The International Comparative Legal Guide to: A practical cross-border insight into private client work 7th Edition ICLG Private Client 2018 Published by Global Legal Group, in association with CDR, with contributions from: Aird & Berlis LLP Alon Kaplan, Advocate and Notary Law Office Aronson, Ronkin-Noor, Eyal Law Firm Arqués Ribert Junyer – Advocats Berwin Leighton Paisner LLP Bircham Dyson Bell LLP Cadwalader, Wickersham & Taft LLP DORDA Rechtsanwälte GmbH Griffiths & Partners and Coriats Trust Company Limited Hassans International Law Firm Higgs & Johnson Holland & Knight LLP Katten Muchin Rosenman LLP Khaitan & Co Lebenberg Advokatbyrå AB Lenz & Staehelin Loyens & Loeff Macfarlanes LLP Maples and Calder Matheson Miller Thomson LLP MJM Limited Mori Hamada & Matsumoto Mourant Ozannes New Quadrant Partners Limited O’Sullivan Estate Lawyers LLP Ospelt & Partner Attorneys at Law Ltd. P+P Pöllath + Partners Rovsing & Gammeljord Society of Trust and Estate Practitioners (STEP) Spenser & Kauffmann Attorneys at Law Studio Tributario Associato Facchini Rossi & Soci (FRS) Tirard, Naudin, Société d’avocats Vieira de Almeida Withers Bergman LLP Zepos & Yannopoulos
Transcript
The International Comparative Legal Guide to:
A practical cross-border insight into private client work
7th Edition
ICLGPrivate Client 2018
Published by Global Legal Group, in association with CDR, with contributions from:
Aird & Berlis LLPAlon Kaplan, Advocate and Notary Law Office Aronson, Ronkin-Noor, Eyal Law FirmArqués Ribert Junyer – AdvocatsBerwin Leighton Paisner LLPBircham Dyson Bell LLPCadwalader, Wickersham & Taft LLPDORDA Rechtsanwälte GmbHGriffiths & Partners and Coriats Trust Company LimitedHassans International Law FirmHiggs & JohnsonHolland & Knight LLPKatten Muchin Rosenman LLPKhaitan & CoLebenberg Advokatbyrå ABLenz & StaehelinLoyens & LoeffMacfarlanes LLP
Maples and CalderMathesonMiller Thomson LLPMJM LimitedMori Hamada & MatsumotoMourant OzannesNew Quadrant Partners LimitedO’Sullivan Estate Lawyers LLPOspelt & Partner Attorneys at Law Ltd.P+P Pöllath + PartnersRovsing & GammeljordSociety of Trust and Estate Practitioners (STEP)Spenser & Kauffmann Attorneys at LawStudio Tributario Associato Facchini Rossi & Soci (FRS)Tirard, Naudin, Société d’avocatsVieira de AlmeidaWithers Bergman LLP Zepos & Yannopoulos
WWW.ICLG.COM
Further copies of this book and others in the series can be ordered from the publisher. Please call +44 20 7367 0720
DisclaimerThis publication is for general information purposes only. It does not purport to provide comprehensive full legal or other advice.Global Legal Group Ltd. and the contributors accept no responsibility for losses that may arise from reliance upon information contained in this publication.This publication is intended to give an indication of legal issues upon which you may need advice. Full legal advice should be taken from a qualified professional when dealing with specific situations.
