BVI VISTA trusts
22 October 2020
The British Virgin Islands' Virgin Islands Special Trusts Act 2003 (as amended in 2013) created a new type of trust (a "VISTA trust") intended to solve a commonly perceived dilemma with the use of trusts to hold the shares of underlying companies. This was that, on the one hand, the settlor will often wish to retain as much control as possible over the management, particularly as to investments, of the company yet, on the other, the trustee would remain ultimately responsible (and thus potentially liable) for avoiding loss through mismanagement or loss-making investments.
Whilst this dilemma had, to a degree, been addressed through the modern inclusion of "anti-Bartlett" and similar provisions in trust instruments, it was thought that enshrining the solution in statute would bring greater certainty and comfort such that these wishes of potential settlors could be met without potential trustees being reluctant to take on the trusteeship.
The essence of how the dilemma is solved is that what would otherwise be:
- the trustee's obligation to oversee the underlying company and, where necessary, to intervene in its management can be entirely negated or partially limited;
- the trustee's powers, as shareholder, in relation to voting the "designated shares" and appointment and removal of directors through voting the shares can be limited and defined in what are known as "office of director rules";
- the trustee's obligation to consider, for example, selling the designated shares and investing in less risky assets can be removed by an obligation to retain the shares indefinitely or only to dispose of them with the consent of the directors of the company or other persons named; and
- any vested beneficiaries' rights, under the rule in Saunders v Vautier (1841) 49 ER 282, to wind up the trust are dis-applied for twenty years.
As might be imagined, the solution required various safeguards and other related specific statutory provisions:
- at least one of the trustees of a VISTA trust must be a BVI company licensed under the Banks and Trust Companies Act, or a BVI private trust company;
- VISTA does not apply to all BVI trusts, it must be specifically stated in the trust instrument to apply (however BVI trusts which were not originally VISTA trusts may be converted);
- VISTA applies to the designated shares in a BVI company (or companies) only (hence most VISTA trusts are structured so that all assets are held through an underlying BVI company);
- the trust deed may specify "permitted grounds for complaint" in which an "interested person, may require the trustee to intervene in the management of the company under an "intervention call";
- the interested persons, the directors and any person who should be a director of the underlying company have the power to apply to the court if the trustee breaches its duties or obligations under VISTA;
- where retention of the shares is no longer compatible with the wishes of the settlor, any interested person may apply to the court for permission for the shares to be sold or disposed of; and
- where it is necessary to ascertain the wishes of the settlor, there is an obligation to consult the settlor or, if this is impractical or the settlor is deceased, account must be taken of the settlor's communicated wishes or what those wishes would most likely have been.
In addition to all the usual good and valid reasons for establishing a trust, VISTA trusts have proven particularly useful for trusts to hold underlying companies where, for instance:
- the settlor has control over investments in an investment account held by the company;
- the underlying company holds family operating companies or other such potentially risky assets or assets which the settlor would not wish disposed of; and
- the VISTA trust is also structured as a BVI purpose trust and the underlying company is a BVI private trust company.