The Private Fund Foundation
A Private Foundation (Private Fund Foundation) is a corporate body established for the Dutch-Antillean Law, to be used by anyone protecting his or her assets and its shares. It can be established at a solicitor’s and can be the proprietor of shares in a LTD or PLC, of real estate, copyright or bank deposits etc. The foundation is registered in the index of foundation of the Chamber of Commerce in Curaçao. The preferential treatment takes place by means of a negotiated document. This way the UBO (Ultimate Beneficial Owner) can be appointed as the beneficiary, without being the proprietor of the assets.
The difference between a ‘normal’ Foundation and the Private Fund Foundation is that the latter is allowed to make payments to the so-called beneficiaries, without these payments being charitable. The Private Fund Foundation does not have shareholder or members. It administers its assets in one’s own name. The transfer of assets of non-residents (people not living in the Netherlands Antilles) to the Foundation is exempt from gift tax/succession rights. Moreover the Private Fund Foundation is not subjected to company tax of its income.
The only restriction is that the foundation is not allowed to have an enterprise. Acting as a management company, holding company or investment company is not considered as having an enterprise. There is no minimum of capital deposit and the starting-up capital of the Foundation needs not to be put in the act of foundation. The Foundation can have her capital operate without limitations whereas all sorts of investments are possible. In this way she can participate in a company as a limited partner.
These features enable the Private Fund Foundation to be an excellent instrument to control the assets in the broadest sense of the word. It is a perfect alternative for the Anglo-Saxon Trust which has no legal entity. One has to take into account that the benefactor may be in debt of gift tax in his home country. Private Fund Foundation established in Curacao should at least have one residing manager who possesses a legitimate license by the Supervisory Board for a company in technical and general services. In most cases the Antillean Trust Company will make it his task and will act as a residing manager. The Trust company also takes care of the compulsory local address and office.
The importance of a Private Fund Foundation is the separation of private assets to assets of the foundation. One who turns over his or her shares to the foundation (in most cases the beneficiary of the foundation) is no longer the owner of these shares. The beneficiary’s name will not be mentioned in the act of foundation. His/her rights will be derived from a non-public act which can be acknowledged as an act of foundation. The local manager watches over the capital of the Foundation. He/she is obliged to follow the beneficiary’s instructions and assignments.
On account of article 2.53 of the Dutch Civil Law a beneficiary can request the judge to dismiss a manager having done or neglected something in violation of the law of constitution or has committed improper management.
In many cases the Private Fund Foundation can act as an instrument for the protection of the assets against external dangers:
- An instrument for the control of the assets;
- An investment instrument;
- Limited or no liability;
- Minimal legal charges on income and property;
- Minimal legal charges of interests on deposits in countries without source tax;
- An instrument for “holding” of shares;
- An instrument for “holding” of real property;
- An instrument for “holding“ and exploiting copyrights and license;
- An instrument for the protection of family capital against e.g. economical risks and debits;
- The possibility (e.g. in cases of inheritance) to alter the beneficiary from the foundation;
- The absence of duty for the publication of the financial status of the foundation;
- The possibility of privacy of the identity of the beneficiary, for example in competitive cases.
The transfer of shares by the beneficiary to the Private Fund Foundation can take place by means of an agreement with the Foundation, while the beneficiary can have one or more trusted representatives participate in the board of directors of the Foundation. Hereby he keeps 100% control on his/her assets. If the beneficiary dies all will be dealt with according to his/her wishes.
The Private Fund Foundation is fully acknowledged in the Dutch judicial system by law of the State Secretary of 22 October 2002. The fiscal treatment of a trust is as a directive for the discussion of the Private Fund Foundation by the Dutch Tax Authorities. According to the Dutch Antillean laws the identity of the beneficiary can be kept private if desired.
Lunar Asset Management does not provide legal or fiscal advice. The text mentioned above is solely meant for information. The information is from a reliable source, although Lunar Asset Management does not guarantee its correctness and completeness.