Benefits:
- Nil Tax: Complete exemption from Seychelles income or business tax, no Withholding Tax (“WHT”) is levied when distributions are made and no stamp duties are applicable
- Fast Registration and name approval: Seychelles structures can be incorporated within as little as 4 hours of request
- Inexpensive:
- annual government fee is only $200
- Minimum initial capital required is just US$1 which can be paid after registration (contrast that with Panama where one must invest a minimum of US$10,000 to set up a PIF)
- Easy to Establish: Requires only the registration of a Foundation charter
- Simple to Structure:
- Only one Councillor is required (which can be either a person or a corporate entity)
- The Founder may also be a Councillor (but can’t be sole Councillor)
- Easy to Administer:
- No annual return need be filed
- Accounts do not have to be audited
- No requirement to file annual accounts
- No annual meeting need be called
- Asset Protection: The Act:
- Specifically provides that a Seychelles PIF is a separate legal entity in its own right
- Specifically provides that neither the Founder nor the Beneficiaries have any ownership interest in the Foundation assets
- Specifically protects the transfer of assets to the PIF from attack by creditors of the Founder
- Requires that any claims by a creditor of the Founder can only be brought within 2 years from the date of transfer of property to the PIF
- Privacy:
- A Nominee can sign the Foundation Charter
- There is no requirement to file the Foundation’s regulations
- There is no requirement to file the names of the Foundation Beneficiaries (or Protector)
- Names of the Councillors do not have to be stated in the charter
- Succession Planning:
- Entitlement to benefit from Foundation assets can be passed from one generation to the next outside the bounds of the Founder’s will or personal estate
- Seychelles law specifically excludes the operation of foreign laws as to forced heirship
- Founder can reserve specific powers to himself or to others including:
- the right to appoint or remove Councillors
- the right to add or exclude Beneficiaries
- the right to add or remove Protectors
- A Protector can be appointed:
- and can veto certain decisions (eg change of Councillors or Beneficiaries)
- A Founder, a Beneficiary or a Councillor can also be appointed as Protector (but a sole Councillor or sole Beneficiary cannot act as Protector)
- Flexible Uses: A Seychelles Foundation:
- Can have beneficiaries; or
- May solely be for a specified purpose (without beneficiaries); or
- Can be for a specified purpose and have beneficiaries.
SEYCHELLES FOUNDATIONS – DETAILED GUIDE
CONTENTS
| Paragraph number | Description |
| 1. | Introduction |
| 2. | Seychelles Foundations – Benefits |
| 3. | Types of Foundations |
| 4. | The Founder |
| 5. | The Foundation Council |
| 6. | The Protector |
| 7. | The Beneficiaries |
| 8. | Registered Agent and Registered Office in Seychelles |
| 9. | Establishment and Objects of Seychelles Foundations |
| 10. | Foundation Assets |
| 11. | The Foundation Charter |
| 12. | The Foundation Regulations |
| 13. | Foundation Asset Protection Provisions |
| 14. | Continuation and Merger |
| 15. | Accounting records |
| 16. | Foundation Registers |
| 17. | Minutes and Resolutions |
| 18. | Foundation Name |
| 19. | Annual fee payable to the Registrar and Striking-off |
| 20. | Fiscal Exemptions |
| 21. | Miscellaneous |
1. INTRODUCTION
What is a Seychelles foundation?
1.1 A Seychelles foundation is formed on the registration of its charter signed by its founder who donates initial assets to it. A Seychelles foundation is a separate legal entity which holds property in its own right and has no owners.
1.2 A foundation’s council (analogous to a company’s board of directors) manages foundation assets in accordance with the terms of its charter and regulations for the benefit of the foundation’s beneficiaries or for a specified purpose. A foundation’s charter or regulations may reserve to the founder or to a protector certain rights, such as the right to approve the appointment or removal of councillors or beneficiaries and the right to approve amendments to the foundation’s charter or regulations.
1.3 Seychelles foundations are provided for under the Foundations Act 2009 as amended (the Act). The Act strikes an effective balance between sound regulation and market attractiveness.
Why use a private foundation?
1.4 Private foundations are often formed for wealth management purposes including to hold and to protect family wealth and for ‘outside estate’ succession planning. Foundations are commonly used to hold investments such as company shares, bonds and real estate or as part of a family office structure. Foundations are increasingly being used as a cost-effective alternative to trusts.
1.5 Divestment of ownership by founder – When a founder donates assets to the foundation, those assets cease to belong to him or her and the foundation itself becomes the sole legal and beneficial owner of its assets. Foundations assets do not become the assets of a beneficiary unless actually distributed to that beneficiary in accordance with the foundation’s charter or regulations.
1.6 Wealth protection – As a foundation’s assets do not belong to the founder, such assets are protected (in the absence of fraud) from attack by the founder’s personal creditors.
1.7 Succession planning – Foundation assets can be administered for the benefit of successive generations, outside of the founder’s deceased estate. By establishing a foundation, a founder may make arrangements for the enjoyment of certain foundation assets by designated beneficiaries during his or her lifetime and succession arrangements for the distribution of the foundation’s assets to one or more beneficiaries after the founder’s death without reference to a will and avoiding the cost and complications of probate formalities.
2. SEYCHELLES FOUNDATIONS – BENEFITS
2.1 Value for money – Competitive government registration and annual renewal fees.
2.2 Nil Seychelles taxation - A foundation is exempt from Seychelles taxation on its income and profits and is exempt from Seychelles withholding tax and stamp duty.
2.3 Privacy – The names of beneficiaries, councillors and protectors are not publicly- accessible. Use of a nominee founder is permissible, in which case the founder’s rights may be transferred to the ultimate principal after registration of the foundation.
