The PTC is a company which has the sole purpose of acting as trustee of a specific trust or a related group of trusts. It will ordinarily be involved with one or more trusts created for the benefit of a specific family. In an environment where providers of trust services are regulated, a Jersey-incorporated and/or administered PTC is exempt from the licensing requirements under the Financial Services (
l it only provides trustee services to those trusts specified in its memorandum and articles of association;
l it does not solicit from or offer such services to the public; and
l the administration of the PTC is carried on by a person registered to carry on trust business in
The flexibility of the PTC arrangement has led to an increase in its popularity during the past few years. In the face of stiff competition from jurisdictions such as Bermuda,
Styled as ‘liability of directors of a corporate trustee’, the former article 56 had provided that in the event of a breach of trust committed by a corporate trustee of a Jersey trust, the directors would be deemed to be guarantors of this company in respect of any pecuniary damages and costs awarded against it by the court. Although untested, it was commonly understood the article had hitherto served to discourage family members and advisers from using the island for the purpose of implementing a PTC, their membership of the board of directors rendering them exposed to this statutory personal guarantee.
Advantages of establishing a PTC
PTCs are used in a variety of situations and may prove most useful where a family is looking to create
one or more trusts for different purposes, which might include the ownership of real estate, aircraft, yachts or separate closely-held interests in a family business. The PTC is also highly effective when consolidating the administration of various family trusts and the structuring of interests in private family mutual funds or private equity investments.
With trust settlors often reluctant to relinquish total control over — and involvement with — assets settled into trust, where tax considerations permit and provided the PTC is administered properly, a settlor and his or her family may retain a material degree of control and involvement without prejudicing the validity of the subject trusts. The use of a PTC can also provide a framework within which a settlor, family members and even certain key employees who have a close working knowledge of the family’s particular business, might be appointed as a director of the PTC and participate in the various fiduciary decision-making processes. The trustee (through the board of the PTC) can, therefore, remain highly knowledgeable of and sensitive to a family’s circumstances, the inclusive arrangement fostering greater familiarity. Naturally, when undertaking the responsibility of acting as directors of the PTC, all relevant individuals shall be obliged to fulfil the legal obligations associated with such a role but the composition of the board should allow commercial decisions to be made swiftly.
Recognised by most as a key to preserving wealth across generations, the education of beneficiaries can be comprehensively undertaken within the forum of a PTC arrangement. The board can form advisory and sub-committees, inviting various family members to sit on these committees in order that they might become familiar with the management of the family’s financial assets and, where appropriate, contribute to deliberations underlying the exercise of the trustee’s dispositive and other powers.
Owning a PTC
Ownership of the issued shares in the PTC is an important consideration for a client and his or her advisers. The particular dynamics and tax situation of the client family will strongly influence any thinking in this regard, but decisions will still have to be made relating to the succession of the shares and whether, perhaps, different classes of shares should be created. While an entrepreneurial patriarch might want to take the issued shares in his own name or in the name of a nominee, this may give rise to unfavourable tax consequences and even compromise the degree of confidentiality provided by the structure. Further concerns might also exist among family members not included as shareholders themselves. For these and several other reasons, the common alternative ownership arrangement involves the use of a Jersey (non-charitable) purpose trust, with the corporate trustee engaged to administer the PTC usually also providing trustee services to the purpose trust in the ordinary course of its fiduciary services business.
Creating a PTC
The Jersey PTC, treated as non-resident in the island for tax purposes as an ‘exempt’ company, can normally be incorporated within five business days of the delivery of the application for its incorporation. There is no prescribed minimum where the capitalisation of a
For example, it is now permissible under the Companies (
The number of trusts that might be included in a PTC structure should not adversely impact the fees associated with its administration, as no traditional minimum responsibility charges should apply. The corporate trustee will likely fulfil the majority of the necessary administrative functions having negotiated a suitable time-based or fixed fee for the work it is to undertake. It is not, however, bearing the same degree of fiduciary risk such as that incumbent upon it following its appointment as an independent professional trustee. The inclusion of higher risk commercial operating assets within the PTC’s investment portfolio, meanwhile, is also accepted as a further benefit of creating such a structure. Difficulties are often encountered in this respect when it is proposed such assets might be included within a trust managed and controlled entirely by a corporate trustee.
Where it has been agreed that a Jersey PTC shall provide an appropriate mechanism within which the needs and objectives of the client and his or her family might be met, therefore, the incorporation of the PTC can readily be accomplished. Where substantial family assets are involved, the various benefits associated with such an arrangement are worthy of consideration.
With its customised flexibility, the Jersey PTC continues to represent a useful structuring option in the arena of high net worth private client wealth planning.
Garry Toy is director of private client fiduciary services at Royal Bank of Canada Trust Company (International) Limited.