A BVI VISTA Trust is a special type of trust where settlors can retain control over the management of their companies held by the trust.
The Virgin Islands Special Trusts Act (VISTA) of 2003 governs the formation and dissolution of a special trust where the settlor maintains control.
Foreigners can create a VISTA trust as the settlor, transfer ownership of their companies to the trust and still maintain control over their companies.
Why was the VISTA Act Needed?
General trust laws have what is known as the “prudent man of business” rule since the 19th century. This rule requires trustees to act prudently and with due care when managing trust assets. In addition to monitoring trust investments and their performances, trustees must use due diligence and act as if the investments were his/her own. In other words, trustees could be held liable to the beneficiaries by not acting prudently and with due diligence to make sure investments were performing profitably. An old English Court of Appeals case called Re Whiteley set forth the prudence and due diligence requirements upon trustees. This required trustees to become actively involved with trust assets.
Some settlors found it annoying that the trustee could interfere with a “family” business. This potential conflict caused most company owners to avoid placing them into a trust where the trustee must be actively involved under the “prudent man of business” rule.
The BVI enacted the VISTA Act to allow company owners to maintain current management and control of their companies placed into trusts. The law allows Trust Deeds to limit the powers of the trustee in regards to the management of the companies whose shares are owned by the trust.
Background
The British Virgin Islands (BVI) are a British Overseas Territory located near Puerto Rico in the Caribbean. Its political system is described as a parliamentary dependency under constitutional monarchy. BVI was granted its autonomy in 1967. However, its monarch is Britain’s Queen Elizabeth II.
BVI VISTA Trust Benefits
A BVI VISTA Trust has these benefits:
• Foreign Owner: The trust is created and controlled by the foreigner.
• No Taxes: Trusts are exempt from all taxes. However, beneficiaries who are U.S. taxpayers and all others residing in countries taxing global income must declare all income to their tax authorities.
• Privacy: The BVI does not require their trusts to be registered with the government. Therefore, settlor’s and beneficiaries names and their assets are never part of any public records.
• Control: Every company owned by the trust remains in the control of the settlor. The trustee has no powers to interfere with management of the companies owned by the trust.
• Perpetual: Trusts can be created with indefinite lifespans.
• English: As a British Overseas Territory, the official language in the BVI is English.
BVI VISTA Trust Name
Every trust must select a unique name which is not similar to other legal entities.
The name must include the word “Trust”.
Requirements
The VISTA law requires that the special trust acts as a holding company for the Settlor’s companies with the intention of:
• Holding all the company’s shares indefinitely; and
• Trustee will not intervene in the companies’ affairs or management.
With traditional trusts, the trustee acts as a “prudent investor” in regards to the held shares. Thus, the trustee may monitor the company’s administration and performance, and may become “active” in the company’s affairs. The trustee can sell shares to maximize the trust assets financial advantage or to spread the risks. This often brings the trustee into conflicts with “family” investment and trading companies.
VISTA eliminates these potential conflicts by allowing settlors to create VISTA trusts where the trustee has no duties which can interfere with the daily operations and management of the companies.
In essence, a company’s shares can be held indefinitely by a trust with no interference from the trustee. The company’s directors and managers will continue with their management duties. In addition, the trustee is prohibited from exercising any of the voting rights associated with the shares.
Powers of the Settlor
Upon establishing a VISTA trust, the settlor may set forth the rules appointing, removing, and compensating directors, managers and officers of the companies owned by the VISTA trust. For example, the settlor can name successor directors upon the settlor’s death (if the settlor is a director).
The settlor may require the trustee to transfer the shares of the companies to named beneficiaries upon the settlor’s death. This will avoid costly, time consuming probate procedures which having just a will creates. This may also avoid estate and inheritance taxes.
Qualifying Companies
The law only allows for BVI companies shares to be held by a VISTA trust and not shares of companies outside the BVI. However, if a BVI offshore company like an IBC holds the shares of foreign companies, the BVI company’s shares can be held by the VISTA trust giving the settlor total control of the companies while the VISTA trust acts as a shield (or extra layer) between the settlor and his/her companies.
Best Situations to Create a VISTA Trust
There are situations and times best suited for a VISTA trust to be formed. Such as:
• When the settlor faces the possibility of a financial crisis, but does not wish to relinquish control over his/her companies.
• Where unconventional investment portfolios exist and the settlor wishes to minimize the risks such as options, futures, or risky commercial enterprises.
• Management of off-balance sheet structures or securitizations.
• When the settlor desires that certain assets not to be disposed of upon his/her death like family companies or family heirlooms.
• Where trading companies are at risk and need to be separated from all other assets.
Trust Deed
The Trust Deed is the primary legal document describing the purpose for the trust, naming specific beneficiaries, appointing the trustee, describing the assets, and determining under what circumstances the beneficiaries may obtain title to the assets. Future beneficiaries (such as the current beneficiaries’’ heirs) will be set forth. The Trust Deed also sets forth how the trust will be managed and what compensation the trustee will receive, how the trustee may be removed and replaced, and all other important terms and conditions the trust will need to manage the assets. The lifespan of the trust will also be clearly stated.
Trustees
Natural persons who are citizens and residing in other countries may be appointed as a trustee in the BVI. In addition, licensed BVI private trust companies may be appointed as a trustee.
Beneficiaries
Like any other trust, the Trust Deed may name specific persons as beneficiaries who benefit from the trust’s assets and how and when they can have trust assets transferred to them. Trust are created to benefit the beneficiaries.
Registration
The BVI does not require trusts to be registered with the government. So, they will never be part of any public records.
Duration
The BVI sets a maximum of 100 years as the lifetime for their typical trusts. However, the VISTA Act allows their trusts to be perpetual (indefinite) if the Trust Deeds provides for it.
Taxation
BVI does not impose any type of taxes on their trusts.
However, beneficiaries who are U.S. taxpayers and all others residing in countries taxing worldwide income must disclose all income to their governments.
Form a BVI VISTA Trust Conclusion
A BVI VISTA Trust has these benefits: foreigners can create and control their trusts, no taxation, complete privacy, maintain control of trust held companies, option for perpetual lifespan, and English is their official language.