2.4 Succession planning – Foundation assets can be administered for the benefit of successive generations, outside of the founder’s personal estate and without the involvement of executors or probate formalities.
2.5 Wealth protection
- Foundation assets are the property of the foundation only.
- Strong asset protection provisions (including a 2 year claim limitation period) protecting foundation assets from attack by creditors of the founder.
- Specific exclusion of foreign forced-heirship laws.
- Beneficiaries’ rights to information may be restricted.
- Provision may be made to disentitle a beneficiary who challenges the foundation, the transfer of any assets to or by the foundation, or any decision of a councillor, protector or founder.
2.6 Ease of administration
- No annual audit requirement
- No requirement to prepare or file financial accounts in Seychelles but requirement to keep accounting records.
2.7 Foundation Council – A foundation must have one or more councillors, who may be individuals or corporate entities. A councillor is not required to be resident or licensed in Seychelles.
2.8 Low minimum initial assets – The initial assets of a foundation must have a value of not less than US$1 or the equivalent in any other currency, which may be endowed after registration.
2.9 Reserved powers – Powers may be reserved under the foundation charter or regulations to the founder or a protector, such as the right to approve the appointment or removal of councillors or beneficiaries and the right to approve amendments to the charter or regulations.
2.10 Purpose foundations permissible – A purpose foundation is a foundation without beneficiaries, established for the fulfillment of a specific purpose. A purpose foundation can exist for charitable purposes or for other specific purposes.
2.11 Independence of Seychelles – Seychelles is a stable and independent Country (having gained independence from the UK in 1976).
3. TYPES OF FOUNDATIONS
Common types of private foundation include:
- A discretionary foundation with beneficiaries –
v A typical private foundation will have beneficiaries: e.g., a two generational foundation with parents as the principal beneficiaries and their children being ultimate beneficiaries to whom the foundation assets will be distributed on their parents’ death, subject to any distribution conditions or age requirements.
v Where discretionary format regulations are adopted, the Council has discretionary powers in relation to distributions to beneficiaries and the beneficiaries do not have fixed entitlements; the Council has absolute discretion to approve distributions to all or any one or more of the beneficiaries in such amounts, proportions and generally at such time and in such manner (with or without conditions) as the Council may think fit. The regulations may set out the founder’s wishes relating to beneficiary distribution entitlements, proportions and timings, which shall serve as a non-binding guide for the Council.
- A non-discretionary foundation – Where non-discretionary format regulations are adopted, the Council will not have discretionary powers as regards beneficiary entitlements; the beneficiaries will have fixed entitlements as provided for in the regulations.
- A purpose foundation – This is a foundation without beneficiaries, which is established for the fulfillment of a specific purpose. A purpose foundation can exist for charitable purposes or for another specific purpose, such as, for example, to own the shares of a private corporation or for the maintenance of a park, or for a general purpose such as to further the creation and preservation of fine art or for business purposes including trading.
4. THE FOUNDER
4.1 The founder is the individual or legal person (e.g. a company) who subscribes their name to the charter establishing a foundation, acting either on their own account or on behalf of another, and who endows the foundation with its initial assets (section 2 of the Act).
4.2 As the Act permits a founder to act on behalf of another person, a nominee founder may be used. As in other foundation jurisdictions, it is mandatory to state the name of the founder in a foundation’s charter. As the charter must be filed with the Registrar and is therefore publicly accessible (i.e. the filed charter is open to public inspection at the Registrar’s office), to preserve privacy the norm is to use a nominee corporate founder who acts on behalf of the ultimate principal.
4.3 Where a nominee founder is used for signing the charter and registering the foundation, the ‘founder’s rights’ (see paragraph 4.6 below) are often transferred to the ultimate principal (on whose behalf the nominee acted) following registration of the foundation. The founder may, in the charter or by written instrument, assign or transfer all or any part of his or her rights, powers and obligations as founder to such person or persons as the founder shall determine (section 26(1) of the Act). Any such assignment or transfer shall not be effective until written notice thereof is provided to the foundation’s council and registered agent (section 27(3) of the Act). Where the founder’s rights are transferred, any reference to the founder in its charter, regulations or in the Act is deemed to be a reference to the transferee (current holder of the founder’s rights): section 26(2) of the Act.
4.4 A foundation’s founder may also be a beneficiary. However, the founder cannot be the sole beneficiary unless the charter or regulations provide for the designation of one or more beneficiaries in the event of the death or legal incapacity of the founder (section 59(2) and (3) of the Act).
4.5 Although usually a foundation will have one founder, the Act allows for multiple founders. For example, where matrimonial property jointly owned by a husband and wife is gratuitously transferred to a newly-formed foundation (as the foundation’s initial assets), the transferor husband and wife will be joint founders.
4.6 Founder’s rights – Under section 27 of the Act a founder may reserve, in the charter or regulations, to the founder or for other persons, certain rights or powers, such as the power to approve or direct: (i) the appointment or removal of councillors, (ii) the appointment and removal of beneficiaries, and (iii) the amendment of the charter or regulations. A founder may retain wide, narrow or no reserved powers, but see paragraph 4.7 below. Where powers are reserved to the founder, the foundation’s Council is not permitted to carry out such matters without the founder’s prior written consent. Alternatively, ‘reserved’ powers may be given to a foundation protector (see paragraph 6 below). In that event, a founder may reserve the right to remove or appoint protectors. However, a founder’s reserve powers are subject to a requirement that no disposition of any assets of a foundation shall be made other than through the action or resolution of the Council, which shall give effect to the exercise of the reserve powers in accordance with the terms of the charter or regulations or procedures laid down by the Council, as the case may be (section 27 of the Act).
