In the past 15 years, the private trust company (PTC) has become a useful vehicle for meeting multigenerational wealth-planning requirements involving trusts. A PTC is a company with objects that are limited to acting as trustee or co-trustee for a single or specified group of related trusts. For example, a PTC can act as trustee for a group of family or business trusts. Most, if not all, offshore jurisdictions recognise the PTC as an appealing vehicle for private wealth planning, so they can be incorporated quickly and cost-effectively.

PTCs allow clients to safeguard control over administration of their assets, and present a more private and familiar alternative to institutional trust companies.

• Control: family members or key advisors can sit on the board or committees of a PTC, granting control without compromising the legal validity of the trust structure.
• Familiarity and continuity: involving family members and advisors creates a close association with the settlor’s family, and reduces the turnover of staff.
• Confidentiality: the small, private nature of a PTC avoids the need for large, highly regulated financial institutions, and restricts circulation and disclosure of information about the family’s affairs.

Similarities between PTCs and exempted companies can comfort settlors less familiar with trust structures. Connections include:

• Like exempted companies, PTCs in most offshore jurisdictions can be created with or without share capital, e.g. voting and non-voting, or as a company limited by guarantee.
• Flexibility: a PTC can be tailored to the settlor, and will coordinate administration with the family’s independent investment advisors and any family office.
• Investment freedom: PTCs avoid the investment limitations or reputational concerns of a licensed trustee.
• Consolidation: of particular use for multinational families, PTCs enable harmony among trusts governed by different jurisdictions, avoiding the need to have trustees in each country.

PTCs are affordable and cost-effective, and can reduce liability for future costs.

• Costs: PTCs avoid ad valorem or other scale charges levied by licensed trust companies.
• Tax: where ownership of shares by the settlor leads to tax exposure, a PTC can be owned by a non-charitable purpose trust to orphan ownership.
• Professional liability: an institutional trustee may be reluctant to assume direct ownership of high-risk assets, but may be more willing to administer a PTC.
• Individual liability: PTCs avoid the risk of personal unlimited liability which flows from individual trusteeship.

In Bermuda, PTCs are exempt from licensing requirements. The Trusts (Regulation of Trusts Business) Act 2001 exempts a company that provides trustee services only to those trusts specified in that company’s memorandum of association. The exemption, enacted by s3 of the Trusts (Regulation of Trust Business) Exemption Order 2002, circumvents the expensive licensing process of some jurisdictions and saves time and money when changing directors and officers.

A PTC in Bermuda is usually an exempted company. The application to incorporate is submitted to the Bermuda Monetary Authority. The application requires information about the PTC owners and the settlor of the underlying trust, and signed personal declarations for each ultimate beneficial owner who holds, directly or indirectly, 5 per cent or more of the PTC.

Every exempted company in Bermuda needs either a director, secretary or resident representative who is ordinarily resident in Bermuda. A PTC must have at least one shareholder, and their names must be kept in a register at the company’s registered office.

In the British Virgin Islands (BVI), a PTC is exempt from regulation and licensing requirements under the BVI Financial Services (Exemptions) Regulations 2007, provided it conducts unremunerated work or provides trust business to an individual or a group of related qualifying trusts. Professional director services are not considered as remuneration payable by the PTC for trust services. To be a qualifying trust, each beneficiary of the trust must be either connected to the settlor or a charity.

A PTC must be incorporated as a business company (BC) in the BVI. This is done by filing the memorandum of understanding and articles of association with the registrar, together with a certificate from its first registered agent; no governmental approval is required, and a BC can be incorporated within 24 hours.

A BC must have at least one director but they need not be resident in the BVI. A BC must have a licensed registered agent who holds a class I trust licence, and corporate directors are permitted. As in Bermuda, a PTC must have at least one shareholder, and the names of all shareholders must be kept in a register at the company’s registered office.

Wealthy individuals often look for innovative, cost-effective and flexible solutions with legitimacy, privacy, continuity and the ability to participate. All of these advantages, and more, are provided by PTCs.