Isle of Man Foundations for Offshore Planning – An Introduction (Section 1 of 3) – Corporate / Commercial Law


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Worldwide: Isle of Man Foundations for Offshore Planning – An Introduction (Article 1 of 3)

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While Isle of Man trusts and Isle of Man limited liability companies have been the mainstays of offshore wealth planning for decades, the relatively recent introduction of the Isle of Man Foundation in 2011 provided advisors with a mix of functionality owned by legal entities and fiduciary vehicles, to pursue the goals of their clients.

Having been the preferred choice of our civil law counterparts for centuries, a Foundation offers objectivity and operational structure without compromising flexibility, in terms of discretion.

This is the first in a three-part series we’ve produced on Foundations, through to a webinar led by experts who can help you meet the needs of your clients. In this introductory article, we’ll cover the basics of Foundations, to help you or refresh your understanding:

What is an Isle of Man foundation?

An Isle of Man foundation is established and regulated under the
Foundation Law 2011, and registered in the Isle of Man. The law added the civil law entity to the panoply of advisers seeking to provide offshore services from a well-established international financial center.

The blended approach offered by foundations is unique, with characteristics that set them apart from more familiar structures such as limited liability companies or trusts.

The next article in this series will dive into the technical details of every aspect of this vehicle, but for now we’ve just provided a quick rundown of the building blocks you need to know:

  • Founder – The person who initially instructed the establishment and accepted the objects of the foundation.
  • Dedicators – Anyone other than the Founder who devotes assets to the Foundation.
  • Official documents – There are two official documents, the Foundation Instrument and the Foundation Regulations, which specify the details relating to the administration of the foundation and the rights and obligations of the persons appointed under the rules.
  • Objects – Specified in the Foundation Instrument, these detail the purpose and specific objectives of the Foundation.
  • advice – Composed of one or more members, the Council ensures the administration of the Foundation in accordance with the Official Documents.
  • Registered agent – All foundations must have a registered agent approved by the Isle of Man Financial Services Authority. You can find more information about Isle of Man registered agents here.
  • Executor – If the object of a foundation is to achieve a non-charitable purpose, the foundation must have an executor. This person ensures that the Council functions in accordance with the Official Documents and in the best interest of the Foundation.
  • Beneficiary – The part that can benefit from the Foundation.

Foundation vs trust vs limited liability company

The table below compares and contrasts the characteristics of foundations, trusts and limited liability companies in the Isle of Man and can be helpful in determining the most suitable vehicle to achieve desired goals.

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Although Foundations cannot engage in direct trade, other than trade relating to the Objects, they may have subsidiaries which in turn can be used for commercial transactions.

As you can see in the table, a foundation and a trust can be used in very similar circumstances, for the benefit of successive generations or charitable initiatives. The main differences concern flexibility in operational changes (e.g. appointment and dismissal of Board members / Directors and / or editing of constitutional documents), accountability of managers (i.e. legal action is against the Foundation rather than its Board members), perpetuity and liquidation – each offering discretion or choice in certain areas, which may make it better suited to client needs.

Ultimately, a Foundation offers a living structure that can be responsive and adaptable to changing needs, where provided for in Official Documents. Something that can be more limiting when using a trust structure.

Of course, foundations can also be used in conjunction with trusts to provide some of the benefits of a trust combined with those of a legal person – for example, diversified interests, to act as a trustee, and to provide oversight and guidance. additional transparency; which could make institutional transactions more attractive.

What is an Isle of Man foundation for?

A Foundation owns and owns assets, usually provided for specific purposes; for example, for the benefit of family members or philanthropic efforts. With this in mind, the uses of the Isle of Man foundations may include:

  • A familiar alternative to trusts for clients in civil law jurisdictions;
  • A legal entity for succession planning or philanthropic activities;
  • A wealth planning vehicle for holding assets (eg, shares of private companies, yachts, airplanes);
  • To be used in conjunction with a trust to provide additional structure and oversight;

Support the creation and administration of foundations

At Dixcart, we offer a full range of offshore services to advisors and their clients when considering setting up a foundation on the Isle of Man. Our in-house experts are professionally qualified, with rich experience; this means that we are well positioned to support and take responsibility for different roles, including acting as a registered agent, board member or executor as well as providing expert advice where appropriate.

From pre-application planning and advice to the day-to-day administration of the Foundation, we can support your goals every step of the way.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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