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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.