The International Comparative Legal Guide to: Private Client 2018
General Chapters:
Country Question and Answer Chapters:
1 BREXIT: The Immigration Implications – James Perrott, Macfarlanes LLP 1
2 Keep Calm and Carry On: The Increasing UK Regulatory and Tax Issues Facing Offshore Trustees – Matthew Braithwaite & Helen Ratcliffe, Bircham Dyson Bell LLP 11
3 Pre-Immigration Planning Considerations for the HNW Client – Think Before You Leap – Joshua S. Rubenstein, Katten Muchin Rosenman LLP 17
4 Best Interest – Conflict of Interest: The Fiduciary Rule and Financial Advisory and Financial Planning Services – Margaret O’Sullivan, O’Sullivan Estate Lawyers LLP 23
5 Family Asset Protection – the Latest Key Developments: Variation of Nuptial Settlements and Family Companies Coming Under Further Attack in the Divorce Courts – Marcus Dearle & Jessica Henson, Berwin Leighton Paisner LLP 26
6 Navigating Complex US Immigration Laws: US Visas & Taxation – Mark E. Haranzo & Reaz H. Jafri, Holland & Knight LLP / Withers Bergman LLP 29
7 Philanthropy in Canada: New Rules and Opportunities – Elise Pulver & Rachel Blumenfeld, Aird & Berlis LLP 34
8 Still a Good Bet? What You Need to Know Now About Investing in UK Residential Property – Marilyn McKeever, New Quadrant Partners Limited 37
9 The Limits to Transparency – George Hodgson & Emily Deane TEP, Society of Trust and Estate Practitioners (STEP) 41
10 Andorra Arqués Ribert Junyer – Advocats: Jaume Ribert i Llovet & Jordi Junyer i Ricart 44
11 Austria DORDA Rechtsanwälte GmbH: Paul Doralt & Katharina Binder 54
12 Bahamas Higgs & Johnson: Heather L. Thompson & Kamala M. Richardson 60
Welcome to the seventh edition of The International Comparative Legal Guide to: Private Client.This guide provides corporate counsel and international practitioners with a comprehensive worldwide legal analysis of the laws and regulations of private client work.It is divided into two main sections:Nine general chapters. These are designed to provide readers with a comprehensive overview of key issues affecting private client work, particularly from the perspective of a multi-jurisdictional transaction.Country question and answer chapters. These provide a broad overview of common issues in private client laws and regulations in 28 jurisdictions.All chapters are written by leading private client lawyers and industry specialists and we are extremely grateful for their excellent contributions.Special thanks are reserved for the contributing editors Jonathan Conder and Robin Vos of Macfarlanes LLP for their invaluable assistance and STEP for their continued and valued participation in the guide.Global Legal Group hopes that you find this guide practical and interesting.The International Comparative Legal Guide series is also available online at www.iclg.com.
Alan Falach LL.M. Group Consulting Editor Global Legal Group [email protected]
The International Comparative Legal Guide to: Private Client 2018
Country Question and Answer Chapters: 30 Liechtenstein Ospelt & Partner Attorneys at Law Ltd.: Dr. iur. Alexander Wolfgang Ospelt
& Mag. iur. Dr. iur. Sascha Kurt Brunner 191
31 Portugal Vieira de Almeida: Tiago Marreiros Moreira & Frederico Antas 198
Family Asset Protection – the Latest Key Developments: Variation of Nuptial Settlements and Family Companies Coming Under Further Attack in the Divorce Courts
■ ensuring that this broad class of potential beneficiaries does not include any spouse or prospective spouse, but includes future generations of the family.
Nuptial Settlements and the Risk of Variation – The Second Defence
Even if nuptiality cannot be avoided, a well-advised settlor will consider taking advantage of a secondary line of defence against an attacking spouse: the protection afforded by the so-called “firewall” legislation of certain offshore jurisdictions. In essence, this legislation (found in the Cayman islands, the Bahamas, Bermuda, the British Virgin Islands, Isle of Man, Jersey and Guernsey) ensures that any issues arising in relation to the trust must be determined in accordance with that jurisdiction’s law. Any foreign judgment which is inconsistent with that law will not be recognised.In practice, this means that even if the family court makes an order to vary a trust governed by the laws of one of these jurisdictions, the trustees are under no obligation to comply with such an order. In fact, in certain circumstances the offshore Court will go so far as to direct the trustees that they must not comply with such an order (see, for example, the Cayman case of RBS Coutts Cayman Ltd v W [2010]).
Developing Lines of Attack: Assets in Corporate Structures Being Treated as Being Held on Resulting Trusts and/or as Variable Nuptial Settlements
More often than not, when complex and elaborate corporate and real estate structures are created, insufficient consideration is given to the potentially serious impact a divorce may have on that structure. When companies are scrutinised and come under attack in the divorce courts, the protection afforded by the corporate structure is not as watertight as many assume. And this often involves attacks on real estate.
Why Do Companies End Up on the Table?
On divorce, the court has the power to order a sale or transfer of shares in a company owned by a party. But, in certain circumstances, where appropriate, the family courts have gone far further.In Prest, the Supreme Court considered the issue of when a court may take the assets of a company in order to satisfy the personal liability of another party. Or, to look at it another way, when the court may “pierce the corporate veil”.
If the family court considers a trust to constitute a ‘nuptial settlement’, this will allow the court to open up its armoury under the matrimonial legislation, s24(1)(c) Matrimonial Causes Act 1973, and make an order to vary the trust in favour of the financially weaker spouse. From a trust perspective, this is intervention by the family court at its most invasive.And what about spousal claims against corporate structures, particularly those holding residential and commercial real estate? This topic highlights the communications/knowledge development divide that has historically existed between Family Division and Chancery Division lawyers. This divide is only slowly starting to be bridged following the Supreme Court’s decision in Prest v Petrodel Resources Limited & Others [2013] (‘Prest’).
