Embed Size (px)
Citation preview
Using Dutch foundations
for private wealth planning
Prof. Niek Zaman
Doha, 23 October 2013 Dubai, 24 October 2013
Index
• Key features of the Dutch foundation • Main aspects of structuring of the foundation
o Objects o Governance
• Different types of use: o Charity and non-profit purposes o Private wealth planning (alternative for voting trust) o Asset protection (alternative for common law trust) o Estate planning (alternative for common law trust)
2
Key features of the Dutch foundation (I)
• Legal personality • Orphan entity: no shareholders, no members • Solid framework provided by Dutch law • Simple, flexible and revocable • Frequently used; tested before court • Full control with the (management) board • Flexible governance structure
3
Key features of the Dutch foundation (II)
• No specific statutory requirements concerning composition, appointment, suspension and dismissal of board members
• No legal requirement of having Dutch resident board members • No distribution of profits to founders or members of its bodies allowed • Currently no legal requirement to publish annual accounts • No legal requirements concerning domiciliation in the Netherlands • Cost efficient (both set-up and maintenance) • Tax neutral structure in general possible
4
Main aspects of structuring of the foundation – Objects (I)
Role of the objects of the foundation:
• Fiduciary tasks, if desired; • Guidelines for the management board regarding their management; • Boundaries for the management board regarding the way in which they can use
the assets of the foundation
5
Main aspects of structuring of the foundation – Governance (II)
• The management board is the only mandatory corporate body of the foundation • Possibility of having other corporate bodies (such as a supervisory board, advisory
board) • Allocations of specific rights to the founder(s) • No specific mandatory requirements concerning composition, appointment,
suspension and dismissal (i.e. option to appoint successors in board) • Governance can be tailored to a large extent (variation of voting rights within the
board, approval rights for founders, supervisory board and meeting of depository receipt holders etc)
6
Different types of use of Dutch foundations
Over the last century the Dutch foundation has – due to its flexibility – evolved to a legal form which is used for a broad variety of purposes: • Charity and non-profit purposes • Protection against (hostile) take-overs of listed companies • Social enterprises (health care, schools) • Pension funds • Family office • Private wealth planning (family businesses) • Asset protection • Estate planning
7
Charity and non-profit purposes (I)
Traditional purpose of the Dutch foundation How it generally works: • Client incorporates foundation with specific charitable
objects • Client and/or family members (or others) donate funds to
the foundation • Board of the foundation (if desired, formed by the client
himself) controls the funds, invests the funds and makes distributions for charitable purposes
8
Charity and non-profit purposes (II)
Main features: • Creation of own charity (family) fund • Separation of funds from private estate • Flexibility with respect to governance (without prejudice to a
few specific requirements regarding Dutch tax-exempted charity status)
• Donations by non-Dutch tax payors to foundation are not subject to Dutch gift tax
• Donations by exempted foundation are not subject to Dutch gift tax
9
Private wealth planning (I)
10
Shares
Depositary receipts (DRs)
Donation of depositary receipts
Purpose: • Protecting continuity of the company or other assets (i.e.
art collection) by separating legal ownership/control (of the foundation) and the financial interest (of the holders of DRs)
• The contractual relationship between the foundation and the holders of the DRs can be tailored to a large extent
• Donation of DRs possible without losing control over the assets
• No dilution of family wealth (shares, art collection, other assets)
• Tax neutral structure, if desired
Private wealth planning (II)
11
Shares Depositary receipts (beneficial ownership)
Donation of depositary receipts How it works: • Client incorporates foundation with the object to hold
assets in (i.e. shares in companies) in administration (on a fiduciary basis) for the risk and benefit of the holders of depositary receipts (DRs) of those assets
• Client transfers assets (mainly shares in companies) to foundation in exchange for issuance of DRs
• (Board of) foundation (as legal owner of the assets) has full control over the assets (including the financial rights and voting rights attached to the shares)
• Due to the contractual relationship between the foundation and the holders of the DRs (laid down in the conditions of administration), the holders of the DRs have the ultimate beneficial interest in the assets held by the foundation
Foundation
Shares (control)
Company
Asset protection or civil law trust (I)
12
Donation of assets under certain conditions and obligations
How it works: • Client incorporates a foundation with the object to
acquire assets in its own name and to hold these assets for the benefit of certain beneficiaries
• Client (ir)revocably donates assets to the foundation under certain conditions and obligations for the foundation (such as distribution to certain beneficiaries under certain circumstances i.e. emergency events, such as insolvency and death)
• (Board) of the foundation (as legal owner of the assets) has full control over the donated assets (within the boundaries set by the objects of the foundation)
‘Civil law trust’
Asset protection or civil law trust (II)
13
Donation of assets under certain conditions and obligations
Main features: • Donated assets are ‘parked’ in the foundation, as:
o donated assets are legally separated from the estate of the donor
o And, until distribution in accordance with the contractual obligations, the donated assets have not been transferred to the beneficiaries (yet)
• Due to the freedom of contract the contractual obligations can be tailored to a large extent
• Board can be formed by the client or family members (although for protection purposes they should automatically cease to hold office in certain situations)
• Client can regain donated assets by revoking donation (although for protection purposes this right should lapse in certain situations)
Asset protection or civil law trust (III)
14
Civil law trust versus Common law trust Legal personality No legal personality (contract) No disclosure of beneficiaries Disclosure of beneficiaries No third party involvement Third party involvement (trustee) No maximum duration Maximum duration Freedom of governance within foundation
Freedom of governance within trust deed
Civil law with, in general, more statutory provisions
Common law with, in general, case law
Estate planning (I)
15
Donation of assets under certain conditions and obligations
How it works: • Same foundation structure as used for asset
protection • Possible alternative for last will • In order to avoid joint ownership of his heirs, the
client could (ir)revocably donate his assets to the foundation, under the obligation for the foundation to distribute upon his death specific assets to each heir, taking into account their sharia-share in the estate of the deceased
Estate planning (II)
16
Donation of assets under certain conditions and obligations
Main features: • Allocation of specific assets with specific heirs
(instead of joint ownership) • Separation of funds from assets of client • The donation (and the obligations attached hereto)
does not qualify as a last will • Due to the freedom of contract the contractual
obligations can be tailored to a large extent • Client can regain donated assets by revoking the
donation • According to our experience this structure can be
made sharia-compliant
Questions?
17
Contact
18
Niek Zaman Partner, Civil law notary Rotterdam office T 31 10 224 61 15 E [email protected]
Jan Bart Schober Partner, Tax adviser Dubai office T 971 4 437 27 07 E [email protected]
Martijn van Steensel Associate, Deputy civil law notary Rotterdam office T 31 10 224 66 24 E [email protected]
Marieke Vreeburg Senior associate, Corporate lawyer Dubai office T 971 4 437 27 11 E [email protected]
Amsterdam Arnhem Aruba Brussel Curaçao Dubai Genève Hong Kong Londen Luxemburg New York Parijs Rotterdam Singapore Tokio Zürich
www.loyensloeff.com
