Foundations have existed in parts of Europe since the Middle Ages, when they were originally only used for charitable or religious purposes. In modern times, foundations have increasingly been used for wealth management purposes, as pioneered in civil law jurisdictions such as Liechtenstein and Austria. In recent years, a number of common law jurisdictions have introduced foundation legislation, and the popularity of foundations continues to increase.
Like a company, a foundation is a separate legal entity; in contrast to a trust, which may only operate and own property through a trustee. Once the founder of a foundation transfers assets to the foundation, those assets become the sole property of the foundation. As neither the founder nor beneficiaries of a foundation have any ownership interest in foundation assets and as management and control of a foundation is with the foundation’s council (which may be located in a low tax or nil tax jurisdiction), a foundation is a highly useful entity for tax planning, asset protection, wealth management and “outside estate” succession planning.
Seychelles foundations – Features & Benefits
- Value for money – Low annual Government registration fee of US$200
- Nil Seychelles taxation – A foundation is exempt from Seychelles taxation on its income and is exempt from Seychelles withholding tax and stamp duty (except in relation to any permitted dealings in Seychelles real estate).
- Fast registrations and name approvals
- Establishment – A foundation is established by a foundation charter and registered with the Registrar (Seychelles International Business Authority). On registration, a foundation is a separate legal entity.
- Minimum initial assets – The assets of a foundation shall be of a value of not less than One United States dollar (US$1) or the equivalent in any other convertible currency. The initial assets may be endowed by the founder after registration of a foundation.
- Privacy – While a foundation’s charter must be signed by or on behalf of the founder, use of a nominee founder is permissible. Although the charter is required to be filed at the Government Registry, there is no requirement to file a foundation’s regulations. It is not required to file the names of the foundation’s beneficiaries and any protector, in that such information may be contained in or be determinable under the foundation’s regulations.
- Foundation Council – The Council manages the foundation and is responsible for the administration and distribution of the foundation’s assets and the carrying out the foundation’s objects. A foundation must have a minimum of 1 councilor, who may be a natural person or corporate entity. A founder may, but is not required to, be a councilor, but cannot be a sole councilor.
- Succession & Tax planning – Foundations are a versatile and robust tax and succession planning tool, as the founder and beneficiaries of a foundation have no ownership interest in foundation assets and as management and control of a foundation is vested in the foundation council (which may be located offshore). Foundation assets do not become the assets of a beneficiary unless actually distributed in accordance with the provisions of the foundation’s charter or regulations. The benefit of foundation assets can be passed on from one generation to the next, outside of the founder’s personal estate.
- Ease of administration - No annual audit requirement; no requirement to file financial accounts or annual return in Seychelles; and no annual meeting requirement in respect the councilors, the founder/s or any protector.
- Strong asset protection – Foundation assets are the property of the foundation only, i.e. neither the founder nor the beneficiaries have any ownership interest in foundation assets. Seychelles law contains specific exclusion of foreign forced-heir ship laws and comprehensive provisions protecting dispositions to a foundation from challenge from creditors of the founder; and claims by creditors of the founder are statute-barred after 2 years from the date of the transfer of the relevant property to the foundation.
- Founder’s reserve powers – A founder may reserve, in the foundation charter or regulations, to himself or for other persons, various rights – for example, the right to appoint or remove councilors, the right to appoint or remove protectors and the right to add or exclude beneficiaries.
- Protector – The appointment of a protector is optional. Typically, where appointed, a protector is given limited veto power in that the protector’s prior approval will be required in respect of certain foundation decisions, such as the addition or removal of a beneficiary or councilor. A founder, beneficiary or councilor of a foundation may be appointed as a protector, but a sole councilor or a sole beneficiary may not act as a protector.