“But M, that Owner’s Box was hosting an Extraordinary General Meeting of Organised Crime. When else would we have had the opportunity to get rid of two dozen of the most evil men in the world, controlling criminal empires from Hong Kong to Medellin? It will take their syndicates years to reorganise. And let’s not be naïve here; exactly how does the Cabinet think the owner could afford to pay $250 million for Ronaldo?”
“I might agree with you, Double-Oh, but these days the public expects villains, however evil, to stand trial. And where soccer is concerned different rules apply. You totally ruined a much anticipated sporting event; and the body count was too high. The PM himself had the final say and decided it’s time for you to go”.
He studied the highly polished toecaps of his handmade Artioli shoes; a deep frown formed on his brow. Whilst he was on active duty, the Service paid school and university fees. With five boys at Eton, all in different years, and twin girls in the Sixth Form at Marlborough, the annual bill was eye watering. Those of the boys who did not join the Household Cavalry would need to go to Cambridge. The girls had already set their hearts on Oxford: they knew it was intellectually inferior but the shopping more than made up for that, so far as they were concerned. He would hate to let them down.
“You alright, Double-Oh?”
“Just doing some mental arithmetic, M. What happens next?”
“Well, obviously you will have to hand in your licence, the Walther PPK, satellite phone cufflinks, armoured attaché case and your other toys. Q’s expecting you in to see him tomorrow morning. You can hang on to the Aston Martin until you leave for the Cayman Islands next Monday.”
“The Cayman Islands? Monday?”
“Yes. Well, you certainly can’t stay here. And anyway, you’ll enjoy it. It’s politically and economically stable, with the highest standard of living in the Caribbean. Communications are excellent. It has first class hotels and some wonderful restaurants. There’s golf, tennis, sailing and diving, amongst other activities. Long white sandy beaches to walk and crystal clear water to swim in. If you tire of all of that there are a number of daily flights to Miami, with a flight duration of approximately one and a quarter hours. There are also regular flights to Fort Lauderdale, Tampa, Orlando, Raleigh-Durham, Atlanta, Chicago, Houston, Jamaica, Havana, Nassau, New York, Charlotte, Toronto and London – if and when we allow you back.”
“What about the financial side? I can’t live on love and coconuts at my age.”
“Well luckily for you, in recognition of your services to the Nation, we’ve arranged with HM Revenue and Customs for you to be allowed non-dom status and found a distant relative offshore to settle a couple of Cayman trusts for you and your offspring. The Treasury has agreed that they can be funded with some of the Service’s winnings from your Monte Carlo jaunt – remember you made them on expenses whilst on duty, Double-Oh – and some of the gold we confiscated from that megalomaniac Oddfinger a few years ago. You can set up your own private trust company to look after it all. Do you know anything about Cayman private trust companies?”
“As a matter of fact, I do” he said, settling back into the deep leather chair and forming a steeple in front of his chin with the fingers of his two hands. M sighed. She had seen the finger steeple before and suspected that it meant she was about to receive a lecture. She was not to be disappointed.
“Many wealthy families use Cayman Islands trusts for their long term estate planning. Over the last decade or so an increasing number have discovered that by establishing their own private trust company to serve as trustee of their trusts, rather than retaining the services of a commercial trustee, they are provided with additional flexibility, as well as economic benefits.
Cayman private trust companies are an attractive alternative to the use of commercial trust companies and provide a convenient way of enabling a client and his family to stay fully involved in estate planning arrangements effected through the medium of a Cayman trust. They are particularly well suited to dealing with difficult assets such as family businesses, which commercial trust companies are often reluctant to accept as a trust asset and add flexibility to estate planning arrangements.
The licensing regime is logical and sensible; private trust companies are required to licence as restricted trust companies and are well regulated by the Cayman Islands Monetary Authority, but not oppressively so.
The advantages of establishing a private trust company to serve as trustee of family trusts vary according to the circumstances of the case. Generally they relate either to purely economic considerations, where the trust assets are of such significance that a commercial trustee’s fees (usually calculated on a percentage basis) are disproportionate to the amount of work involved in the trusteeship, or otherwise to particular difficulties arising from nature of the underlying assets. There are certain types of trust asset, particularly family businesses, which commercial trust companies consider involve them in undue levels of risk, so that they are either reluctant to accept those assets into the family trust or unwilling to accept the trusteeship at all.