4.7 Recommendation to obtain prior expert legal and tax advice:
- The Council’s role is to manage the foundation and carry out its objects. If a founder is given very wide powers in respect of a foundation (e.g. the power to direct or approve ‘fiscal’ matters such as investment activities or distributions and the power to direct the dissolution of the foundation or amendment of its constitutional documents) this may potentially cause the foundation to be viewed as mere nominee of the founder or may constitute ‘management or control’ so as to make the foundation ‘tax resident’ where the founder is resident or domiciled, which could have tax consequences for the foundation or founder.
- It is recommended that an intended founder seek expert legal and tax advice (in his country of residence and domicile and any place the foundation is to be managed and controlled from) before establishing a foundation, including as to the scope of any powers the founder proposes to reserve in respect of the foundation.
5. THE FOUNDATION COUNCIL (BOARD OF COUNCILLORS)
5.1 A Seychelles foundation is required to have a Council, whose role is to govern and manage the activities of the foundation. Subject to the rights and powers of the founder and any protector, a foundation’s Council is responsible for:
(a) carrying out the objects of the foundation;
(b) management and administration of the assets of the foundation in accordance with the foundation charter or its regulations;
(c) entry into contracts on behalf of the foundation and the performance of such lawful acts as may be necessary or desirable to fulfill the objects of the foundation; and
(d) distribution of foundation assets in accordance with the provisions of the foundation’s charter or regulations, to the foundation’s beneficiaries or, in the case of a foundation established for a specified purpose, in fulfillment of that purpose.
5.2 Under section 32 of the Act, the foundation’s Council is required to consist of one or more councillors, who may be natural persons (individuals) or legal persons (e.g. companies). A councillor is not required to be resident or licensed in Seychelles.
5.3 A founder may be a councillor but not a sole councillor (section 35(d) of the Act). A protector of a foundation may be a councillor but not a sole councillor (section 35(c) of the Act). However, in view of potential conflicts of interests, it may not be desirable for a protector to be a councillor.
5.4 Under section 35(a) and (b) of the Act a person shall not be appointed as or remain as a councillor of a foundation:
(a) in the case of a natural person (individual), if the person is a minor or mentally incapacitated or an undischarged bankrupt; and
(b) in the case of a legal person(e.g. a company), if the entity is wound up or otherwise dissolved.
5.5 It is not mandatory for the names and addresses of a foundation’s councillors to be stated in the charter. Accordingly, to preserve privacy (as the charter is filed with the Registrar and is accessible by public search), it is common to appoint the councillors by the regulations or other document signed by the founder, rather than by the charter. If, however, the founder prefers to state the names and addresses of the first councillors in the charter, then the foundation may file an appropriate notice with the Registrar on the appointment or cessation of appointment, or change of name or address, of a councillor (see sections 36(1)(b), 50(2)(b) and 51(1)(b) of the Act).
5.6 On the appointment or cessation of appointment, or change of name or address, of a councillor, the foundation shall (within 14 days) give written notice thereof to its registered agent in Seychelles (see sections 36(1)(a), 50(2)(a) and 51(1)(a) of the Act).
5.7 Foundations are not subject to a mandatory requirement to hold an annual general meeting of councillors.
5.8 A councillor of a foundation shall act in accordance with the foundation’s charter, regulations and the Act (section 37(1) of the Act).
5.9 In exercising his or her powers and discharging his or her duties and functions, including in the management and investment of the foundation’s assets, a councillor is subject to the following duties of care under section 37(2) and (3) of the Act:
(a) To act honestly and in good faith with a view to the best interests of the foundation;
(b) To exercise the care, diligence and skill that a reasonably prudent person would exercise in similar circumstances; and
(c) To take all such steps and do or cause to be done all such things as may be necessary to properly administer the foundation to achieve its objects.
5.10 The duties of a councillor referred to in paragraph 5.9 above are owed only to the foundation, i.e. not to the beneficiaries (section 37(4) of the Act).
6. THE PROTECTOR (OPTIONAL)
6.1 The protector, whose role is to oversee administration of the foundation by the council, is an optional appointment (section 52 of the Act). A protector is a person appointed in respect of a foundation where it is desired to retain some supervision over the actions of the councillors (rather than direct supervision by the founder – see paragraphs 4.6 and 4.7 above). The charter or regulations may require that the protector’s prior consent or direction be obtained in respect of certain foundation matters, such as the right to approve the appointment or removal of councillors or beneficiaries and the right to approve amendments to the charter or regulations.
6.2 A protector may be an individual or legal person including a company (section 52(1) of the Act). The appointment of a protector may be effected by a foundation’s regulations or other written instrument, thereby ensuring that the protector’s identity is not publicly accessible (unlike a foundation charter, regulations are not filed with the Registrar).
6.3 A founder, beneficiary or councillor of a foundation may be appointed as a protector but a sole councillor cannot act as protector and a sole beneficiary cannot act as protector (section 52(2) of the Act). However, in view of potential conflicts of interest, it may not be desirable for a protector to also be a councillor or a beneficiary.
6.4 A protector’s duties include, subject to any contrary provisions of the charter or regulations of a foundation, to: (a) take such action as the protector may deem necessary to ensure compliance by the foundation and the councillors with the foundation’s charter, the regulations and the Act; and (b) generally monitor the management of the foundation by the councillors, including the conduct of the councillors (section 55(2) of the Act).
6.5 Under section 55(1) of the Act, a foundation’s charter or regulations may specify the powers of the protector (see also section 27, under which a founder may reserve, in the charter or regulations, certain powers or rights form himself or for any other person). Powers that may be vested in a protector include (without limitation) the power to approve or direct: (i) the appointment or removal of councillors, (ii) the appointment or removal of beneficiaries, and (iii) the amendment of the charter or regulations. Wide, narrow or no powers may be reserved for a protector, but see paragraph 6.9 below. Where powers are reserved to the protector, the foundation’s council is not permitted to carry out such matters without the protector’s prior written consent. Where powers are reserved to the protector instead of the founder, the founder may reserve the right to remove or appoint protectors.
