WWW.ABACUS.GI GIBRALTAR Foundations Expert Wealth Management & Financial SolutionsExpert Wealth Management & Financial Solutions Abacus is an independent, privately owned group of companies, established in Gibraltar over 40 years ago. We provide comprehensive financial solutions and services to both private and corporate clients worldwide. Four decades of expertise in wealth management, corporate structuring, international pensions, tax, fund administration and accounting services help us create and deliver professional solutions that are simple, effective and bespoke. Clients that choose to work with us will benefit from a broad range of integrated services that will be personally selected to suit their needs and implemented to our highest service standards. Why a Gibraltar foundation? The Foundations Act 2017 is practical, modern, flexible and clear. It allows for quick and easy formation of Foundations and for their administration in an uncomplicated and transparent way. A Gibraltar Foundation is an effective and confidential way of planning the succession of assets. Clients considering which legal entity to use for the future administration and distribution of their wealth choose a Foundation because it allows for the exercise of a significant degree of control and influence by the Founder. Guardian provisions and separate categories of Enfranchised and Disenfranchised Beneficiaries (check our Glossary below) encourage prospective Founders to feel that their assets will be secure, protected and administered in accordance with their intentions. Foundations are exempt from all forms of taxation in Gibraltar if the beneficiaries are not resident in Gibraltar and there is no income accrued in and derived from Gibraltar. 2 THE ABACUS GROUPAdvantages Gibraltar Foundations are an excellent way for wealthy individuals and families to manage and distribute wealth for present and future generations. They may be created quickly and easily, requiring minimal filing procedures and organisation formalities. A Foundation has separate legal personality and, like a company, can exist indefinitely. It can act and contract in its own right, making it easy for counterparties, like banks and commercial partners, to understand and accept in the course of transactions. Like a company, everyone understands that they are dealing with an entity that is legally separate from the Foundation Council, the people who run it. Unlike companies, however, a Foundation does not have a share capital because they were not intended as commercial enterprises, so a Foundation does not have shareholders or owners to whom its Council is accountable. They are often used in preference to companies and trusts because they enjoy many of the same characteristics, management structures and asset protection benefits of both. The combination of these features makes them an attractive option, for those seeking asset protection and planning the future management and later distribution of their wealth. Finally, Foundations are confidential arrangements. Gibraltar law stipulates that certain minimum matters be disclosed in the Foundation Charter which is a matter of public record. However, the Charter need not disclose who the beneficiaries will be, the nature of the assets or the basis on which they are to be administered and distributed. WWW.ABACUS.GI 3 Gibraltar FoundationsA private Foundation is a legal entity which holds assets that are managed independently of the Founder for a specific purpose or for beneficiaries, by a Council. Foundations are used primarily as asset-holding entities. The Founder will gift assets to it for the benefit of themselves and others, such as family or for a wider class of beneficiaries. In Gibraltar, a Foundation is established by registration at Companies House, by or on behalf of the Founder, to hold, administer and distribute the Foundation’s assets, either for the benefit of beneficiaries, or for a purpose (such as for commercial or charitable reasons) according to the Foundation Charter, its Rules and Gibraltar law. The Foundation Council then manages and administers the assets in accordance with the Founder’s intentions, expressed in a private letter of wishes to the Council and with the Charter and Rules. It is a requirement that a Gibraltar- licenced service provider be appointed to the Council. Beneficiaries, whether named in the constitutional documents or selected at the discretion of the Council, have no legal interest in Foundation property or assets, unlike the equitable interest of trust beneficiaries in a trust fund. Endowments (gifts) made by the Founder are irrevocable as they then become the property of the Foundation as a separate legal person. A Guardian, a role akin to that of a Protector in a trust, may be appointed. The primary duty of a Guardian is to see that the Rules and Charter are complied with. The appointment of a Guardian is required when a corporation is the Founder, when a Disenfranchised Beneficiary (see Glossary below) is named, when there are no beneficiaries, when there is uncertainty regarding the beneficiaries or when the number of beneficiaries exceeds 50. Otherwise, the appointment is optional. 