The advantages of using a private trust company generally include some or all of the following:
it may result in significant cost savings as a commercial trust company will provide its accounting and administrative services as a contracting party and not as a fiduciary, so that it will have a lower level of legal responsibility;
the commercial trust company will not need to be provided with so much information about the underlying trust assets: this will instead be provided to the private trust company;
the directors of the private trust company, which may include the paterfamilias and other family members, will have a more direct involvement in trust matters, e.g., selecting beneficiaries to receive discretionary distributions;
the structure provides a convenient way to pass control and influence over family business interests and wealth to the “next generation” over a suitable period of time and in a regulated manner by bringing in designated successor(s) as director(s) of the private trust company during the paterfamilias’ lifetime. By allowing a designated successor to participate in the affairs of the private trust company in this way during the paterfamilias’ lifetime: (i) the paterfamilias can evaluate the suitability of his designated successor; and (ii) the successor can become familiar with the operations of the private trust company, the underlying business activity, and the way in which the trust is run.
Almost all private trust companies are incorporated as standard exempt Cayman companies with an issued share capital of the statutory minimum of US$25,000. Working capital requirements are minimal.
The constitution of the board of directors of the private trust company is of paramount importance. The directors will have primary responsibility for ensuring that the family trusts are carried out and that the administrator and investment managers perform their roles satisfactorily. One of the main advantages of using a private trust company is that the paterfamilias, together with members of his family and circle of trusted advisors, may perform a hands on function. As directors they will be far more intimately involved and influential in trust affairs than would be the case if a commercial trustee was used.
The Cayman Islands Monetary Authority requires the board of directors of private trust companies to be comprised of fit and proper persons and that it should include persons with appropriate expertise in trust matters. All proposed directors must supply detailed information to the Cayman Islands Monetary Authority as part of the application process and are subject to formal approval.
The board will typically include one or more family members; frequently the paterfamilias will be designated as chairman of the board during his lifetime and have the power to designate his successor as such (subject to the Cayman Islands Monetary Authority’s approval). In addition to family members, the board will usually include a senior representative of the commercial trust company which provides the various administrative services to the structure and a lawyer or other trusted family advisor. These two will be designated to the Cayman Islands Monetary Authority as the providers of the required trust expertise.
There are a few potential disadvantages in using a private trust company, which are generally perceived to be as follows:
the costs of establishing the private trust company and related arrangements (excluding work on the underlying trust) may be $30,000 – $40,000. The private trust company will have to have a paid-up share capital of at least US$25,000;
the private trust company will have to have an annual audit and make annual filings with the Cayman Islands Monetary Authority;
all parties involved as directors and shareholders of the private trust company will have to be vetted and approved by the Cayman Islands Monetary Authority. This will entail completing a personal questionnaire, supplying a curriculum vitae, character and financial references, and a police certificate showing that the individual concerned has no criminal convictions (save for traffic offences). The Cayman Islands Monetary Authority will undertake its own investigations, including through Interpol;
the private trust company may only undertake a limited number of trusteeships (the Cayman Islands Monetary Authority indicate a maximum of approximately 20) and details of the proposed beneficiaries will have to be disclosed;
if the structure is used to accommodate a number of family trusts, each director of the private trust company will inevitably have full information regarding all trusts and their underlying assets.
These disadvantages are generally outweighed by the advantages, at least so long as the trust assets have a minimum value ofUS$100 million or more.”
M felt she had been lectured enough and cut him off before he could descend into the minutiae.
“That’s very impressive. How on earth do you know all that?”
“I was drawn against a Scotsman living in Cayman in the matchplay event at the R&A’s Autumn Meeting a couple of months ago”, he replied. “Nice chap; not a bad golfer either. We had dinner in the clubhouse afterwards and somehow the conversation turned to private trust companies.”
“Well don’t set your hopes too high, Double -Oh”, she said, with the smugness of a card player about to trump an opponent’s ace. “You’re not getting anything like US$100 million. Cayman changed the rules, coincidentally in September whilst you were at the R&A’s Autumn Meeting; your Scottish friend couldn’t have known about it. It’s now possible to set up a Cayman private trust company to look after much smaller trusts – a very good example of sensible deregulation in the offshore world, if you want my opinion,” she said.
He shifted uneasily in his chair. He had seen the superior look, which now shone from M’s eye before. His finger steeple collapsed as she swept into detail.