6.6 The protector of a foundation has full right of access to the books, records and accounts of the foundation (section 55(3) of the Act).
6.7 Under section 55(4) of the Act a protector of a foundation has, in addition to the rights conferred on the protector by the foundation’s charter and regulations, the right:
(a) to be informed of all meetings of the councillors and to table business to be considered at such meetings;
(b) to attend and be heard but not to vote at such meetings;
(c) where any business of a foundation is conducted by the circulation of documents, to be included in the circulation of documents at the time that they are circulated to the councillors; and
(d) where any business of a foundation is conducted by the delegation of powers to a councillor or an agent, to be informed of the terms and any exercise of the delegation.
6.8 A protector or a person acting as an officer, employee or agent of a protector or performing any duty on behalf of the protector, is not liable in damages for anything done or omitted to be done in the discharge or purported discharge of the protector’s duties under the charter, regulations or the Act, unless it is proved that the act or omission was done in bad faith (section 58 of the Act).
6.9 Recommendation to obtain prior expert legal and tax advice
- The Council’s role is to manage the foundation and carry out its objects. If a protector is given very wide powers in respect of a foundation (e.g. the power to direct or approve ‘fiscal’ matters such as investment activities or distributions and the power to direct the dissolution of the foundation or amendment of its constitutional documents) this may potentially constitute ‘management or control’ so as to make the foundation ‘tax resident’ where the protector is resident or domiciled, which could have onshore tax consequences for the foundation.
- It is recommended that an intended founder and protector seek expert legal and tax advice (in their country of residence and domicile and any place the foundation is to be managed and controlled from) before establishing a foundation, including as to the scope of any powers the founder proposes to reserve to the protector and/or founder in respect of the foundation.
7. THE BENEFICIARIES
7.1 While a foundation (other than a purpose foundation) does not have shareholders or owners, it has beneficiaries. Nevertheless, the foundation itself is the sole legal and beneficial owner of foundation assets, and such assets do not become the assets of a beneficiary unless actually distributed to that beneficiary in accordance with the foundation’s charter or regulations (section 71 of the Act).
7.2 The appointment or other designation of the beneficiaries can be through the foundation’s regulations or other private document, so that the names of the beneficiaries are not filed with the Registrar and are not publicly accessible. A foundation’s regulations may specify how and when the beneficiaries may receive benefits from the foundation and any conditions attaching to distribution entitlements. Under the regulations, beneficiary distributions may be ‘fixed’ or may be subject to the Council’s absolute discretion as to entitlements, proportions, timings and any conditions.
7.3 A beneficiary under a foundation is required, by reference to the charter or regulations, to be identifiable by name or ascertainable by reference to either a class or a relationship to another person, whether or not living at the time of the establishment of the foundation or at the time by reference to which, under the terms of the charter or regulations, members of a class are to be determined (section 59(1) of the Act).
7.4 Although the founder may be a beneficiary he or she cannot be the sole beneficiary unless the charter or regulations provide for the designation of one or more beneficiaries in the event of his or her death or legal incapacity (section 59(2) and (3) of the Act).
7.5 Under the terms of a foundation’s charter the founder is able to limit the extent of a beneficiary’s entitlement to information relating to a foundation and its assets. It is common for a foundation’s charter to only give beneficiaries the right to receive a copy of the charter and to provide that the disclosure to beneficiaries of any other documents or information (such as the regulations or information on foundation assets) is at the discretion of the Council subject to the prior approval of the protector or the founder. If the founder requires that the beneficiaries have a broader entitlement to information (for example, an entitlement to information on foundation assets, minutes of council meetings, etc), the charter can be tailored accordingly. If no provision is made in the charter or regulations for information disclosure to beneficiaries, section 61 of the Act provides default provisions which entitle beneficiaries to inspect the charter, regulations, audit reports, financial statements and council minutes and resolutions.
8. REGISTERED AGENT AND REGISTERED OFFICE IN SEYCHELLES
8.1 Under section 28(1) and (2) of the Act a Seychelles foundation must at all times have a registered agent in Seychelles, being a company licensed by the Registrar to conduct foundation services under the International Corporate Service Providers Act. The registered agent is a non-fiduciary position, whose role includes attending to Seychelles filings and acting as a point for service of documents on the foundation (see paragraph 8.3).
8.2 A foundation must have a registered office in Seychelles, which must be the same address as that of the foundation’s registered agent in Seychelles (section 31(1) of the Act).
8.3 Documents may be served on a foundation by service of such documents on its registered agent at the registered office of the foundation (section 31(2) of the Act).
9. ESTABLISHMENT AND OBJECTS OF SEYCHELLES FOUNDATIONS
9.1 A Seychelles foundation is established by a charter made in writing and signed by one or more founders and on the issuance of a certificate of registration by the Registrar upon registration of the foundation under the Act (section 3(1) of the Act). The sole document to be filed when applying for registration of a new foundation is the foundation’s charter.
9.2 Pursuant to section 7(1) of the Act the objects of a foundation:
(a) may be charitable, non-charitable or both, and may be to benefit a beneficiary or beneficiaries, or to carry out a specified purpose, or to do both;
(b) shall include the management of its assets and income and the distribution thereof, as the Council may by resolution of councillors determine pursuant to the charter or regulations: (i) to the beneficiaries a foundation; or (ii) in the case of a foundation, with or without beneficiaries, which has a specified purpose or purposes, in fulfillment of that specified purpose or purposes; and
(c) may include any other objects that do not contravene section 7(2) of the Act (see paragraph 9.3 below).
