Richard Grasby, Head of Trusts and Private Wealth for Maples and Calder in Asia, discusses with Hubbis why the British Virgin Islands ("BVI") and the Cayman Islands are attractive jurisdictions for setting up trusts and other wealth planning-related structures.
Q. What trends are you seeing in Asia in terms of interest in trusts and other structures?
A. Many wealthy Hong Kong families have had structures in place for a long time, and are very familiar with multi-generational planning vehicles. The Cayman Islands and the BVI are two of the most popular jurisdictions to be used for these purposes.
Certainly we are seeing a lot more wealth being generated in emerging economies of Asia. Many of these are civil law and non-English speaking, and the use of trusts is relatively new. Clients from these countries have much lower levels of understanding of trusts, and as such getting a structure in place can be a much longer process.
As the amount of wealth held by these families is increasing, it is becoming more and more important that they think about the future and how to protect themselves from situations such as divorce, death and incapacity. A great deal of the wealth in Asia is still linked to family businesses, and as the wealth creators start to get older, they need to plan for the future. A well-thought out succession plan can significantly preserve the value of a business and this is something which outside investors do look for.
Q. What are some of the cultural differences between clients in Asia and clients in Europe?
A. There is obviously a huge variety of cultures within both Asia and Europe themselves, but it is more noticeable in Asia that Asian clients often want the lowest price option on offer and /or the quickest – even if they have been advised that this is not the best!
Asian clients wish to retain control. Structures which facilitate this and which can be dismantled are often preferred – at least initially. European clients are usually more constrained by tax legislation.
Other cultural differences include the existence of a second (or even third) family, which is common in certain parts of Asia and the resulting family dynamics which can ensue!
Q. What are the main reasons for Asian clients to choose the BVI and the Cayman Islands as jurisdictions for setting up structures?
A. Familiarity is the main reason that a lot of clients go for the BVI: a significant majority of them own BVI companies. Similarly, most IPOs involve Cayman Islands companies and most funds use Cayman Islands structures – so clients have a certain level of knowledge.
Other attractions are the depth of service providers such as law firms and corporate administrators, together with a reliable court system. There is no tax in either the Cayman Islands or the BVI, which is a benefit. The fact that the Cayman Islands and the BVI are used for commercial transactions is an additional attraction for Asian families as many of them (and their trustees) are also heavily involved in mergers and acquisitions, IPOs and financing.