TCI Guarantee Companies
Guarantee Companies have been used
increasingly to achieve substantially the same objectives as
offshore trusts.
Characteristics
The principal defining characteristic of a Guarantee Company
is that the liability of the members is not limited to the
amount unpaid on shares. This is "because companies limited by
guarantee do not have a share capital". Prospective members
are instead required to provide the Board of Directors with a
guarantee that they will contribute a fixed (e.g. US$100.00)
in the event that the "company" has debts when it is wound up.
Reporting requirements which would otherwise arise by virtue
of share ownership may therefore be avoided in many instances.
The Articles of Association of TCI Guarantee Companies can be
drafted to effectively separate management powers from the
potential to benefit from any assets contributed. Typically a
structure will provide that assets contributed by the client
member(s) are managed by the Guarantee Company's Board of
Directors and that the contributing/client membership is
effectively the only class of membership which can
"potentially" benefit at the discretion of the Board.
When properly structured a Guarantee Company creates a
relationship between the management and the contributing
member/client which is similar in effect to that of a trustee
and a settlor.
Notwithstanding that an individual is a member of a TCI
Guarantee Company, when properly structured his/her position
for reporting/tax purposes will be as follows:
-
Not a shareholder
-
Not a director or officer
-
No voting rights or fixed entitlements to assets contributed
-
No tangible control over dividends, loans or payments
Uses:
The objectives which may be achieved by careful use of TCI
Guarantee Companies include the following:
-
Indefinite, legitimate deferral of capital gains tax in
certain circumstances;
-
Enhanced asset protection;
-
Confidentiality of membership (exempted TCI Guarantee
Companies benefit from the same high level of confidentiality
as standard IBC's and are almost as simple and cost-effective
to maintain);
-
Avoidance of probate and estate costs.
By virtue of the above Guarantee Companies can clearly be
useful as conduits for active investment enterprises and as
shareholders in other structures, e.g. by structuring them as
charitable foundations and utilizing them as shareholders of
trustees to private family trusts.
|
