Since their inception on 1st January 2012, Isle of Man Foundations have proven to be a popular and efficient way for clients to manage assets, in particular with regard to succession planning.
Why?
Something of a ‘Hybrid’ between a trust and a company, a Foundation is an independent self-governing legal entity which can be used to hold assets and enter into transactions in its own name.
Like a company it has limited liability, and like a trust it can be used to benefit successive generations of family members.
Unlike a company, Foundations have no shareholders or members. Instead, beneficiaries are those who take benefit from the distribution of foundation assets only. Unlike with a Trust, Foundations are not restricted by a time period so could in theory continue in perpetuity.
But what about privacy?
Although the Foundation’s founding instrument is kept on public record, the rules are not, so details of beneficiaries and objects can be kept private. Likewise, individual beneficiaries do not have an interest in the foundation or its assets, which can greatly simplify their tax affairs.
What about the jargon?
Despite the differing terminology, the principles & parties involved with an Isle of Man Foundation are again very similar to that of a company or trust as outlined below:
- Founder – similar to the settlor of a trust, the founder is the person who establishes the foundation.
- Council - Similar to a board of directors or trustees, council members control and make decisions on behalf of the Foundation, in accordance with the Foundation instrument and its rules. Again similar to directors and corporate trustees, council decisions are taken by board resolutions.
- Enforcer - If the foundation is non-charitable, an enforcer is required to ensure the council carries out its functions in the manner expected. This is similar to the role of a trust protector. (Often the founder chooses to be the enforcer in order to keep an overview of council activities and have the ability to block and approve decisions.)
- Objects – the purpose of the foundation, i.e. what it is trying to achieve, be it charitable or otherwise.
- Instrument - Similar to a Company’s Memorandum & Articles of Association, the instrument is kept on public record and lists the name of the foundation, its objects & initial council members.
- Rules - Similar to details in a trust deed, the Rules of a Foundation set out the terms on which council members & registered agents can be appointed.
- Registered Agent - The Registered Agent is responsible for establishing the Foundation & providing its business address where copies of all statutory documentation are held. Peregrine Corporate Services holds the appropriate licences for the Financial Services Authority of the Isle of Man allowing us to offer Registered Agent facilities to clients.
What is the next step?
For further information regarding Isle of Man Foundations contact Jamie McKenna on +44 (0) 1624 626586 or by email at jmckenna@burleigh.co.im
Peregrine Corporate Services Limited is licensed by the Isle of Man Financial Services Authority.
