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International Business Corporations (“IBCs”) are the best known vehicles for conducting business abroad, The IBC structure is used to carry out a business enterprise and keep the owners business assets (and liabilities) separate from their own. As a separate entity, the IBC may even have its own tax identification number, and is considered to be a juridical person. It has all of the rights and responsibilities of a natural person under the law. The key point is that the assets and liabilities of the corporation are separate and distinct from those of the shareholders.
The Trust structure, however, is a vehicle usually only found in English speaking, common law countries. Structures such as the "Offshore Trust" or "Common Law Trust" or “Asset Protection Trust”, are used for offshore estate tax planning, or to protect assets from frivolous litigation.
The Trust structure was meant to be a safe haven, with the Trustee as the guardian of that safe haven. It was not meant to be a structure that would engage in business activities, as an IBC was meant to do. Like the ‘corporation’ however, under current interpretation, the Trust structure is a separate juridical person, thus separating the Owner from his Assets and protecting them under the law. The purpose being to keep the owner’s previously held assets safe and secure from violation or attachment.
Unfortunately, the outcome of recent court cases in the US suggest that some judges either do not understand the essence of what a Trust is, or simply have made decisions wherein they have disregarded the trust legislation altogether. This being the case, any Trust structure domiciled in the US, and some domiciled in other common law countries, can not be depended upon for the purpose intended. It may not necessarily be that the laws in these countries are lacking in respect to Trust structures. The danger is that the judges responsible for upholding those laws may interpret them in a way that results in no real protection being provided by the Trust structure.
Under the circumstances, Civil Law jurisdictions are now considered superior to Common Law jurisdictions, as domiciles for asset protection vehicles. For this reason, as a possible alternative to granting a Trust to protect assets, IMT suggests clients consider creating a Personal Interest Foundation (“PIF”), governed by law codified in Panama, a stable, democratic, Civil Law country.
The PIF vehicle is relatively new in Panama, becoming law in 1995, but the Foundation concept has existed in Liechtenstein for many years and although based upon the well established Liechtenstein legislation, the Panamanian structure has additional attributes. It is more flexible. In addition a Panama PIF can usually be created for around US$2,000.00, while the cost of a Liechtenstein Foundation may exceed US$10,000.00, while offering no advantage to justify the extra expense. In Panama, the annual PIF maintenance is similarly less costly than in Liechtenstein. The PIF can be created by one or more natural persons or by a juridical entity, such as a corporation. A foundation charter is created, which in essence, is similar to IBC incorporation, and like IBC incorporation documents, the foundation charter document is public record.
The Foundation is directed by a council of three or more members. The directors of the foundation are called Council Members. In addition, like a trust, a private protector may be named to have special oversight authority. The client may wish to take this position personally, especially if nominee council members are being used. The position of ‘Protector’ is not required, but it is advisable. The position of protector can be by private agreement between the Foundation and the person acting as protector, however there is extra protection for the client if the position is spelled out in the foundation charter.
A Foundation is generally used to hold cash, investments and shares in private, commercial, or holding companies, particularly with a view to Estate planning; in which area it is an eminently suitable vehicle.
Beneficiaries can validly include the Founder, family members, third parties or institutions. The Founder or client may generally retain full control over the assets held by the Foundation throughout his lifetime, and the Founder may at all times amend his disposition or dissolve the Foundation; the Foundation Council may be required by the Regulations to act only upon the First Beneficiary's instructions.
Protected Confidentiality
The Panamanian law on Foundations imposes strict sanctions on the members of the Foundation Council and associated bodies, as well as on any private or public employees, which may have any knowledge of the activities, transactions, or operations of a Foundation in case of any unwarranted breach of confidentiality. These penalties are without prejudice to any corresponding civil liability. This implies that, as a matter of law, all information regarding a Foundation is strictly the property of the Foundation itself, no unauthorized parties having access to same, and any knowledgeable persons being liable to sanctions should any information regarding the Foundation be unduly shown to others. Therefore, access to documentation regarding the Foundation is strictly limited, which may not be the case in Foundations established in other jurisdictions.
Source Courtesy : IMTS-INC.NET
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