The decision as to where to establish an offshore trust can only be made based on the specific requirements of the client. It is not possible to make an assertion that one jurisdiction is always more appropriate than another. This note does not therefore attempt to guide the reader to any one jurisdiction over another. Instead it highlights some of the features which Cayman, BVI and Jersey have in common and where they are different. It also describes certain of the legal requirements in respect of trusts in each jurisdiction and examines some of the factors to consider when deciding which jurisdiction to use.
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BRITISH VIRGIN ISLANDS |
CAYMAN ISLANDS |
JERSEY |
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Principal legislation |
Trustee Act (as amended in 1993 and 2003). Virgin Islands Special Trusts Act, 2003 ("VISTA"). Recognition of Trusts Act (Overseas Territories) Order 1987. Trustees' Relief Act. |
Trusts Law (2007 Revision). Fraudulent Dispositions Law (1996 Revision). Perpetuities Law (1999 Revision). Banks and Trust Companies Law (2007 Revision). |
Trusts (Jersey) Law 1984 (as amended in 1989, 1991, 1996 and 2006). |
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Application of principles of English common law and equity |
Yes, subject to modification by BVI statute. |
Yes, subject to modification by Cayman Islands statute. |
Not directly, but many of these principles are reflected by Jersey statute and in Jersey customary law and where the statutory provisions are silent or the issue is absent in customary law the courts look to English and other Commonwealth cases for guidance. |
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Status of the jurisdiction and court system |
The BVI is a British Overseas Territory which is self-governing and part of the Commonwealth. The head of state is HM the Queen of England and the UK is responsible for the appointment of the BVI's governor, external affairs, internal security and the administration of the courts. The BVI is part of the Eastern Caribbean Court system which was founded in 1967. |
The Cayman Islands is a British Overseas Territory which is self-governing and part of the Commonwealth. The head of state is HM the Queen of England and the UK is responsible for the appointment of the Cayman Islands' governor, national security and the administration of the courts. |
Jersey is a UK Crown Dependency which is self-governing and part of the Commonwealth. The head of state is HM the Queen of England and the UK is responsible for the appointment of Jersey's governor, and the senior members of the judiciary such as the Bailiff and deputy Bailiff. |
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The Privy Council in London is the final court of appeal. |
The Cayman Islands has its own independent court system. The Privy Council in London is the final court of appeal. |
Jersey has its own independent court system. The Privy Council in London is the final court of appeal. |
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Government regulatory approvals |
None (except in the case of certain unit trusts). |
None (except in the case of certain unit trusts). |
None (except in the case of certain unit trusts). |
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Government fees |
None. |
None (except CI$500.00 per annum if voluntarily registered as an exempted trust and in the case of certain unit trusts). |
None. |
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Types of trusts |
Discretionary trust. Life interest trust. Charitable purpose trust. Non-charitable purpose trust (see below). Bare trust (nomineeship). Unit trust. Pension trust. Employee benefit trust. Most of the above forms of trust can be set up as a VISTA trust (see below) or as settlor-reserved power trust. |
Discretionary trust. Life interest trust. Charitable purpose trust. STAR trust (see below). Bare trust (nomineeship). Unit trust. Pension trust. Employee benefit trust. Exempted trust (see below). Most of the above forms of trust can be set up as a settlor-reserved power trust (see below) or an asset protection trust (see below). |
Discretionary trust. Life interest trust. Charitable purpose trust. Non-charitable purpose trust (see below). Bare trust (nomineeship). Unit trust. Pension trust. Employee benefit trust. Most of the above forms of trust can be set up as a settlor-reserved power trust (see below) or an asset protection trust (see below). |
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Timing |
A BVI trust is capable of being established within a few days, assuming that AML requirements are satisfied. |
A Cayman Islands trust is capable of being established within a few days, assuming that AML requirements are satisfied. |
A Jersey trust is capable of being established within a few days, assuming that AML requirements are satisfied. |
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Trust duty |
Trust duty of US$100.00 is payable on settlements and declarations of trust by affixing revenue stamps to the document which must be cancelled by an 'authorised person' (which includes the settlor, a trustee or a BVI lawyer), but confidentiality is maintained since the payment of the duty does not involve the submission of the document to the BVI authorities. Bare trusts and charitable trusts are exempt |
Stamp duty of CI$40.00 on settlement and declaration of trust but confidentiality is maintained since the payment of duty does not involve the submission of the document to the Cayman Islands authorities. |
None. |
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Requirements for trust to have local assets or to be administered locally |
None. |
None (except in the case of certain unit trusts). |
None (except in the case of certain unit trusts). |
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Filing requirements and confidentiality |
Except in the rare case of certain unit trusts which are 'public funds' and thus need to be registered in accordance with the requirements of the Mutual Funds Act, 1996 (as amended), there are no public filing requirements for trusts and trust instruments are confidential documents. The registered agent of a company which is an exempt private trust company (see below) must retain copies of the trust instrument and other essential records at their offices in the BVI. There is no requirement for the regulatory authorities to be provided with these or for them to be filed publicly. |
