Offshore Private Foundation History
Although offshore private interest foundations have only recently become widely known, the concept dates back to the days of the Roman Empire. The Catholic Church was one of the first to utilize the concept that we now refer to as a foundation. The Church was considered a “divine foundation” with the various organizations within the church having legal control over its “patrimony”. Foundations were initially conceptualized for communal purposes. They were not utilized for private purposes such as serving the interests of individuals or families.
The concept of the “private interest foundation” did not come about until 1926 when the Principality of Liechtenstein created the “Law of Persons & Companies” (Personen und Gesellschaft Recht - P.G.R.), which first established the concepts of the “Family Foundation” and “Mixed Foundation”. The former being for the benefit of one or more members of a family and the latter enabling the Foundation to add a charitable capacity for other persons or specific charitable purposes.
Wealthy families have incorporated family foundations in Liechtenstein for many years in order to ensure the protection and safe transition of assets to family beneficiaries. Liechtenstein, being a completely neutral principality for purposes of war (similar to Switzerland) with strict secrecy laws has provided a safe haven for assets for many years. While the Liechtenstein Family Foundation has served its purpose and proven itself as an asset protection and estate planning tool, it is relatively expensive to establish and administer. The Liechtenstein Foundation law is also quite cumbersome and outdated.
Offshore Foundation Recent History
Panama enacted private interest foundation legislation in 1995 which catapulted the popularity and use of the offshore foundation. The law was clear, concise and not overly regulatory. The Panama Private Interest Foundation is extremely versatile in its potential uses. This coupled with relatively low fees offered by Panama firms (compared to Liechtenstein) made the Panama Private Interest Foundation a popular entity and brought it to the masses.
Several jurisdictions, mainly in the Caribbean, have either enacted or are considering enacting similar foundation legislation. So far though, only Anguilla (although Anguilla has its own negative issues such as being under the jurisdiction of the EU) compares favorably to Panama. The legislation enacted in other jurisdictions has a tendency to be unnecessarily lengthy and overly regulatory in nature.
Panama Foundation Issues
Many have been watching a recent case in Panama regarding HSBC bank and a former customer (HSBC vs. Peter Gordon) who was representing a Panama Foundation. This particular individual that was operating the bank account on behalf of the foundation was unhappy with the level of service and fees and decided to transfer the funds of the foundation to a new bank in Panama. He also went on to a few message boards on the internet and posted about his experience with HSBC. Granted this was probably unwise and he may have gone over the top, but what ensued was startling.
To make a long story short, HSBC sued the individual and was able to convince the Panama Supreme Court to freeze the assets of the Panama Foundation. This is a huge problem and has set horrible precedent in Panama. So much for "bullet proof" asset protection and "a Panama Foundation has no 'owner'" marketing ploys. What is even worse is that HSBC has "won" this case and the Supreme Court is now deciding whether or not the $5 million judgement can be extracted from this bank account which is owned by the Panama Foundation.
The Seychelles Foundation could not be coming about at a better time. When people read the comparisons, especially in light of the recent HSBC case, the decision should be an easy one to make.
Seychelles Foundation
A draft bill is currently working its way through the Government channels in Seychelles that is expected to be enacted sometime in August or September. The Seychelles Foundation Act 2008 will offer many unique characteristics and improve upon existing foundation legislation offered in other jurisdictions including Panama. In particular, the asset protection provisions will be unrivalled.
Keep checking back for updates as Sterling Offshore will post the new Act and accompanying information on the website as soon as it is officially enacted. You may also contact us letting us know you are interested in receiving information on the Seychelles Foundation and we will let you know as soon as it is available.