ABOUT THE AUTHOR: Hilary Spilkin TEP is
Vice-President and Director of the Liberian International Ship and
Corporate Registry
The Liberian Associations Law was amended in 2002 to
include the establishment of private foundations.
The Liberian private foundation, modelled on the 1993 modern
Austrian law of foundations (Stiftung), is a useful and
flexible vehicle, used for various purposes, including charitable,
public and personal. There is a prohibition against using the
private foundation for commercial purposes. However, this does not
exclude the regular business activities of the private foundation,
such as management of its income or engaging in activities that are
necessary for the proper administration of its assets. This
includes the buying and selling of assets, as long as this is not
deemed a trading activity.
Similar to all foundations, the Liberian private foundation is a
separate legal entity and all assets transferred to it, usually in
the form of a gift by a donor, are irrevocable and the sole
property of the foundation.
The private foundation is established through the memorandum of
endowment, and an initial endowment of not less than USD10,000. The
donor(s) cannot withdraw the assets once they are donated or
endowed to the foundation. The assets are placed at the disposal of
the foundation and the appointed officers will distribute income
and capital in accordance with the donor’s instructions, as
specified in the memorandum.
The memorandum may be executed by the donor(s) while they are
alive or at death, in the form of a will. Forming a private
foundation in Liberia is a simple process, which involves:
(i) submitting an application for registration and the
memorandum of endowment to the Registrar, and
(ii) appointing a Registered Agent, which culminates in the
issuance of an official certificate of registration.
In the case of a foundation formed by a will, the executor of
the estate will act as the donor.
The memorandum of endowment must include the following
information:
- name of the foundation
- designated beneficiaries
- donor’s name and address
- registered address of the foundation and the Registered Agent
in Liberia (this will always be the Liberia International Ship and
Corporate Registry Trust Company, which is the exclusive agent for
all non-resident Liberian entities)
- address for service of process
- objects of the foundation
- statement of the foundation’s initial assets
- statement defining the duration of the foundation, and
- name and address of the Secretary.
Upon receipt of the statement of initial assets, the Registrar
will issue a certificate of endorsement of statement of value of
initial assets. A detailed statement of the specific assets endowed
is not required. Moreover, additional assets may be added at any
time without notifying the Registrar of their value or source.
The procedural rules governing the management of the private
foundation are set forth in the management articles, which are
signed by the donor and submitted with the application for
Registration. The articles and memorandum are not filed with the
Registry, and so do not become part of the public record, but are
returned to the foundation with the certificate of endorsement.
Instead, an extract of particulars of the memorandum, signed by the
Secretary, is filed with the Registrar. The extract will include
the names, addresses and specimen signatures of the appointed
officers and secretary, plus the address for service of documents
to the donor. The donor’s name will not be part of the public
record.
Management of the Liberian private foundation rests with its
officers, who are generally professional administrators. The
officers oversee the distribution of the income and capital in
accordance with the donor’s instructions.
A private foundation must have at least three officers, at least
two of whom shall be natural persons. A beneficiary may not be
appointed as an officer. One of the officers may also act as the
secretary, and corporate secretaries are permitted under the
law.
As with the donor, there are no statutory restrictions on the
residency or nationality of the officers or secretary. Moreover,
there are no requirements for assets to be located in Liberia.
Provision is also made for the optional appointment of a
supervisory board consisting of at least three natural persons, one
of which may be the donor. The supervisory board assists with the
day-to-day management of the assets and is considered independent
from the officers and beneficiaries.
‘Additional assets may be added at any time without
notifying the Registrar’
There are minimal filing requirements with the Registrar, thus
protecting the privacy of the beneficiaries and the donor. Once
formed, there is a mandatory annual return for the private
foundation, which must be signed by the Secretary and submitted to
the Registrar. The annual return confirms that the information
filed in the extract is correct and that proper accounts are
maintained. The Registrar does not require submissions of financial
accounts, nor are they required to publically file such
information. Any changes or amendments to the extract must be filed
with the Registrar.
A foundation domiciled outside Liberia may, if permitted to do
so by its constitution, apply to migrate its domicile to Liberia.
In the same way, Liberian law allows for conversion of any
recognised entity to a private foundation, provided its own
constitution allows for this.
Liberia imposes no gift tax on the donated assets at the time
the private foundation is established. Moreover, any income
generated by the assets of the private foundation is exempt from
tax in Liberia. However, there may be tax implications for the
beneficiaries in their respective places of domicile for any income
they receive from the private foundation.
Recent legislation
Liberia is one of a few common-law jurisdictions that have
recently adopted legislation for establishing foundations. The
reasons for this are clear.
First, foundation law is less complicated than the body of trust
law that has grown up around the common-law equivalent. Second, the
concept of the foundation maintaining ownership of their
hard-earned assets is more acceptable to a client than the concept
of a trustee maintaining ownership of the assets. In either case,
the original owner of the assets has to relinquish ownership and
entrust it to either a trustee, who is the designated owner of the
assets in the case of a trust, or, in the case of a private
foundation, to a founder, who has no ownership interest in the
foundation property.
This significant difference between the trust and foundation is
made clear from the formal process of registration of a foundation
with the relevant authority. The Liberian law provides that ‘from
the date of registration which is mentioned on the certificate of
registration, the Private Foundation shall be a legal person by the
name contained in the Memorandum of Endowment, capable forthwith of
exercising all the functions of a Private Foundation’ (paragraph
60.22). Trusts, in contrast, are legal relationships which must
meet certain legal requirements to be valid and enforceable. The
effect of registration is similar to that of incorporation of a
company.
In conclusion, a private foundation is useful for preserving
wealth and for asset protection, and allows for flexibility in
international tax planning.