Except in the case of certain unit trusts which are regulated mutual funds under the Mutual Funds Law (2007 Revision) and in the case of exempted trusts (in respect of which documents lodged are not available for public inspection), there are no public filing requirements for trusts and trust instruments are confidential documents The Confidential Relationship (Preservation) Law (1995 Revision) ('CRPL') makes it a criminal offence to divulge or attempt, offer or threaten to divulge certain confidential information. 'Confidential information' is defined broadly and includes information concerning any property which the recipient thereof is not, otherwise than in the normal course of business, authorised by the principal to divulge. |
Except in the case of certain unit trusts which are regulated Control of Borrowing (Jersey) Law 1947 or the Collective Investment Funds (Jersey) Law 1988 and thus need to be registered in accordance with the requirements of those laws there are no public filing requirements for trusts and trust instruments are confidential documents. An exempt private trust company (see below) must be administered by a person who is licensed to carry out trust company business under Financial Services (Jersey) Law 1998 but there is no requirement for the regulatory authorities to be provided with the trust instrument or other essential records of the trust or for these documents to be filed publicly. |
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Taxation |
Income tax is zero-rated in the BVI and there are no capital or inheritance taxes in the BVI. Specific exemptions from taxation are also contained in the Trustee Act. |
No taxes in the nature of income tax, corporation tax, capital gains tax nor inheritance tax are payable in the Cayman Islands. If a Cayman Islands trust is registered as an exempted trust, the trustee is entitled to apply for an undertaking from the Governor of the Cayman Islands that it will be exempt from local tax (if any should be introduced) for up to 50 years. |
There are no capital or inheritance taxes in Jersey. Income tax is chargeable on persons who are resident or ordinarily resident in Jersey. In the normal trust situation, ie with settlor, life tenants and beneficiaries all being non-Jersey resident, full exemption from Jersey taxation is given to foreign income and Jersey bank interest, by concession. This exemption is automatic, and does not need to be applied for. |
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Trustees |
Minimum of one trustee (corporate or individual). Subject to special requirements for VISTA and non-charitable purpose trusts, trustees can be licensed BVI professional trustees, BVI exempt private trust companies, foreign corporate trustees or individuals (wherever resident). |
Minimum of one trustee (corporate or individual). Subject to special requirements for STAR trusts and certain types of unit trusts which are licensed mutual funds, trustees can be licensed Cayman Islands professional trustees, Cayman Islands private trust companies, foreign corporate trustees or individuals (wherever resident). |
Minimum of one trustee (corporate or individual). Subject to special requirements for certain types of unit trusts which are regulated Control of Borrowing (Jersey) Law 1947 or the Collective Investment Funds (Jersey) Law 1998, trustees can be licensed Jersey professional trustees, Jersey private trust companies, foreign corporate trustees or individuals (wherever resident). |
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Private trust companies permitted |
Yes. Under The Financial Services (Exemptions) Regulations, 2007. See Walkers' memo: Regulations Enabling Private Trust Companies to be Established in the BVI. |
Yes. Under the Banks and Trust Companies Law (2007 Revision) and the Private Trust Company Regulations 2008. See Walkers' memo: Private Trust Companies and Restricted Trust Licence Companies. |
Yes. Under the Financial Services (Trust Company Business (Exemptions)) (Jersey) Order 2000. See Walkers' memo: Private Trust Companies in Jersey. |
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Regulations of professional trustees |
Yes. By the BVI's Financial Services Commission. |
Yes. By the Cayman Islands Monetary Authority. |
Yes. By Jersey's Financial Services Commission. |
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Protectors permitted |
Yes. This is made clear by BVI statute. |
Yes. |
Yes. |
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Application of the relevant provisions of the Hague Trusts Convention |
Most of the provisions of the Hague Trusts Convention have been extended to the BVI by statutory instrument and many of these are reinforced by BVI statutory provisions dealing with conflict of laws |
The Hague Trusts Conventions has not been extended to the Cayman Islands. |
The provisions of the Hague Trusts Convention have been extended to Jersey and many of these are reinforced by the Trusts (Jersey) Law. |
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Anti-forced heirship provisions and provisions preventing judgments based on such provisions from being enforced against trusts |
The Trustee Act contains robust, comprehensive and carefully crafted provisions protecting most BVI trusts (and dispositions to their trustees) from 'forced heirship' claims. These also prevent foreign judgments based on such claims from being recognised or enforced in the BVI. |
The Trusts Law (2007 Revision) contains robust, comprehensive and carefully crafted provisions protecting most Cayman Islands trusts (and dispositions to their trustees) from 'forced heirship' claims. These also prevent foreign judgments based on such claims from being recognised or enforced in the Cayman Islands. |
The Trusts (Jersey) Law now contains robust, comprehensive and carefully crafted provisions protecting most Jersey trusts (and dispositions to their trustees) from 'forced heirship' claims. These also prevent foreign judgments based on such claims from being recognised or enforced in Jersey. These provisions may not apply to trusts set up by Jersey domiciliaries. |
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Non-charitable purpose trusts permitted |
