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Purpose Trusts & PTCs

A purpose trust is a particular type of trust which, unlike a conventional trust, can be formed to hold assets for a purpose without conferring a benefit on any person. An example of such a purpose is to hold shares in a company. An enforcer is appointed to oversee the activities of the trustees.

Purpose Trusts are currently used, among other things, in conjunction with asset financing transactions and securitisations.

They are also used to hold the shares in a private trust company (PTC) structure, where confidentiality and control issues are important. The advantage of using a purpose trust in such a scenario is that there are no registration or disclosure requirements of such trusts under Guernsey law. Therefore the ownership of the PTC will be confidential, and the shares in the PTC will be immune from an attack on the Settlor.

A PTC is a privately owned company that acts as trustee, usually exclusively for a wealthy family trust or group of trusts. The board of the PTC can be populated with a mixture of professional advisers and a client's family members. Often PTCs are at the heart of The Family Office. They have a number of popular advantages:

  • They provide a means by which a Settlor, or his family, can retain a greater degree of control over their trust affairs without compromising the validity of the trust(s). The Board of the PTC will have a heightened knowledge of the family's business and financial affairs and be sensitive to the range of those interests, whilst also being empathetic to the needs of the beneficiaries, and having an intimate knowledge of the Settlor's wishes. All of this should allow them to deal with sensitive family issues more freely and often with greater speed and flexibility;
  • Having a PTC as trustee of family trusts will also avoid the need for future changes in the trusteeship;
  • Professional trustees are often reluctant to take ownership of assets or participate in ventures where substantial risks may be present, and a PTC (due to the composition of the Board) can enable riskier investments to be included in the trust fund, (although the PTC will still have the usual trustee obligations).

The administration/management of the PTC and underlying trusts will normally be carried out by a licensed administrator in Guernsey, with a management agreement in place between the PTC and the administrator setting out the terms of such agreement. The PTC will normally need to be licensed by the GFSC, and this is a relatively simple process handled by the administrator.

Hansard Trust in Guernsey can provide all the services associated with the set-up and ongoing administration of a PTC structure.

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