In a recent press release the European Parliament has announced that the ultimate beneficial owners of companies and trusts will have to be listed in public registers in EU countries, under updated draft anti-money laundering rules approved by the Economic Affairs and the Justice and Home Affairs committees.
Under the disguise of its being an Anti Money Laundering measure the EU is cleverly almost sneakily hoping to bring Offshore Company’s tax free profits into the EU tax net!
Under the alleged anti-money laundering directive (AMLD), as amended by MEPs, public central registers – which were not envisaged in the initial Commission proposal – would list information on the ultimate beneficial owners of all sorts of legal arrangements, including companies, foundations and trusts.
If you are one of those people who doesn’t wanting competitors or predators (eg no win no fee lawyers) to know what you own a strategic rethink of your Corporate and business structure is called for. What you might want to do is place an Offshore Discretionary Trust or Offshore Discretionary Foundation at the bottom of the EU Company ownership tree.
In the case of an Offshore Trust or Private Foundation (“PIF”) 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 Trust or Foundation Instrument the names of the persons that are to ultimately benefit from the Trust or PIF (which would usually include you and your partner/children).
The second, more creative approach is to set up a Discretionary Trust or Foundation and to maximize the “Discretionary” nature of the structure to avoid any person’s names appearing anywhere in the Trust or PIF Instrument.
One of the key features of Discretionary Foundations and Trusts is that the Trustee or Council/lor retains the power to add or substitute further beneficiaries after the Trust/PIF has been formed. If privacy is key what you can do in this instance is nominate an internationally recognized charity to be the primary beneficiary from the outset.
If you are setting up a Seychelles Foundation this may not really be necessary however as under the Seychelles law (a) The Foundation is deemed to be both legal and beneficial owner of any property it holds (eg shares in a European Company?) and (b) there is no deemed entitlement for beneficiaries.
Let’s assume you set up an Offshore Discretionary Foundation to own the shares of your European company. What this means is (ie if it’s a Seychelles Foundation) even if you or your spouse are named as beneficiaries of the Foundation your names should not have to appear in the EU register as “beneficial owners” of the Company.
Local legal advice should be sought however what’s clear is that timing will be key. Ideally you will want to review and if necessary upgrade your Corporate etc structure before the obligation to record beneficial ownership begins.