Yes, provided, inter alia, that the purpose is specific, reasonable and possible, at least one trustee is a 'designated trustee' (such as a licensed BVI trustee), and an enforcer is appointed. See Walkers' memo: Non-Charitable Purpose Trusts in the BVI. |
Yes, under the Special Trust Alternative Regime, commonly referred to as the STAR law, set out in Part VIII of The Trusts Law (2007 Revision). The objects of a STAR trust or power may be persons or purposes or both. The persons or purposes may be of any number or kind, whether charitable or non-charitable, as long as the purposes are lawful and not contrary to public policy. A STAR trust must have at least one trustee that is a trust company licensed, or a private trust company registered, in the Cayman Islands. See Walkers' memo: STAR Trusts |
Yes, by reason of Article 12 of the Trusts (Jersey) Law provided that the trust instrument provides for the appointment of an enforcer to enforce the trust in relation to its non-charitable purposes. The objects of a purpose trust or power may be persons or purposes or both. The persons or purposes may be of any number or kind, whether charitable or non-charitable, as long as the purposes are lawful, not contrary to public policy or so uncertain as to render performance impossible. |
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Settlor reserved power trusts permitted |
Yes. These are permitted as a result of section 86 of the Trustee Act and VISTA trusts are also frequently set up to reserve managerial/administrative/investment powers to the settlor as director of an underlying company. |
Yes. The Trusts Law (2007 Revision) specifically provides that a wide range of powers can be reserved by the settlor of a trust or granted to others without invalidating the trust. See Walkers' memo: Reserved Powers Trusts. |
Yes. Article 9 of the Trusts (Jersey) Law specifically provides that a wide range of powers can be reserved by the settlor of a trust or granted to others without invalidating the trust. |
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Special legislative provisions designed to protect trusts and transfers to their trustees from creditors' claims |
No. |
Yes. Under the Fraudulent Dispositions Law (1996 Revision) a disposition made at an undervalue (such as a disposition to trustees) is only subject to the claims of a creditor if the creditor can show an intent wilfully to defraud and then only for up to six years from the date of transfer. See Walkers' memo: Asset Protection Trusts. |
No. |
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Special legislative provisions designed to protect third parties such as lenders who deal with trustees |
Yes. Fairly sophisticated provisions which relate to trustees which deal with third parties are contained in the Trustee Act. Some of these provisions will only apply if the trust instrument so specifies. See Walkers' memo: Trustees who deal with Lenders and other Third Parties. |
No but, following English principles, a third party may have recourse to the trust fund by way of 'subrogation' to the trustee's right to reimbursement (where such right exists). |
Yes. Provisions which relate to trustees which deal with third parties are contained in the Trusts (Jersey) Law and provide that persons paying or lending money to trustees need not consider the propriety of the transaction or the application of the money. |
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Special legislative provisions specially designed to cater for situations in which trust assets comprise shareholdings in controlled companies |
VISTA sets up a special alternative trust regime to cater for the succession to shares in controlled companies, so that these can be run by their directors free from trustee intervention and the trustee will be exonerated from liability for the consequences of not intervening eg in investment decisions. See Walkers' memo: VISTA Trust Summary. |
No, but Cayman Islands trusts commonly include an 'anti-Bartlett' provision and STAR trusts can be established with a purpose specifically to hold the shares of a controlled company with no obligation on the part of the trustees to intervene in its management. |
No. But Jersey trusts commonly include an 'anti-Bartlett' provision and purpose trusts can be established with a purpose specifically to hold the shares of a controlled company with no obligation on the part of the trustees to intervene in its management. |
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Perpetuity period for beneficiary trusts |
100 years, plus a 'wait and see' rule whereby a disposition or power will only fail when it actually takes effect outside the perpetuity period. A trust which benefits persons can now be set up as non-charitable purpose trust which may exist in perpetuity. |
150 years, plus a 'wait and see' rule whereby a disposition or power will only fail when it actually takes effect outside the perpetuity period. Exception for STAR trusts which may exist in perpetuity |
Jersey trusts may exist in perpetuity. |
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Other features of the jurisdiction's trust laws |
Clear provisions as to the circumstances under which the courts of BVI have jurisdictions over trusts. Provisions relating to the construction of express powers to vary trusts. Provisions extending the circumstances in which the court may vary trusts on behalf of minor, unborn or unascertained beneficiaries and provisions enabling trust instruments to appoint persons to approve such variations. Cy-près provisions. Provisions relating to 'illusory appointments'. Provisions enabling managing trustees to be appointed. |
Provisions enabling trusts to be registered as exempted trusts and for trust documents to be lodged with the Registrar of Trusts. |
Clear provisions as to the circumstances under which the courts of Jersey have jurisdictions over trusts. Provisions extending the circumstances in which the court may vary trusts on behalf of minor, unborn or unascertained beneficiaries. Cy-près type provisions relating to both charitable and non-charitable purpose trusts. Provisions relating to the standard of trustees' duties. Provisions relating to the delegation of the trustees' duties to managers and other professional advisers. |
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Cayman
Islands London Jersey |
British Virgin
Islands Hong Kong Dubai |
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.