Curaçao Trust could be used for asset segregation purposes

According to Professor of Law David Hayton, an Anglo-Saxon trust arises from the settlor’s transfer of title to property to another person, intending that person to be a trustee-manager of it for the benefit of beneficiaries or for a charitable or other permitted purpose. Trusts are founded on a transfer of title to property: contracts are not. Professor Hayton:

Such a contractual concept inevitably leads – or rather misleads – civil lawyers to consider that the Anglo-Saxon trust is simply a glorified form of contract between the settlor and the trustees for the benefit of beneficiaries who have rights to enforce the terms of the trust against the trustees. This, most definitely, is not the case, as becomes clear if a detailed contrast is made between the trust concept and the contract concept, such concepts being mutually exclusive, though a contract may lead to the creation of a trust, while a trust upon fulfilment of its terms may result merely in a contract of loan (eg the borrowed money held on trust for the lender is used for the sole purpose for which the money was lent, so a mere debtor-creditor relationship then arises.

Curaçao is a civil law jurisdiction and its concept of a trust differs from the Anglo-Saxon one. Since the 1st of January 2012 it is possible to set up an Anglo-American like trust pursuant to Curaçao law. The Curaçao Trust must be incorporated by a notarial deed executed before a civil law notary in Curaçao.

The Curaçao Trust can be used for many purposes, including as a top holding vehicle for international structures, as asset protection tool for previously privately owned assets, as a business or investment trust, in financing- and securitization transactions, as a security trustee and also to set up a protected cell company (or segregated portfolio company). The protected cell company is an interesting vehicle which can be used for umbrella funds and captive insurance companies.

Especially for parties in civil law jurisdictions, whom are generally not familiar with trusts or are reluctant in using trusts, the Curaçao Trust could be attractive as Curaçao is a civil law jurisdiction. Although it is originally a common law instrument, the Curaçao Trust is embedded in our civil law legal system, possibly making it easier to comprehend than the real common law trust. Finally, using a Curaçao Trust has the advantage that Curaçao is part of the Kingdom of the Netherlands and thus that the Dutch Supreme Court (Hoge Raad) in the Hague has ultimate jurisdiction over any disputes that may be brought for the courts in Curaçao.

Karel Frielink
Attorney (Lawyer) / Partner

(8 February 2014)


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