Special, But Still a Trust
25 Mar 2015
VISTA trusts, as they are commonly known, came into existence in 2004 with the enactment in the British Virgin Islands ("BVI") of the Virgin Islands Special Trusts Act 2003 ("VISTA"). During these past 10 or so years, VISTA trusts have proved to be very popular and are strongly marketed by BVI service providers. As with all markets where there is a choice, there is strong competition and this has led to a certain degree of standardisation in respect of documentation, cost and client expectation.
It is, however, important to take a step back and to remember that a VISTA trust remains a trust and that trustees of VISTA trusts still have significant duties and liabilities.
VISTA was introduced to deal with one specific issue: to disengage a shareholder trustee from management responsibility in respect of the shares in an underlying company held as part of the trust fund. VISTA enables a trust to be established where the trustee has an express duty to retain company shares whilst at the same time limiting the trustee's obligations to monitor and intervene. Such limitations apply only to shares in a BVI company (the "VISTA Company") and only where an express designation has been made in respect of those shares.
Whilst the statutory protection afforded by VISTA allows an otherwise "ordinary" trustee some degree of latitude with respect to its VISTA Company shares, it should not be mistaken as a form of statutory exoneration enabling a VISTA trustee to sit back and be completely passive; nor is it a tool with which a settlor or the director of a VISTA Company can fend off a trustee looking to get involved (and as a result, seek to reduce a trustee's fees to a nominal figure).
For example, VISTA does not apply to property other than designated shares in a VISTA Company, so any other property in the trust fund (including dividends declared by the VISTA Company) would be subject to the long-standing rules relating to trust investments (i.e. the trustee still has a duty to monitor the assets and consider diversification).
Above and beyond the protection afforded the trustee in respect of the shares in the VISTA Company, a VISTA trust remains a trust and all of the other duties of a trustee remain.1 Trustees should therefore ensure that they act appropriately, levy a realistic charge for their services from the outset, and resist any suggestion that they will have "less to do".
VISTA trustees should also keep in mind their obligation and duty to account to the beneficiaries of the trust; an obligation which extends to the entire trust fund, including the VISTA Company.
In order to be able to provide an account, a trustee needs to know the value of its holding in a VISTA Company, so a VISTA Company will need to provide the trustee with regular accounts. Depending on the value and complexity of the VISTA Company these may not need to be audited, but they do need to be in a form capable of being understood by the trustee and anyone else who needs to see them.
In addition, VISTA enables an "interested person" with a permitted ground for complaint to call upon the trustee in writing ("an intervention call") to intervene in the affairs of the VISTA Company.2 The trustee must, if satisfied that the complaint is substantiated, take such action as it thinks appropriate. An interested person is also able to request the trustee to provide such information concerning the VISTA Company as is reasonably required for the person to decide whether an intervention call is necessary in the first place.
If there is an appointed enquirer,3 such person has a duty to make reasonable enquiries as to whether a permitted ground for complaint exists. The trustee must use all reasonable endeavours to ensure at all times that an appointed enquirer or, if there is no appointed enquirer, at least one interested person is given certain specified documents and information (which will include documents and information relating to the current activities of the VISTA Company).
Whilst the terms of VISTA specifically allow the exclusion of a trustee's duty to intervene in the VISTA Company's affairs, they do not exclude the duty to be informed of the VISTA Company's affairs (or enable others to be so informed) - a subtle difference which is often overlooked. It doesn't necessarily follow that a trustee should directly concern itself with the contents of the accounts, but a beneficiary may make such an enquiry of a trustee and in order to respond the trustee may need to make further enquiry.
For VISTA trustees, the refusal, or inability, of the VISTA Company to prepare such accounts or provide relevant information should be a red flag and cannot be considered a satisfactory situation. The fact that the VISTA trustee, or an affiliate, will commonly provide the registered office services to the VISTA Company should offer some assistance because the registered agent will require a certain amount of information about the VISTA Company's affairs in order to meet its compliance obligations, but that will not, of course, provide the full picture, nor should the trustee leave matters there.
1 For further information see the Maples and Calder Legal Guide on VISTA.
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