9.3 Under section 7(2) of the Act the objects of a foundation shall not include:
(a) the carrying on of any activity which is unlawful, immoral or contrary to any public policy in Seychelles; or
(b) the carrying on in or from within Seychelles of any activity in respect of which a licence or authorisation under any statute or regulation is required and no such licence or authorisation has been granted to the foundation; or
(c) the carrying on of business in Seychelles, except so far as may be necessary for the carrying out of the foundation’s business outside of Seychelles, and for such purposes a foundation shall not be treated as carrying on business in Seychelles by reason only that:
(i) it opens and maintains an account or accounts with a bank licensed under the Financial Institutions Act 2004;
(ii) it engages the services of or otherwise deals with counsel and attorneys, accountants, bookkeepers, international corporate service providers, foundation service providers, mutual fund administrators or managers, securities dealers, investment advisors or other similar persons carrying on business in Seychelles;
(iii) it prepares or maintains its books and records in Seychelles;
(iv) it holds, in Seychelles, meetings of its councillors or of supervisory persons; or
(v) subject to required approval, it holds a lease of property for use as an office from which to communicate with councillors or supervisory persons or beneficiaries or where books and records of the foundation are prepared or maintained.
9.4 There is no ‘rule against perpetuities’ or other statutory limit to the duration of a foundation. Typically, a foundation will be established for an indefinite (unlimited) period of time. However, if so required by a founder, a foundation may be formed for a limited duration (if, for example, the foundation is to be dissolved upon the happening of a specified event or on the expiration of a fixed period of time). A foundation’s charter must specify if it is established for an indefinite or limited duration (section 4(2)(i) of the Act). A founder may reserve the right to dissolve the foundation.
10. FOUNDATION ASSETS
10.1 A foundation’s charter must require the foundation to have initial assets of a value of not less than US$1 or the equivalent thereof in any other currency (section 8 of the Act).
10.2 The assets of a foundation must be exclusively managed, including being realised, applied, administered, invested and disbursed, in accordance with the foundation’s charter, regulations and the Act and for the attainment of the objects specified in the charter and authorised under the Act (section 12(1) of the Act).
10.3 A foundation may own assets worldwide. However, under section 11(1)(b) of the Act, a Seychelles foundation’s assets are not permitted to include any immovable property (real estate) in Seychelles or any shares, debentures or other interests in any legal entity incorporated or registered in Seychelles, except that (under section 11(1)(a) of the Act) a foundation’s assets are permitted to include any of the following Seychelles assets:
(a) shares, debentures or other interests in a company incorporated under the International Business Companies Act;
(b) shares, debentures or other interests in a company licensed under the Companies (Special Licences) Act 2003;
(c) shares, debentures or other interests in a company incorporated under the Protected Cell Companies Act 2003;
(d) any interest in a partnership registered under the Limited Partnerships Act 2003;
(e) any interest or entitlement as a beneficiary under a trust registered under the International Trusts Act 1994;
(f) any company, trust or other entity licensed as a mutual fund under the Mutual Fund and Hedge Fund Act 2008;
(g) any interest or entitlement as a beneficiary under another foundation registered under the Act;
(h) any funds in an account with a bank licensed under the Financial Institutions Act 2004; or
(i) subject to required approvals, a lease of such immovable property in Seychelles as may be required for the use as its own office purposes.
11. THE FOUNDATION CHARTER
11.1 The charter of a foundation must be in the form of a written document and is required to be executed by or on behalf of each founder (section 5(1) of the Act).
11.2 For the purpose of registering a foundation, the charter is required to be submitted by the registered agent of the proposed foundation to the Registrar, who shall retain and file it in the Register. Accordingly, the charter is accessible by public search.
11.3 Under section 4(2) of the Act a foundation’s charter must specify (at minimum):
(a) the name of the foundation;
(b) the name and address of each founder;
(c) the objects of the foundation;
(d) the initial assets of the foundation (and a statement that the foundation may not have assets with a total value of less than one United States dollar (US$1) or the equivalent thereof in any other currency);
(e) where the foundation has been established to carry out a specified purpose (irrespective of whether or not the foundation has beneficiaries), the details of the specified purpose;
(f) the establishment of a Council to administer the foundation’s assets and to carry out its objects (but the first councillors do not have to be named or appointed in the charter)
(g) the name and address of the foundation’s registered agent in Seychelles;
(h) the address of the registered office in Seychelles of the foundation;
(i) a statement of whether the foundation: (i) is established for an indefinite period of time, or (ii) is to be dissolved on the expiration of a fixed period of time or on the happening of a specified event (including details of the fixed period or event); and
(j) the manner in which a beneficiary is to be appointed.
11.4 While a foundation’s charter must specify the manner in which beneficiaries are to be appointed, it is not mandatory to specify the names of the beneficiaries in the charter (the norm is not to do so) of a foundation. Commonly, the charter will state that the beneficiaries are to be appointed as provided for in the foundation’s regulations (the regulations are not filed with the Registrar: see paragraph 12 below).
11.5 The Act provides that the charter may, on an optional basis, make provision for other matters, including (without limitation) supplementary assets, the appointment and removal of councillors, the manner of council decision-making, the addition and removal of beneficiaries, the powers, duties and removal of protectors, the making of regulations, the appointment of an auditor, the amendment of the charter and regulations, the continuation of the foundation outside Seychelles, the reservation of founder’s rights and the appointment of any supervisory person.
11.6 A foundation charter is usually prepared in the English language. The charter may also be written and filed in any other language, in which case it shall be accompanied by a translation in English certified, as a true and accurate translation of the charter, by the registered agent of the foundation (section 5(2) of the Act). The registered agent is prohibited from giving such a certification unless it has obtained or confirmed such translation from a qualified translator or such other person as may be acceptable to the Registrar (section 5(3) of the Act).
