Mauritius Private Foundation - as an alternative to Private Trust Companies

15 January 2016
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<span style="font-size:10.0pt; font-family:"Verdana","sans-serif";mso-bidi-font-family:Arial">Private trust company (PTC) is common in private wealth planning and is particularly attractive to ultrahigh net worth families wanting to consolidate their various family interests in a bespoke private structure to take advantage of the many benefits including close involvement in management, in-house specialist knowledge and expertise, continuity, flexibility and potential costs efficiency which PTC offer.</o:p>

<span style="font-size:10.0pt; font-family:"Verdana","sans-serif";mso-bidi-font-family:Arial">Usually a double structure of a company and a trust are used to establish the PTC arrangement. A typical PTC is a limited company established for the sole purpose of acting as trustee of a trust or group of related trusts. In order to avoid issues arising from ownership or control of the PTC, the shares in the PTC are usually 'orphaned'.</o:p>

<span style="font-size:10.0pt; font-family:"Verdana","sans-serif";mso-bidi-font-family:Arial">The Mauritius private foundation offers a rather neat alternative to the typical structure. A Mauritius private foundation can be used to replace both the PTC and the purpose trust, removing an additional layer of administration and cost.</o:p>

<span style="font-size:10.0pt; font-family:"Verdana","sans-serif";mso-bidi-font-family:Arial">A Mauritius private foundation can be established for the sole purpose of acting as a trustee. As a legal person of full corporate capacity, a foundation could act and exercise all the powers and would be bound to the obligations of a trustee in the same manner as any trustee which is a company. Contrary to a company, a foundation has no members or shareholders, and is therefore already an orphaned structure. As such there is no need to establish a trust or other holding vehicle to deal with issues arising from ownership and control.</o:p>

<span style="font-size:10.0pt; font-family:"Verdana","sans-serif";mso-bidi-font-family:Arial">The result is a simplified single structure consisting of a Mauritius private foundation.</o:p>

<span style="font-size:10.0pt; font-family:"Verdana","sans-serif";mso-bidi-font-family:Arial">In contrast to directors of companies who owe fiduciary duties to the company, council members owe a duty to the foundation to act in good faith in the exercise of their functions. As the foundation is established for a purpose guardian has a duty to the founder and the beneficiaries to act in good faith and also to enforce the constitution and the purpose. There is no requirement to have a Mauritius licensed fiduciary on the council or as guardian.</o:p>

<span style="font-size:10.0pt; font-family:"Verdana","sans-serif";mso-bidi-font-family:Arial">The Mauritius regulator normally evaluates each application of PTC on a case by case basis to ensure that the PTC does not offer its services to the public but these are limited to a particular family or connected group of persons. The regulator would normally require that the PTC be managed by a licensed management company and that the licensee is responsible for the administration of the PTC. </o:p>

<span style="font-size:10.0pt; font-family:"Verdana","sans-serif";mso-bidi-font-family:Arial">As such the regulator considers applications on a case by case basis and has discretion whether or not to grant a PTF an exemption from the requirement to hold a fiduciary license.</o:p>

<span style="font-size:10.0pt; line-height:115%;font-family:"Verdana","sans-serif";mso-ansi-language:EN-US">The setting up of a Mauritius private foundation is a useful alternative to the usual PTC as it will avoid the complexity and cost required by the double-decker structure of a company and a trust and hence the simplicity of a single entity with real personality. Besides, the foundation is exempted to have a fiduciary licence as compared to a PTC. Another important benefit of a Mauritius private foundation is lesser compliance and regulatory burden as well as tax efficiency.</o:p>