¶ 1801
Overview
Scope of the chapter. This chapter begins Part IV, on foundations. It examines the Foundations Act 2012 (No. 11) as a statute: where it came from, what kind of entity it creates, what the two constitutional documents of a foundation must contain, who may bring a foundation into existence, how the Registrar establishes and registers it, and the ways in which it may leave the Cook Islands, be revoked or come to an end. Chapter 19 examines the governance of a foundation once it exists: the council, the enforcer, the rights of founders and beneficiaries, and the duty to keep and disclose records (see infra ch. 19). Chapter 20 examines the foundation in planning: succession, forced heirship, the protective provisions on creditors and foreign judgments, and the use of a foundation alongside an international trust (see infra ch. 20).
The entity in brief. A Cook Islands foundation is a legal person, established by the Registrar on the application of a licensed trustee company, that holds assets for objects stated in a public foundation instrument and administered by a council under private foundation rules. Foundations Act 2012, §§ 4, 5, 9, 22, 32–34 (Cook Is.). The foundation owns its assets. Its beneficiaries, if it has any, have no interest in them. Id. § 29(1). It may exist for persons, for a purpose, or for both, and its objects may be charitable, non-charitable or both. Id. § 7(3)–(4). Every foundation must have a registered agent, which must be a trustee company, and every foundation's rules must name a default beneficiary to take what remains when it ends. Id. §§ 16(1), 27(1).
Why the statute matters. The foundation is the third of the vehicles this treatise examines, after the international trust and the limited liability company. It answers a need that the other two meet less well. Clients from civil-law countries often know the foundation and distrust the trust, which their own law does not recognise and which their tax authorities may treat unpredictably. A foundation gives them an owner of the assets that is a legal person, governed by a council, under a statute that sets out the roles of each participant. The Cook Islands Act combines that civil-law form with the protective provisions of the International Trusts Act: Cook Islands law governs every question about the foundation, foreign forced-heirship and matrimonial claims are excluded, foreign judgments that ignore the Act are not recognised, and a creditor of the founder must prove fraud beyond reasonable doubt within short limitation periods. Id. §§ 36–40 (see infra ch. 20).
Plan of the chapter. Paragraph 1810 describes the origins of the Act, its amendment in 2013 and by the Trustee Companies Act 2014, and its place among the international statutes. Paragraph 1820 examines the nature of a foundation: personality, capacity, ownership of the assets and the position of beneficiaries. Paragraph 1830 examines the objects. Paragraphs 1840 and 1850 examine the foundation instrument and the foundation rules. Paragraph 1860 examines founders, dedicators and the endowment. Paragraph 1870 examines establishment, registration, renewal, amendment and the Registrar. Paragraph 1880 examines migration into and out of the Cook Islands, revocation, termination, winding up and the court's powers in the life of a foundation. Paragraph 1890 compares the foundation with the international trust and the LLC, and with the foundations of Nevis and Belize, and closes with a formation checklist.
Terminology. In this chapter "the Act" means the Foundations Act 2012 as amended by the Foundations Amendment Act 2013 and by the Trustee Companies Act 2014. Section references without a statute are to the Act. The Act's own vocabulary is used throughout: the "founder" is the person who instructed the trustee company to apply for establishment; a "dedicator" is anyone else who dedicates assets; the "foundation instrument" is the public document filed with the Registrar; the "foundation rules" are the private document held by the registered agent; the "council" administers the foundation; the "enforcer" is an optional supervisor; and a "person with sufficient interest" is a person who may apply to the High Court. Id. § 3. Dollar amounts in the Schedule of fees are in United States dollars, as the Schedule states; other dollar amounts in the Act are in New Zealand dollars, the currency named in the definition of "dollar." Id. § 3, sched.