Despite their varying histories, all of these jurisdictions have incorporated the common law concept of the trust into their legal systems. While the basic features of the trust remain, there are some notable differences in how trusts can be structured. Some of these can be beneficial but equally others can be a potential banana skin. Richard Grasby, Head of Private Client and Trusts in Hong Kong, outlines some of these differences. Please note this is only a summary and specialist legal advice should be sought.
1. Maximum permitted duration1
Bermuda, Isle of Man, Jersey, Guernsey and the Seychelles do not impose a maximum permitted duration for a trust. In the Cayman Islands, for trusts which are neither “special” nor for charitable purposes the maximum duration is 150 years. For non-purpose trusts, the maximum permitted duration is 360 years in the BVI and 99 years in Mauritius.
2. Trusts for non-charitable purposes
All of the jurisdictions by their respective statutes have enabled trusts for non-charitable purposes, but in slightly different ways. The Cayman Islands has created a separate regime2 which allows trusts for purposes (charitable and non-charitable) and persons or any or all of them.
BVI, Mauritius, the Seychelles and the Isle of Man require a local trustee3 for a non-charitable purpose trust. Jersey, Guernsey and Bermuda do not require a local trustee.
As far as enforcement of such trusts is concerned, the requirements also vary. Bermuda does not require an enforcer – the other jurisdictions do.
In Mauritius, for a non-charitable purpose trust created by a Mauritian national, the appointment of the enforcer and any successor must be approved by the Financial Services Commission.
3. Need for registration
The Seychelles requires registration of a trustee appointment declaration in respect of a Seychelles trust.
4. Arbitration provisions
Guernsey is one of the few jurisdictions which has incorporated in its legislation how alternative dispute resolution processes may interact with trusts. While the provisions have had limited application to date, they are of interest.
5. Limit on trustee’s exoneration
Jersey, Guernsey and Mauritius laws state that nothing in the terms of a trust shall relieve, release or exonerate a trustee from liability for breach of trust arising from the trustee’s own fraud, wilful misconduct or gross negligence. In the other jurisdictions, the terms of a trust may (but do not have to) exonerate a trustee from liability for gross negligence4.
6. Special trusts
As mentioned in section 2, the Cayman Islands has a regime for “special” or “STAR” trusts and the BVI has a different form of special trust aka the VISTA5 trust. These are not two versions of the same concept (this is a common mistake).
VISTA is designed to govern the relationship between a trustee as shareholder of a BVI company and the company itself and allows the directors to manage the company with limited involvement of the trustee-shareholder. It is a popular structure in Asia and elsewhere.
7. Other local issues
One of the trustees of a Seychelles trust must be an approved trustee resident in the Seychelles.
In Mauritius, one of the trustees must be a qualified trustee resident in Mauritius.
8. Protector provisions
Mauritius and Seychelles laws contain detailed provisions relating to a protector. Interestingly, Mauritius legislation contains default powers which will be given to a protector unless otherwise provided in the trust deed.
Isle of Man, Bermuda and BVI laws mention protector only briefly although the Isle of Man does define a protector.
Cayman Islands, Jersey and Guernsey laws make no such references. Protectors are permitted by virtue of the common law and the extensive reservation of powers provisions.