Nuptial Settlements and the Risk of Variation – The First Defence
First of all, the court has to be satisfied that there is a ‘nuptial settlement’ – that there is a connection between the settlement and the marriage in question. The term is not defined in the legislation and judicial debate continues over what it is intended to capture. The leading modern case on the meaning of nuptial settlements, Brooks v Brooks [1996], a BLP (Paisner & Co) case in which we acted for the successful wife, provides a useful starting point. In that case, the House of Lords (as it then was) treated a private pension fund as a nuptial, and therefore variable, settlement. Lord Nicholls suggested a nuptial settlement would be one which makes: “some form of continuing provision for both or either of the parties to a marriage, with or without provision for their children”.Clearly, trusts made in contemplation of the marriage will fall squarely within the net, as will trusts holding the couple’s matrimonial home. However, the courts have also demonstrated a willingness to find ‘nuptiality’ where a trust only makes provision for one of the parties to the marriage. Ultimately, all cases are fact-sensitive. The court will look at the reality of the situation and assess the quality of the connection between the trust and the marriage. This assessment will be informed by factors such as the identity of the settlor and the beneficiaries, the time at which the trust was established and the intentions expressed in any letter of wishes. With this in mind, there are obvious steps to take when drafting a trust to reduce, if not avoid entirely, indications of nuptiality. These include:■ thinking carefully about the wording of letters of wishes and
the impact that this could have one day in a divorce court;■ ensuring that the trust has a broad class of beneficiaries, as
this makes it more difficult to link the trust to any particular marriage; and
This puts companies firmly under the family law spotlight.2nd case: Resulting trust…and leaving the door open for a variation.More recently, the court was invited to consider a similar issue in Chai v Peng & Others [2017] – a case involving the Chairman of Laura Ashley, Dr. Khoo Kay Peng, and his former wife and ex Miss Malaysia, Pauline Chai. Among numerous other issues, the case involved UK real estate worth £18 million held in a complex family company structure, which was ultimately owned by the husband. Applying the decision and principles in Prest, the court found that the companies within the structure held the estate on resulting trust for the husband and was capable of being transferred to the wife as part of her overall award. But it went even further. The wife had also applied to vary the company structure as a nuptial settlement. Having found the estate was held on resulting trust (and therefore capable of being transferred to the wife), the judge (Bodey J) did not have to deal with the wife’s variation application. However, he still chose to as a precaution in case he was found to be wrong on the resulting trust point. In doing so, the judge decided hypothetically that the overlying structure itself would not be variable, as this would have, in his view, deprived the companies of their property and paid insufficient regard to the decision in Prest. But he concluded that the provision of accommodation (which in this case was via a notional licence to occupy) would be, if necessary, capable of variation in order to provide the wife with accommodation during her lifetime. In addition, the judge adjourned and left open the wife’s variation application as security in the event the husband did not comply with the court’s lump sum order. In doing so, the judge commented: “the wife may restore that application with a view to trying to achieve income provision, by way of variation of settlement, to replace some of what she would have lost by virtue of the husband not complying in full with my proposed order”. Again, this has potentially serious implications. Effectively, the judge expressed a view that, if necessary, and despite the fact that the overlying corporate structure would remain unvaried, the court still had the power to treat the companies holding the real estate as a variable nuptial settlement to produce an income for the wife in the future.But the law in this area, particularly whether companies are variable as nuptial settlements, is currently in a state of flux. Opinion is divided amongst both the judiciary and lawyers. The potential financial risk and exposure to family companies in the event of a divorce, however, is both real and obvious. While the law remains unclear, there is even more need for HNW and UHNW families and their family law, private client and corporate advisers to be alive to these risks – and, in every case they should always consider advising potential spouses/spouses to enter into responsible pre/post-nuptial agreements.