11.7 A charter may make provision for its amendment (section 6(1) of the Act). It is common for a foundation’s charter to permit amendments to it (or its replacement) by resolution of councillors (the amendment resolution), subject to (if so required under the terms of the charter) the prior written consent of either the founder or protector. However, it is a requirement that a certified copy of the amendment resolution be filed with the Registrar within 14 days of the amendment (section 6(6)(a) of the Act). If a foundation contravenes section 6(6)(a) of the Act, it may be liable to a penalty of US$50 for each day that the contravention continues.
12. THE FOUNDATION REGULATIONS
12.1 While a foundation must have a charter, it may adopt regulations (section 13(1) of the Act). A foundation will usually adopt regulations, to ensure that matters pertaining to foundation beneficiaries and distribution entitlements remain non-public. A foundation’s regulations are a private document (not filed with the Registrar).
12.2 Under section 13(2) of the Act a foundation’s regulations may, without limitation, include regulations:
(a) determining the minimum level of assets of the foundation in the absence of which no distribution to any beneficiary may be made;
(b) concerning the distribution of assets made, or to be made, by the councillors of the foundation;
(c) providing for the designation of any initial beneficiaries or any beneficiaries to be designated at a later date, of the foundation;
(d) providing for the identification of any remaining beneficiary upon the winding up of the foundation; and
(e) providing for the regulation of the foundation’s Council.
12.3 The regulations must be in writing and shall be signed by each founder, or if there is no surviving founder, by each councillor of the foundation (section 13(3) of the Act).
12.4 A foundation’s regulations are usually prepared in the English language. The regulations may also be written in any other language, in which case it shall be accompanied by a translation in English certified, as a true and accurate translation of the regulations, by the registered agent of the foundation (section 14(1)(b) of the Act). The registered agent is prohibited from giving such a certification unless it has obtained or confirmed such translation from a qualified translator or such other person as may be acceptable to the Registrar (section 14(2) of the Act).
13. FOUNDATION ASSET PROTECTION PROVISIONS
13.1 Under section 71 of the Act and except as referred to in paragraph 13.2 below, the assets transferred to or otherwise vested in a Seychelles foundation shall:
(a) be the assets of the foundation, with full legal and beneficial title;
(b) cease to be the assets of the founder, once transferred to or otherwise vested in the foundation by or on behalf of the founder; and
(c) in the case of a foundation with one or more beneficiaries, not become the assets of a beneficiary unless distributed to such beneficiary in accordance with the Act and the foundation’s charter or regulations.
13.2 The Act includes strong asset protection provisions protecting foundation assets from attack by creditors of the founder. Sections 72 and 73 of the Act provide (without limitation) to the following effect:
(a) a transfer of property to a foundation is not void or otherwise liable to be set aside by reference to a foreign rule of forced heirship or any other foreign law;
(b) the capacity of a founder or any other person who transfers property to a foundation shall not be challenged, nor shall any beneficiary or other person be subjected to any liability or deprived of any right, by reason (among others) that: (i) a foreign law does not recognise the concept of a foundation, or (ii) the transfer of property to the foundation contravenes any a foreign rule of forced heirship;
(c) a judgment of a foreign court shall not be recognised or enforced in Seychelles in so far as it is inconsistent with the matters referred to in sub-paragraphs (a) and (b) above; and
(d) notwithstanding any foreign law to the contrary (but subject to section 73(2) to (4) as referred to in paragraph 13.3 below), a transfer of property to a foundation is not void or otherwise liable to be set aside by reason of: (i) the founder’s bankruptcy or the liquidation of the founder’s property, or (ii) any claim by a creditor of the founder.
13.3 Section 73(2) to (4) of the Act only allows very narrow grounds for a creditor of the founder to attack foundation property:
(a) Where a claimant creditor of the founder proves that the founder was insolvent, or intended to defraud the creditor at the time when the founder transferred property to the foundation, the Seychelles Supreme Court may declare that the transfer of property was void to the extent necessary to satisfy a proven claim of the founder’s creditor. The onus of proof as to intent to defraud rests on the claimant creditor.
(b) The anti-foundation busting position is further strengthened by section 73(4) of the Act which provides that such claims are barred absolutely (and shall not be made against a foundation) on the expiry of two years from the date of the transfer of the property to the foundation.
13.4 Notwithstanding any Seychelles or foreign law to the contrary, it shall be lawful for an instrument of transfer or other disposition, or for the charter or regulations of a foundation, to provide that any estate or interest in any property distributed or to be distributed by a foundation to a beneficiary shall not be alienated or pass by bankruptcy, insolvency or liquidation or be liable to be seized, sold, attached, or taken in execution by process of law (section 74 of the Act).
13.5 The charter or regulations of a foundation may provide that a beneficiary shall forfeit his actual or potential benefit, right or interest under the foundation in the event that he challenges: (i) the establishment of the foundation, (ii) the transfer of any assets to or by the foundation, (iii) the foundation’s charter or regulations or (iv) any decision of the founder, a councillor or any protector (section 64 of the Act).
14. CONTINUATION AND MERGER
14.1 Part X of the Act provides for: (i) the consolidation of two or more existing foundations into a new foundation, and (ii) the merger of an existing foundation into another existing foundation.
14.2 Continuation of foreign foundations in Seychelles
(a) Sections 78 to 82 of the Act provide for the continuation of foreign foundations in Seychelles.
