIF can lawfully carry on and some prospective business partners do not like doing business with just a PIF alone.
By establishing a dual structure you can have practical control and commercial input in respect of your offshore assets and investments, whilst at the same time enjoying the enormous asset protection and tax planning benefits that only a PIF can offer.
If you would prefer to talk to someone before you place an order (or if you need help to complete the order form) please Contact Us.