The case involved a wealthy oil trader, Mr. Prest, who, between 1995 and 2004, transferred seven valuable UK residential properties to a group of companies known as the Petrodel Group. The question for the Supreme Court was whether it could order the properties to be transferred to the wife, as part of the financial settlement on divorce, given that they legally belonged to the companies, not Mr. Prest. The Supreme Court clarified that only in very exceptional circumstances will the court be able to ‘pierce the corporate veil’. However, it did not stop there. The Supreme Court went on to conclude that, on the facts and in particular the way in which the properties had been acquired, they were being held on resulting trust by the companies for the husband. The court subsequently ordered the companies to transfer the properties to the wife and, in doing so, fundamentally changed the way family courts could approach the issue. The significance of this decision – particularly to those with corporate interests – cannot be underplayed. In the right circumstances, the family courts now have a clear line of attack. This potentially affects anyone seeking to protect personal assets by placing them in a corporate structure. Increasingly, we are likely to see courts lifting – as opposed to ‘piercing’ – the corporate veil. Courts will look at the reality of the situation when it appears that assets may have been transferred to a company in order to conceal their true ownership: ‘who is the beneficial owner of the asset?’ will be the key question.Given the court’s broad and ‘unfettered discretion’ when deciding how to vary a nuptial settlement, there are potentially significant ramifications for those involved with substantial family companies. Two recent cases amply illustrate the court’s often robust approach to this issue.1st case: When a family company becomes a variable nuptial settlement.In DR v GR and Others [2013], the wife applied for the variation of a settlement involving a discretionary Jersey trust. The trust owned a Liberian company, which in turn owned a UK company, which in turn owned two further companies. It was argued, on behalf of the companies, that the judge (Mostyn J) was unable to order anything other than a transfer of the shareholdings in the Liberian company and could not deal with the assets at the bottom of the settlement. The judge disagreed. He charged assets held by the companies in favour of the wife and removed her as a director of the companies. In doing so, he commented: “a family company which under an arrangement makes some form of continuing provision for both or either of the parties to a marriage is capable of itself of amounting to a variable nuptial settlement whether or not the company is owned by a trust of which the spouses are formal beneficiaries”. He went on to say that if: “some form of continuing provision for both or either of the parties to a marriage” has been made, “which would include, on the authorities, the provision of accommodation... from assets held by a group of family companies then the entire set-up, when viewed as a whole, is capable of amounting to a variable nuptial settlement”.
Berwin Leighton Paisner LLP Family Asset Protection – Key Developments
BLP Private Wealth has helped over 5,000 wealth owners around the world, their families and their other advisers, to protect, grow and pass on their personal and business wealth. Clients have relied on our expert team of lawyers to take care of the fine details of cross-border tax, property investment, trusts and foundations, dispute resolution, long-term succession plans, risks to privacy, family law and many other issues facing them and their businesses.
We are ranked as a Tier 1 firm by The Legal 500 for both Personal tax, trusts and probate and Contentious trusts and probate and in Tier 2 by Chambers and Partners.
BLP Private Wealth is a focused unit of international law firm Berwin Leighton Paisner, which advises many of the world’s best known financial institutions and brands from its 14 international offices, and has been awarded Law Firm of the Year eight times since 2004.
Marcus is a partner and leads BLP’s international Family Asset Protection team across Asia and Europe.
As one of Asia’s leading Private Client and Family lawyers, he advises High-Net-Worth and Ultra-High-Net-Worth individuals, families and trustees on all aspects of relationship breakdown.
His advice includes asset protection, complex international trusts and corporate structures, the commercial interests of private capital, multi-jurisdictional pre- and post-nuptial agreements and cross-border matrimonial litigation. Marcus also advises on children dispute issues and has international, cutting-edge expertise in child surrogacy law.
Marcus has 27 years’ of experience in family law and wealth planning, and is qualified in Hong Kong, England & Wales and the BVI. He regularly speaks at conferences and contributes to a number of broadsheet newspapers, textbooks, magazines and journals. He has acted in a number of high-profile and ground-breaking international family law cases and spearheaded initiatives advancing family law in Hong Kong. He is a Fellow of the International Academy of Family Lawyers and an Officer of the IBA Family Law Committee.
Jessica is a senior associate and member of BLP's Private Client Litigation and Family Asset Protection teams. She specialises in disputes and court applications in relation to trusts, wills, tax planning and the administration of estates.
Jessica also has notable experience of asset preservation in the context of cross-jurisdictional divorce proceedings, acting variously for spouses and trustees. She frequently advises on nuptial agreements, often with cross-jurisdictional connections.
Jessica also advises on non-contentious wealth planning and trust matters.
Jessica obtained a first class degree in Classics at Cambridge University. Jessica is a member of the Association of Contentious Trust and Probate Specialists (ACTAPS) and the Society of Trust and Estate Practitioners (STEP) having completed the Diploma in Trusts & Estates.
Berwin Leighton Paisner LLP Family Asset Protection – Key Developments
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