(b) A foreign foundation that wishes to continue as a foundation registered in Seychelles is required to file with the Registrar (through its proposed Seychelles registered agent): (i) articles of continuation; (ii) a certified true copy of its foreign certificate of registration (or equivalent document) and its charter (or equivalent constitutional document); (iii) documentary evidence, satisfactory to the Registrar, that it is in good legal standing; (iv) its proposed charter under the Foundation Act 2009; and (v) the continuation fee in the sum of US$200.
(c) Upon registration of the articles of continuation, the Registrar shall, if it is satisfied that the relevant requirements of the Act have been met, issue a certificate of continuation.
(d) On the date shown in the certificate of continuation: (i) the foreign foundation becomes a Seychelles foundation registered under the Act; (ii) the assets of the continued foundation continue to be vested in it and it remains liable for all its pre-existing debts, liabilities and obligations; and (iii) the continued foundation is no longer regarded as a foreign foundation.
14.3 Continuation of foundations outside Seychelles
(a) Subject to any limitations in its charter or regulations, a Seychelles foundation may, by resolution of councillors, continue as a foundation registered or otherwise organised under the laws of a jurisdiction outside Seychelles in the manner provided under those laws.
(b) A foundation that continues as a foreign foundation does not cease to be regarded as a Seychelles foundation unless: (i) it has paid all its fees and any penalty required to be paid to the Registrar under the Act; and (ii) the laws of the foreign jurisdiction permit the continuation and the foundation has complied with those laws.
(c) Where a foundation is continued outside Seychelles (and subject to paragraph (b) above): (i) it ceases to be a Seychelles foundation registered under the Act; (ii) the Registrar is required to strike off the name of the foundation from the Register; and (iii) the foundation continues to be liable for all of its debts and obligations that existed prior to its continuation as a foreign foundation.
15. ACCOUNTING RECORDS
15.1 A foundation is required to keep or cause to be kept proper accounting records that: (i) are sufficient to show and correctly explain the foundation’s transactions; (ii) enable the financial position of the foundation to be determined with reasonable accuracy at any time; and (iii) allow for financial statements of the foundation to be prepared (section 75(1) of the Act). Accounting records, in relation to a foundation, mean documents relating to or evidencing the foundation’s assets and liabilities, receipts and expenditure and sales, purchases and other transactions to which the foundation is a party (for example, bank statements, receipts, invoices, title documents, agreements and vouchers, etc) (section 2 of the Act).
15.2 Pursuant to section 75(3) of the Act, as from 6 February 2022, a foundation is required to:
(a) prepare an annual financial summary to be kept at its registered office in Seychelles within 6 months from the end of the Foundation’s financial year; and
(b) on a bi-annual basis, keep its accounting records at its registered office in Seychelles. This means a foundation shall at least twice annually send updated accounting records to be kept at its registered office in Seychelles.
15.3 It shall be sufficient compliance with section 75(3) of the Act (see preceding paragraph) if a copy of the accounting records and financial summary is kept in electronic form at the foundation’s registered office (section 75(3A) of the Act).
15.4 While a foundation’s accounting records are required to be kept at the registered office in Seychelles, they are not required to be filed with the Registrar and are not open to public inspection.
15.5 Where a foundation keeps a copy of its accounting records at its registered office, the foundation shall keep, with its registered agent, a written record of the physical address of the place where the original accounting records are being kept, and of any change thereto (section 75(3A) of the Act).
15.6 The financial year of a foundation shall be the calendar year, unless it is changed by a resolution of councillors and notified to the foundation’s registered agent within 14 days of the passing of the resolution (section 75(3C) of the Act).
15.7 The accounting records that a foundation is required to keep must be preserved by it for at least 7 years from the end of the period to they each relate (section 76(1) of the Act).
16. REGISTERS
Foundation Registers required by the Foundations Act
16.1 A foundation is required to keep, at its registered office, a Register of its councillors, founders, beneficiaries, registered agent, any supervisory persons (including any protector) and any persons authorised as an agent or power of attorney holder of the foundation (section 77(1) and (2) of the Act).
16.2 The Register is not open to public inspection but on each business day in Seychelles shall be open to inspection by the founder, a councillor, any supervisory person (including any protector) and the registered agent of the foundation (section 77(3) of the Act).
Register of Beneficial Owners required by the Beneficial Ownership Act
16.3 In addition to the Foundation Register required to be kept by the Foundations Act, the Beneficial Ownership Act 2020 (the BO Act) and the Beneficial Ownership Regulations 2020 (the BO Regulations) require that a foundation keep a Register of Beneficial Owners at the principal place of business of its Registered Agent in Seychelles. For BO Act and anti-money laundering (AML) law purposes, pursuant to regulation 3(4) of the BO Regulations, the beneficial owner in relation to a foundation includes an individual includes a beneficiary, a founder and any protector, despite them having no ownership interest in the foundation or its assets.
16.3 The registerable particulars of a foundation’s Register of Beneficial Owners must be submitted to the Seychelles Financial Intelligence Unit (FIU) which submitted information is not publicly accessible (see sections 5(6) and 13(4) of the BO Act). The filing of the registrable particulars with the FIU is required to be done by a foundation’s Registered Agent in Seychelles.
Declaration by person on becoming beneficial owner
16.4 Every person on becoming a beneficial owner of a foundation shall within 14 days from the date of becoming a beneficial owner, submit to the foundation a Declaration of Beneficial Ownership containing the registrable particulars relating to the person (section 10(1) of the BO Act and regulation 14 and Second Schedule of the BO Regulations).
Notice of relevant change by beneficial owner
16.5 A relevant change in relation to a person occurs if: (i) the person ceases to be a beneficial owner in relation to the foundation; or (ii) any other change occurs as a result of change in the registrable particulars of the beneficial owner (section 10(8) of the BO Act).