5 WWW.ABACUS.GI What is a foundation?Who can benefit from a foundation? Foundations can be used for a variety of reasons, including for personal, commercial or charitable purposes. They are often used for wealth protection, and estate and succession planning. A major difference between a Foundation and a trust is that the vast majority of trusts are established for the benefit of persons or classes of persons and rarely for a purpose, other than for charitable ones whereas Foundations have long been used for a range of different purposes including commercial ones. Foundations in Gibraltar may have Enfranchised Beneficiaries or Disenfranchised Beneficiaries or both. An Enfranchised Beneficiary is entitled by law to see and obtain a copy of the Charter and the Rules, and to accounts and records but is not entitled to know the reasons for or deliberations of the Councillors for their decisions. Disenfranchised Beneficiaries, on the other hand, do not enjoy any of these rights. This distinction can be useful for a Founder who wishes his or her wider family to have the potential to benefit from the Foundation, but also that only certain family members (or none at all) be entitled to information about the Foundation assets and the management of the Foundation itself. 14WWW.ABACUS.GI Foundations are particularly beneficial for clients in civil law countries where trusts are not recognised. They are also used because taxing authorities often “look through” a structure and may consider that the assets of a trust are the property of the trust’s settlor or its beneficiaries, and subject them directly to taxation. As a legal entity in its own right, a Foundation is recognised as being separate from the Founder and its beneficiaries. Trusts, however, may only act in the name of their trustees and not in their own right as they are not legal entities per se. Trusts can be difficult to understand technically, with the legal title to assets belonging to the trustees, but the beneficial interest lying with the beneficiaries. Foundations are similar to corporations and may be understood accordingly. REPUTATION, REGULATION AND CREDIBILITY ARE AT THE FOREFRONT OF GIBRALTAR’S PRIORITIES Why a foundation and not a trust? 78COUNCIL Foundations require a Council, which is the body that runs the Foundation and makes all the decisions, such as where to invest and how to allocate the assets of the Foundation. The Council has the power to delegate functions to officers it assigns, based on the terms of the Charter, and it has similar control over the Foundation as directors do over a company. CHARTER The Charter is the set of regulations that governs the Foundation. It must contain information such as the name and purpose of the Foundation, its registered office, information relating to the Founder, Beneficiaries (if any, although they do not need to be individually named), and may also (but does not have to) specify details of the initial assets or sums paid into the Foundation. The Charter is a matter of public record. FOUNDER A Founder is the person who has requested the establishment of the Foundation and who must endow it with its initial assets. The Founder does not have any automatic powers or control over the Foundation unless these are included in the Charter and Rules. The Founder will normally nominate the initial Council and may reserve certain powers, such as the power to terminate the Foundation. GUARDIAN The powers of a Guardian may be as described in the constitutional documents but are usually to oversee the conduct of the business of the Foundation by the Council and to act as an enforcer of the rights, such as they may be, of the Beneficiaries BENEFICIARY A Foundation can have one or more individuals as Beneficiary, who may benefit from the assets of the Foundation. However, unlike a trust, the persons appointed to the Council under the Rules of the Foundation do not have a fiduciary duty to the beneficiaries. An Enfranchised beneficiary may request access to a copy of the Foundation’s constitution, records, accounts and other information and may apply to make certain amendments to the Foundation, including its dissolution, whereas a Disenfranchised beneficiary has no such powers. LETTER OF WISHES Although not legally binding, the Founder may wish to provide a letter of wishes to express his intentions and offer useful guidance to the Council. This may be more relevant when the Founder is not on the Council and therefore not directly involved in the running of the Foundation. PROTECTOR A Protector can be appointed by a Foundation and its principal role is to ensure that the Council carries out its obligations as stated in the Charter. RULES The Rules shall prescribe the functions of the councillors; detail the procedures for the appointment, resignation and removal of councillors; detail the procedures for the appointment, resignation and removal of the Guardian; prescribe the manner in which property of the Foundation may be distributed, accumulated or applied; detail whether, and if so how, further property may be endowed upon the Foundation; and prescribe the manner in which property of the Foundation shall be distributed on a winding up of the Foundation. WWW.ABACUS.GI 9 Glossary of key termsNext >