Recent amendment to the Trust Law (2007 Revision) makes this vehicle more accessible for family structures.

The Cayman Islands is an Overseas Territory of the United Kingdom and the concept of common law and equity applies to its legal system unless superseded by its own legislation. The equitable principles of trust law are therefore applicable to the Islands and are also, to some extent, codified in the Trusts Law (2007 Revision).

The legislation itself has been remarkably progressive over the years and has addressed a number of useful issues that would otherwise be left to the common law principles of English law and the consequent uncertainties. For instance there is the issue of what powers can be reserved by the settlor of a trust without there being a risk that a Court would deem the arrangement to be an agency agreement as opposed to a trust. The Trusts (Amendment) (Immediate Effect and Reserved Powers) Law 1998, now embodied in the Trusts Law, states that there is a presumption that any trust document which is not expressed to be a will, testament or codicil will take immediate effect as a trust notwithstanding that the settlor has retained significant control over the trust assets and the powers of the trustee and in particular those powers as set out in the statute.

The challenges however, apart from drafting the appropriate document to meet the needs of the settlor of the Trust whilst ensuring that it cannot be challenged by third parties, can also be one of facilitating a settlor in a jurisdiction where the principles of equity are unfathomable to the settlor (or his would be heirs) because they themselves are not from a common law jurisdiction. The differences between common law on the one hand and civil law and Muslim law, on the other hand, jurisdictions can create an impasse. Indeed it might be challenging to explain to a person in a civil law jurisdiction that they should hand over title to their property to a third party for the benefit of their loved ones, and understandably so. Furthermore, Muslim countries tend to have forced heirship rules which would create additional difficulties for the settlor who intends to leave his property to whomever he pleases. The 1987 Cayman Islands Trust Law however, led the way offshore in addressing forced heirship issues and made it clear that a settlor can establish a valid Cayman Islands trust even though it might conflict with the heirship rules of the settlor’s jurisdiction of domicile.

But what of marketing the concept of a trust to civil law jurisdictions? How does one explain equity or the distinction between legal and equitable title to property in a civil law jurisdiction? For many, in such civil law jurisdictions, cannot be convinced that it is a feasible idea to part ways with legal title to their property or that it is in the best interests of those they ultimately intend to benefit.

It would appear however that Cayman, with the passage of the Banks and Trust Companies Law (2007 Revision) and the Private Trust Companies Regulations, 2008, has now made the provision of a private trust company a more acceptable solution for those skeptics.

The legislation is intended for a settlor who wishes to provide for relatives such as parents or descendants including his or her spouse, children, step children etc or where there are such other defined ‘connected persons’ as set out in the Law.

In such circumstances a private trust company may now be registered under the said Law and is not required to be licensed. With this latest passage of legislation it is now possible to more readily market the establishment of a trust to those previously resistant to the concept.

This is because the settlor can take the positions of both shareholder and director of the company incorporated to act as trustee (but nonetheless ensuring that he does not ultimately breach the requirements of the trust by wandering unwittingly into the arena of a sham). This is particularly important for a settlor where there is a significant amount of wealth to be settled in the trust and he or she is uncomfortable with the idea of handing over title to a third party and walking away.

The private trust company concept is not new to the Trust Law legislation but prior to the implementation of the Private Trust Companies Regulations, 2008, such trust companies required licensing. This could prove to be both time consuming and costly, and as a result was unappealing to all but the very wealthy or for situations where it made sense for a commercial venture as opposed to a family structure.

Now, for inter-group companies or for family structures, one can incorporate a Cayman company for the purpose of acting as the trustee and all that is required is to file annually, with the Cayman Islands Monetary Authority, a declaration confirming:

· the name of the private trust company;

· the names of the directors of the private trust company;

· the name of the registered office that is itself the holder of a trust license;

· the private trust company only conducts such business that qualifies it to be registered and it does
not require a licence; and

· the company is in compliance with the requirements of the relevant regulations as set out in Law.

There is also an initial registration fee of US$4,300 and thereafter an annual fee of US$3,700.00.

This is a major departure from the licensed Private Trust Company that required greater fees for the licence, filing of significant documents for licensing purposes on all directors and shareholders as well as significant capital requirements. The new Regulations now provide a much more practical option.

Sophia Harris is the Managing Partner at Solomon Harris and can be contacted at This e-mail address is being protected from spambots. You need JavaScript enabled to view it . The above is for illustrative purposes only and is not to be taken as a substitute for professional advice.