ISOLAS has a long history in the provision of trust creation and management services in association with Fiduciary Trust Limited, part of the Fiduciary Management group of companies.
Trust legislation in Gibraltar is generally based on the trust law of the United Kingdom; thus Gibraltar recognises and gives full effect to the concept of the trust.
The Trustee Act of Gibraltar is the main governing Act; it is based on the Trustee Act 1893 of the United Kingdom, with amendments being made from time to time. In 1989 Gibraltar introduced the Trusts (Recognition) Act.
This applies to Gibraltar the provisions of the Convention on the Law Applicable to Trusts and their Recognition agreed at The Hague on 20 October 1984.
An amendment to Gibraltar’s Bankruptcy Act made in 1990 now enables asset protection trusts to be established in Gibraltar. The effect is that certain dispositions shall not be voidable at the instance of, or upon application by, any creditor or settlor, provided certain conditions, including the solvency of the settlor are complied with.
Gibraltar’s Registered Trusts Act 1999 allows a trust to be registered with the Registrar of Trusts at Companies House. The Registrar will keep an index of trusts so registered. No information will be maintained at Companies House. Registration is voluntary.
The Trustees Act creates the statutory framework, outlining the powers and duties of trustees and setting out provisions in relation to the investment of trust funds and the powers of the court (mostly in relation to the appointment of new trustees and vesting orders).
The statutory framework generally serves to provide guidance in respect of matters which have not been dealt with in the Trust Deed.
Asset Protection Trusts ('APT')
An amendment made in 1990 to Gibraltar’s Bankruptcy Act enables asset protection trusts to be established in Gibraltar. The Bankruptcy Act is based on the Bankruptcy Act 1914 of the United Kingdom, which renders void any trusts fraudulently intended to avoid obligations in the future.
The amendment to the Bankruptcy Act means that certain dispositions are not voidable at the instance of, or upon an application by, any creditor of the settlor provided certain conditions are complied with.
The settlement of assets will not be voidable by any creditor of the settlor provided that:
(a) the settlor is an individual;
(b) the settlor is not insolvent at the date of the settlement; and
(c) the settlor does not become insolvent in consequence of the settlement before the settlement is registered.
Gibraltar introduced asset protection trust legislation within the provisions of the bankruptcy law, rather than within fraudulent conveyancing laws, so that, for a creditor to commence an action in Gibraltar, he must commence an action under the bankruptcy law – and the standard of intent to defraud that must be met is much narrower and more difficult for a creditor to satisfy.
In order to commence an action under the bankruptcy law, it must be demonstrated that the settlor is resident or domiciled in Gibraltar or that an ‘act of bankruptcy’ has been committed in Gibraltar.
To find out more about our trust creation and management services please contact one of our team today:
Private Trust Company
Until recently, a private trust company could be established in Gibraltar and any limited company could act as a trustee provided that it was not carrying on a licensable activity. Typically, however, such a company would notify the Financial Services Commission that it had been formed to administer a trust set up by one or more individuals, that that was its sole purpose, and that it would not receive remuneration for providing trusteeship.
Whilst that mechanism provided a simple and cost-effective process for establishing a private trust company, the lack of a formal registration procedure sometimes prevented clients and intermediaries from recommending Gibraltar as an appropriate jurisdiction for the incorporation of such a company given that there was no legislative or regulatory framework from within which the private trust company could be formally recognised and could operate.
The introduction in July this year of legislation governing the operation of private trust companies provides greater legislative protection and certainty and encourages potential clients to consider Gibraltar as an attractive jurisdiction in which to establish a private trust company structure. Gibraltar was at a disadvantage compared to other financial centres which had made specific provisions for private trust companies in the legislation. The approach now is that a mandatory registration regime would have been unfairly and unnecessarily onerous especially on private trust companies in respect of which the cost of registration and renewal might have been disproportionate to the size of the trust fund. The local legislation creates a voluntary system of registration which provides for those who choose to submit to a legal framework within which a private company can be officially established and operated.
The emergence of purpose trusts as a vehicle for holding assets on trust to carry out specific purposes is a trend that Gibraltar, as a jurisdiction, in recent months, also recognised by legislating to that specific end. The Purpose Trusts Act 2015 brought Gibraltar into line with a number of other jurisdictions including Jersey, Guernsey and the Cayman Islands to provide for the creation and enforcement of trusts whereby the trustees hold property on trust to carry out a specific purpose which is not of a charitable nature. Under the new legislation, a purpose trust must be established for purposes that are capable of being carried out and are sufficiently certain to be capable of being carried out. It is also a requirement that at least one trustee of a purpose trust must be a licensed trustee. The legislation also sets up particular powers that a trustee will need in the context of a purpose trust, such as, the discretion to formulate the means by which to give effect to the purpose trust. In common with other jurisdictions that had adopted purpose trust legislation the bill also provides for the disapplication of the rule against perpetuities.
Trusts (Private International Law) Act 2015
The trusts industry worldwide is a large, mature and increasingly competitive one. In this marketplace, many jurisdictions have enacted so-called firewall legislation designed to attract substantial investment and deposited trust funds, by providing a secure environment in which local law trusts are free from attack by foreign laws and foreign courts.
As explained by the Minister for Financial Services at the time of the passing of the legislation, typically, firewall legislation does two things. Firstly, it sets out rules that limit the circumstances under which any foreign law can affect a local law trust; and secondly, it prevents the enforcement of foreign judgements that undermine these principles. The passing of this legislation, which sets out the conditions under which Gibraltar courts will have jurisdiction over trusts and, further, the extent to which foreign law will have an impact on local law trusts (in the specific and peculiar contexts of Gibraltar’s membership of the EU, the requirement of recognition of judgement and the applications of the Hague Convention), is considered a milestone in the plan to strengthen Gibraltar as a finance centre.