16.6 If a relevant change occurs in relation to a beneficial owner of a foundation, the beneficial owner shall within 14 days of such change give written notice to the foundation providing the following details for changes to be made to the foundation’s Register of Beneficial Owners: (i) the relevant change; (ii) the date on which it occurred; and (iii) any information needed to update the Register of Beneficial Owners (section 10(3) of the BO Act).
16.7 Every foundation is required to identify and verify its beneficial owners (section 9(1) of the BO Act).
17. MINUTES AND RESOLUTIONS
17.1 A foundation must keep minutes of all meetings of councillors and copies of all written resolutions consented to by councillors (together the minutes and resolutions) (section 46(1) of the Act). The minutes and resolutions are required to be kept at the registered office of the foundation or at such other place as the councillors think fit and the councillors are required to inform the foundation’s Seychelles registered agent in writing of the address of such other place (section 46(3) of the Act).
17.2 The minutes and resolutions shall not be open to public inspection but on each business day in Seychelles shall be open to inspection by the founder, a councillor and any supervisory person (including any protector) of the foundation (section 46(4) of the Act). The minutes and resolutions that a foundation is required to keep must be preserved by it for at least 7 years from the end of the period to they each relate (section 46(5) of the Act).
18. FOUNDATION NAME
18.1 The name of a foundation shall end with the word “Foundation” (section 17(1) of the Act).
18.2 Under section 17(2) of the Act, a proposed foundation shall not be registered by a name:
(a) which includes: (i) “limited” or an abbreviation of “limited”; (ii) “company” or an abbreviation of “company”; (iii) “partnership” or an abbreviation of “partnership”; (iv) a translation of any words conveying a similar meaning to “limited”, “company” or “partnership” in the language or practice of any other country; or (v) an abbreviation of any such translation as is referred to in sub-paragraph (iv);
(b) which in the Registrar’s opinion is the same as or similar to the name of an existing Seychelles foundation;
(c) which in the Registrar’s opinion is misleading, offensive or otherwise objectionable;
(d) which contains the words “Assurance”, “Bank”, “Building Society”, “Chamber of Commerce”, “Chartered”, “Cooperative”, “Insurance”, “Municipal”, “Trust”, “Stock Exchange”, “Securities”, “Royal”, or a word conveying similar meaning; or
(e) which contains any other word that, in the opinion of the Registrar, suggests or is calculated to suggest the patronage of or any connection with the Government of Seychelles or the Government of any other country.
18.3 Under section 17(3) and (4) of the Act, the name of a foundation may be expressed in any language, but where the name is not in the English or French language:
(a) a translation of the name in English or French shall be given to the Registrar, certified as a true and accurate by the registered agent of the foundation; or
(b) where a direct translation of the name does not accurately reflect the name’s meaning, a representation of the name in English or French shall be given to the Registrar, certified as a true and accurate by the registered agent of the foundation.
18.4 The registered agent is prohibited from giving a certification (see paragraph 18.3 above) unless it has obtained or confirmed the translation (or representation) from a qualified translator or such other person as may be acceptable to the Registrar (section 17(5) of the Act).
19. ANNUAL FEE PAYABLE TO THE REGISTRAR & STRIKING-OFF
19.1 The annual fee payable to the Registrar for a Seychelles foundation is due on the day before the foundation’s registration anniversary date (section 24(1) of the Act). If the foundation does not pay its annual renewal fee by the due date (i.e. by the day before its registration anniversary date), an additional fee equal to 10% of the annual renewal fee applies for each month or part thereof during which the annual renewal fee and any additional fee imposed remains unpaid (section 24(2) of the Act).
19.2 Where a foundation has failed to pay its annual renewal fee within 180 days of the due date, the Registrar will publish notice in the Gazette and serve on the foundation a notice that it will be struck off the Register if it fails to pay the annual renewal fee (and all late fees) within 90 days of the date of such notice (section 99(1) of the Act). Where a foundation continues to fail to pay the annual renewal fee (and all late fees), on expiry of the 90 day notice period the Registrar will strike the foundation’s name off the Register and publish notice of the striking-off in the Gazette (section 99(2) of the Act). Typically therefore, if the annual renewal fee is not paid within 270 days, the foundation will be struck off.
19.3 Section 102 of the Act provides for an application to the Registrar for the restoration to the Register of the name of a foundation that has been struck off or dissolved for non-payment of annual fees. Section 101 of the Act provides for an application to the Supreme Court of Seychelles for the restoration to the Register of the name of a struck off or dissolved foundation. For time-limits, eligibility requirements and full details, our Foundation Restoration Guide is available on request.
20. FISCAL EXEMPTIONS
20.1 Under section 110 and Schedule 2 of the Act, a foundation is exempted from:
(a) Seychelles Business Tax on its income;
(b) Seychelles withholding tax;
(c) Seychelles stamp duty (except in relation to any permitted lease of Seychelles real estate for own office use).
20.2 Section 110(2) of the Act provides that, notwithstanding any written law to the contrary, no estate, inheritance, succession or gift tax shall be assessed or payable by a person with regard to any properties, shares, securities or other assets transferred to or held by or relating to a foundation. This means (without limitation) that beneficiaries are not subject to any Seychelles withholding tax on distributions from a Seychelles foundation.
21. MISCELLANEOUS
A foundation may, but is not required to, maintain a seal (section 70 of the Act).
This Guide is not exhaustive and is intended as a general summary only. We do not provide tax or legal advice. We recommend that before forming a Seychelles foundation you seek tax and legal advice from an appropriate qualified expert(s) where you are resident and domiciled. Clients and other persons should ensure they are professionally advised on any restrictions and reporting requirements that the acquisition of or dealings with a Seychelles foundation may involve.
For more information on Seychelles Private Interest Foundations please Contact Us or click on any of these links:
