¶ 2001
Overview
Scope of the chapter. Chapter 18 described what a Nevis multiform foundation is and how it is formed, and chapter 19 described how it is governed (see supra chs. 18–19). This chapter turns to what the foundation is used for. It examines the foundation as a vehicle for succession, its statutory answer to forced-heirship and other personal-relationship claims, its creditor provisions measured against those of the international trust, its use as trustee of a Nevis international trust and as beneficiary of one, its use as the holder of interests in a Nevis limited liability company, and the provisions that let a foundation change its stated form, absorb another Nevis entity, merge, or move to or from another jurisdiction. Multiform Foundations Ordinance, Cap. 7.08(N), §§ 9, 10, 46–48, 62–83, 108–110 (rev. ed. 2017) ("MFO"). The chapter closes with worked structures, model provisions and a checklist.
The planning premise. The foundation is a legal person that owns its property. MFO §§ 3(2), 13(1). A subscription is irrevocable unless the constitution reserves a power of revocation, and title passes to the foundation. Id. § 13(1). Three consequences drive the planning uses examined here. First, because the foundation and not the founder owns the property, the founder's death does not put that property into the founder's estate, and the foundation continues without any grant of probate or administration (see infra ¶ 2010). Second, because the foundation has no owners outside the company and partnership forms, a creditor of a beneficiary or of the founder must find a statutory route to the property, and the Ordinance closes most of those routes (see infra ¶ 2030). Third, because the foundation's characteristics are borrowed from the trust, company or partnership statute named by its stated form, the same legal person can be redesigned during its life by changing that form (see infra ¶ 2060).
The comparison that matters. For most clients the practical question is whether to use a foundation, an international trust under the Nevis International Exempt Trust Ordinance, Cap. 7.03(N) (rev. ed. 2017) ("NIETO"), or a combination of the two. The two statutes share most of their protective architecture, and much of the foundation's creditor and heirship language was taken from the trust Ordinance. The differences are fewer than the similarities but they are material: a shorter time for a creditor of the founder to sue, a smaller bond with a narrower reach, a public register in place of a closed one, mandatory dissolution on cash-flow insolvency, and a power to change form that the trust does not have. This chapter identifies each difference where it arises and Table 20-1 brings them together (see infra ¶ 2030.08).
No reported decisions. No reported decision of the High Court of Saint Christopher and Nevis, the Eastern Caribbean Court of Appeal or the Privy Council construes the provisions of the foundation Ordinance examined in this chapter (see supra ¶ 1810.08). Where a provision follows the trust Ordinance, the decisions and practice on that Ordinance are the nearest guide (see supra chs. 5–11; see infra chs. 21–23). Where it does not, the chapter states the reading the text supports and identifies it as untested.
Companion volumes. The Cook Islands and Belize enacted foundation statutes after Nevis: the Foundations Act 2012 (Cook Is.) and the International Foundations Act 2010 (Belize). Where a comparison helps, this chapter refers to the treatment of those statutes in Lighthouse on the Cook Islands: International Trusts, LLCs, and Foundations and Lighthouse on Belize: Trusts, LLCs, and Foundations, chapters 18 to 20 of each, and to Lighthouse on Asset Protection for the civil-law foundations of Liechtenstein and Panama.