“The Private Trust Companies Regulations, 2008 were brought into force in September 2008 after a long campaign to deregulate private trust companies serving as trustee of family trust arrangements, which is perceived by the Cayman Islands Monetary Authority as an intrinsically “low risk” activity. By deregulating (so that no licence is required) and making them significantly less expensive to establish and operate, the Cayman Islands has put itself at the top of the shortlist of jurisdictions suitable for establishing these vehicles and has also significantly expanded the class of potential users. Under the old regime (which remains in place and which will continue to serve the high end of the family private trust company sector) the costs associated with licensing as a restricted trust company and complying with the applicable regulatory requirements meant that, as you so enthusiastically pointed out, Double-Oh, it was uneconomic to use a Cayman private trust company for trusts with a value of much less than US$100 million. No doubt some of the existing vehicles – there are about 90 of them – will convert into “exempted” private trust companies under the 2008 Regulations. But many work perfectly well as they are and will continue as licensed restricted trust companies.
It is already clear that a significant number of new private trust companies will be established under the 2008 Regulations to look after family trusts with a value of US$20 million or more.
Under the Regulations, a new style private trust company:
can only serve as trustee of trusts established by connected persons, which will most commonly mean a family;
must be incorporated as a Cayman company and must maintain its registered office in the Cayman Islands with a licensed trust company;
must keep up to date copies of the trust deeds of each trust of which it is trustee at the registered office;
must register with the Cayman Islands Monetary Authority and provide an annual declaration of compliance and including specified details;
must include the words Private Trust Company or the letters PTC in its name;
may not solicit or receive contributions from the public or persons who are not connected persons.
Once registered under the Regulations, a new style private trust company is not required to be licensed as a restricted trust company. This means that the cost of an annual audit is avoided and there is no need for directors to be approved by the Cayman Islands Monetary Authority. The initial registration fee of CI$3,500.00 (US$4,270.00 approx) and annual registration fee of CI$3,000.00 (US$3,660.00 approx) under the Regulations are significantly lower than those applicable to licensed restricted trust companies. There is no minimum capitalization requirement. As a result, private trust companies established under the 2008 Regulations will be economic for a much broader range of family trusts, including arrangements as modest as those we are putting in place for you.”
He had heard enough.
“That’s very impressive”, he interrupted. “How on earth do you know all this?”
“We’ve had an undercover surveillance team in Cayman for well over a year now. Boys from the Met, supposedly investigating corruption in high places; but really we wanted to find out if the place was, as we suspected, clean as a whistle and a suitable retirement home for a Very Important Person.”
“I’m flattered. But are you saying you were planning to get rid of me over a year ago?”
“Not you, you idiot. The ex-PM. His wife was out there on business a few years ago and absolutely adored the place. When he’s finished his stint playing peacemaker in the Middle East, the plan is for him to move there and use it as a tax free base whilst he makes his millions from lecturing and writing. And some of the current Cabinet who are capable of speaking and writing intelligently – yes, I know, there aren’t many of those – who haven’t got a prayer of getting in at the next General Election are interested in doing the same. So when your name came up, it seemed an ideal solution for you as well.”
He had a dreadful vision of the rictus smiles of badly dressed ex-politicians and their wives making self important conversation in the bars and restaurants of Cayman’s West Bay Road. He wondered if they might be confined in some way to the other side of the Island.
“We’ve finished our homework,” said M, “so we can bring the Met boys home. We’d thought of leaving them out there for the winter as a reward, but they’ve been rumbled and have been making far too many blunders recently.”
There was a difficult silence, eventually broken by M saying: “So I’m afraid that’s all there is to it, Double-Oh.”
The interview over, he left M’s office and went down in the lift to the underground car park where he had left the 1961 DB4GT Zagato. He started the engine. The throb and snarl of the straight six, fed by three massive twin choke Weber carburettors, reflected his mood. He was angry that he couldn’t decide whether the news M had just delivered about his new Cayman trusts outweighed being dismissed from the Service and losing his licence.
As he navigated the muscular Aston skilfully over Westminster Bridge and through the heavy traffic into Parliament Square, the miserable, grey November rain seemed to envelop the car and him inside it. A vision of a long, white sandy Seven MiIe Beach with its swaying palms and crystal clear waters shimmering in the winter sunshine suddenly appeared before him. Maybe retirement wouldn’t be so bad, particularly if he had the benefit of a couple of decent Cayman trusts and one of those new exempted private trust companies to look after them. He wondered what to call it. “OHMSS PTC” had a nice ring to it; had it been used already, he wondered? He decided to track down his Scottish friend from the R&A when he got back to the flat and ask him to find out.