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The BVI VISTA Trust
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The BVI VISTA Trust
The
Problem
The
trust has always been regarded as one of the best “succession vehicles”, but its use to cater for the
succession of shares in companies has historically been impeded by a rule of English trust law (the
“prudent man of business rule”) which is designed to help preserve the value of trust investments.
This
rule has traditionally made the trust an unattractive vehicle to hold assets which settlors intend trustees
to retain. Another aspect of the rule effectively requires trustees to monitor and intervene in the
affairs of underlying companies (as the English decisions Re: Lucking’s Will Trusts and Bartlett v Barclays
Bank Trust Co Ltd made clear); this also creates difficulties both from the settlor’s standpoint and
from that of the trustees.
The Solution
The
Virgin Islands Special Trusts Act now enables special new trusts, which are known as VISTA trusts, to
be created which circumvent these difficulties.
The Act enables
a shareholder to establish a trust of his company that disengages the trustee from management responsibility
and permits the company and its business to be retained as long as the directors think fit.
This
is achieved in general terms by:
first,
authorising the entire removal of the trustee’s monitoring and
intervention obligations (except to the extent that the settlor otherwise requires); secondly, by permitting
the settlor to confer on the trustee a role more suited to a trustee’s abilities, namely a duty to intervene
to resolve specific problems; thirdly, by allowing trust instruments to lay down rules for the appointment
and removal of directors (so reducing the trustee’s ability to intervene in management by appointing
directors of its own choice); fourthly, by giving both beneficiaries and directors the right to apply
to the court if trustees fail to comply with the requirements for non-intervention or the requirements
for director appointment and removal; and, lastly, by prohibiting the sale of shares without directors’
approval.
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