Trust formation in Common Law jurisdictions

Preconditions.

As of today, in the Euro-Atlantic region, Eastern Europe, and progressive countries in Asia, there are no jurisdictions left that allow for the confidentiality of information about ultimate beneficial owners of companies. Beneficial ownership registries in all countries of the European Economic Area, except for specific cases such as Liechtenstein and Switzerland, are publicly accessible. This is a mandatory requirement set forth in the Fifth Anti-Money Laundering Directive issued by the European Union, as well as in the recommendations of the Financial Action Task Force (FATF) aimed at combating money laundering and the financing of terrorism.

Classical offshore jurisdictions, where registers of beneficiaries are still closed, partially address the issue of anonymity and confidentiality for company beneficiaries. However, in a broader sense, resorting to such jurisdictions entails a range of additional risks. First and foremost, companies from these jurisdictions do not enjoy the trust of banks and regulators and are rightfully considered marginal.

Trust

The desire to maintain confidentiality is not wrongful, especially considering that in all common law jurisdictions (and beyond), there is a separate legislative act in place to address this (among other things). We are referring to trust legislation, which involves the transfer of certain property from one person to another, in temporary or permanent ownership. We will not delve into all the nuances and intricacies, but will limit ourselves to the information that allows us to describe the service we offer. Specifically, we offer the only possible format of this service that meets the objective of confidentiality preservation and is legally available to us.
There are several types of trusts designed to serve different purposes. We are only interested in one type of trust, which is the Bare Trust - the only type of the Trust that does not require registration with the tax authority. Also, the Bare Trust can be established between two private individuals without the involvement of professional regulated trust service providers.

The Bare Trust is a form of contractual relationship in which one person transfers certain property to another. We will consider the simplest and most relevant way for us to apply Trust, where the company’s shares and, as a result, its assets will serve as the property.

A Trust is a contractual relationship that is declared and agreed-on by a corresponding document - the Declaration of Trust or Trust Deed, as it may also be called. The Declaration of Trust is a document that outlines the general provisions and conditions for the transfer and ownership of the property. By signing this document, you enter into a relationship of "trustee - beneficiary" which allows you to legally benefit from the operation of the business without being mentioned as a shareholder of the company, as the shares are held by the trustee on behalf of the beneficiary.

Please note that this is just one side of the coin. The other side is that in the modern world, there are specific standards and norms for conducting business activities, as well as protocols to combat money laundering and terrorist financing. According to these standards, any credit, financial, or other institution that provides services to an organisation is required to identify the ultimate beneficial owner of that organisation. At this stage, the beneficial owner must demonstrate that they are in fact the owner of the organisation but hold its shares through a Trust. If they fail to do so, it does not necessarily mean they have violated the law. It means they have violated the rules of a specific private organisation. However, concealing the beneficiary's information may be an indication of a legal violation or may be considered as such, depending on the circumstances. For more detailed consultation, please contact our specialist at ak@bridgescsp.com.

While providing the service, Bridges solely acts as a consultant in the formation of a Trust between its participants. We are not interested parties, participants of the trust, or providers of trustee, or trust management services.

Formation.

A few words about setting up a simple trust. A Bare Trust can remain confidential, which means that the law does not require Trust members to notify regulatory authorities of its existence. Only the Trust members and the notary who certified their signatures of the Trust in the Declaration of Trust can be aware of it. Certification serves as an additional measure to provide confirmation of the Trust's existence in case of disputes. It is important to note that the fact of the agreements' existence still needs to be proven, as well as the right to ownership. These are not obvious matters in Common Law, as the law recognises that a person formally assigned some property may not necessarily be its actual owner.

On the other hand, the fact that there is another owner of the property, in addition to the formally declared one, or that there are implicit agreements regarding this property, also needs to be proven. The simple certification of signatures on the document serves as a means of confirming the validity of agreements between the parties.

Records of all certifications, including information about the document's content, its copy, the date of attestation, the method of signatory identification, and the amount paid for attestation, are kept by the notary for a period of 12 years

Upon the death or retirement of a notary, all records are transferred to a special government registry. A notary public is a licensed lawyer with a serial certificate. All notarisations are confidential, and access to the records is only possible by court order or within the framework of a police investigation.