Isle Of Man Foundations For Offshore Planning – An Introduction (Article 1 Of 3) – Corporate/Commercial Law

Whilst Isle of Man Trusts and Isle of Man Limited Companies have
been mainstays of offshore wealth planning for decades, the
relatively recent introduction of the Isle of Man Foundation in
2011 has provided advisers with a blend of features possessed by
corporate entities and fiduciary vehicles, to further their
clients’ objectives.

Having been the preferred choice of our Civil Law counterparts
for centuries, a Foundation offers objectivity and operational
structure without compromising on flexibility, where discretion is
concerned.

This is the first in a three part series we have produced on
Foundations, building up to a webinar hosted by experts who can
help you to meet your clients’ needs. In this introductory
article, we will discuss the rudimentary aspects of Foundations, to
aid or refresh your understanding:

What is an Isle of Man Foundation?

An Isle of Man Foundation is established and regulated under the
Foundations Act 2011, and registered on the
Isle of Man. The Act has added the Civil Law entity to the toolbelt
of advisers seeking to provide offshore services from a
well-established international financial centre.

The blended approach that Foundations offer is unique, with
features that make them distinct from more familiar structures such
as Limited Companies or Trusts.

The next article in this series will take a dive into the
technicalities of all aspects of this vehicle, but for now we have
just provided a brief overview of the constituent elements that you
need to be aware of:

• Founder – The person who initially instructed
  the establishment and agreed the objects of the foundation.




• Dedicators – Anyone other than the Founder
  that dedicates assets to the Foundation.




• Official Documents – There are two official
  documents, the Foundation Instrument and the Foundation Rules,
  which set out the details relating to the administration of the
  foundation and the rights and obligations of the persons appointed
  under the rules.




• Objects – Specified in the Foundation
  Instrument, these detail the specific purpose and objectives of the
  Foundation.




• Council – Comprised of one or more members,
  the Council carries out the administration of the Foundation in
  accordance with the Official Documents.




• Registered Agent – All Foundations must have a
  Registered Agent licensed by the Isle of Man Financial Services
  Authority. You can find more information on Isle of Man Registered Agents here.




• Enforcer – If an object of a foundation is to
  carry out a non-charitable purpose, the foundation must have an
  Enforcer.  This person ensures that the Council operate in
  line with the Official Documents and in the best interests of the
  Foundation.




• Beneficiary – The party that can benefit from
  the Foundation.  

Foundation vs Trust vs Limited Company

The table below compares and contrasts the features of Isle of
Man Foundations, Trusts, and Limited Companies and may be helpful
to determine the most appropriate vehicle to achieve the desired
objectives.

Whilst Foundations cannot conduct commercial trade directly,
other than trade relating to the Objects, it can hold subsidiary
companies which can in turn be used for commercial
transactions.

As you can see from the table, both a Foundation and a Trust can
be used in very similar circumstances, to benefit successive
generations or charitable initiatives. The main differences relate
to the flexibility in making operational changes (e.g. appointment
and removal of Council Members / Trustees and/or editing the
constitutional documents), liability of the managers (i.e. legal
action is against the Foundation rather than its Council Members),
perpetuity and winding up – each offering discretion or choice in
certain areas, which can make it better suited to the client’s
needs.

Ultimately, a Foundation provides a living structure that can be
reactive and adaptable to changing needs, where provided for, in
the Official Documents. Something that can be more limiting when
using a Trust structure.

Of course, Foundations can also be used in conjunction with
trusts to provide some of the benefits of a trust combined with
those of a corporate entity – e.g. diversified interests, to act as
trustee and to provide additional oversight and transparency; which
might make institutional transactions more attractive.

What is an Isle of Man Foundation used for?

A Foundation holds and owns assets, typically provided for
specific purpose; for example, to benefit family members or
philanthropic endeavours. With this in mind, uses of Isle of Man
Foundations can include:

• A familiar alternative to trusts for clients from Civil Law
  jurisdictions;




• A legal entity for succession planning or philanthropic
  pursuits;




• A wealth planning vehicle to hold assets (e.g. private company
  shares, yachts, aircraft);




• Use in conjunction with a Trust to provide additional structure
  and oversight;

Supporting the Establishment and Administration of
Foundations

At Dixcart, we offer a full suite of offshore services to
advisers and their clients when considering the establishment of an
Isle of Man Foundation. Our in-house experts are professionally
qualified, with a wealth of experience; this means we are well
placed to support and take responsibility for different roles,
including acting as Registered Agent, Council Member or Enforcer as
well as providing specialist advice, where appropriate. 

From pre-application planning and advice, to the day-to-day
administration of the Foundation, we can support your goals at
every stage.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.