In some countries, like the United States, Luxembourg, Singapore, Jersey and Hong Kong, and even in countries like Bermuda, Cayman and the British Virgin Islands, special attention has been paid to the peculiarities of a “family office”.
A family office vehicle is an entity established to manage a range of services typically required by wealthy persons within a single family (a single-family office) or multiple unrelated families (within a multi-family office). This type of entity is usually set up to provide a “one-stop shop”, primarily to serve wealth management needs, such as investment planning, charitable giving, insurance and tax, but also sometimes extends to non-financial matters, such as travel arrangements, schooling and even household services.
What’s so special about a family office?
These entities are not simply general investment vehicles for the general public, like a standard investment company. They are tailored specifically to meet the particular needs of the family or families they intend to serve. The structure is therefore one that must be flexible enough to adapt to the nuances and priorities of the specific family. It is a highly personalised structure.
Who needs a family office?
Typically, it is the wealthy and the ultra-wealthy who are interested in utilising a family office vehicle to preserve and maximise their wealth within the family. However, this structure may be relevant to anyone interested in establishing, maintaining and growing generational wealth.
How is a family office established?
As a highly flexible structure, a family office vehicle can be established in many different ways: whether through the use of a trust, a limited liability company, a partnership or simply an unincorporated association. What is important is that the structure facilitates the centralisation of the particular skills required to meet the needs of the family, whether it be through having those skills in-house or outsourcing to other professionals to provide the investment management, financial planning, estate or tax planning, charitable giving or even lifestyle services to the family.
The family office vehicle, therefore, becomes the central point for the family to interact with investment managers, lawyers, tax advisors, travel agents, and whatever the family may need.
Determining which structure(s) the family office may use may involve considerations of control, tax efficiency, asset protection, privacy and confidentiality. A company may afford family members greater control than a trust, a trust may offer a greater degree of privacy, a company or a trust may allow for certain tax benefits not available in certain pass-through structures like a partnership. A consideration of all of these factors, along with considerations of the family dynamics, the location of the assets, the regulatory regimes, and the access to professionals within and outside the family, help to determine what structure may be most suited to the particular family. Whatever the structure, however, ensure that the governing document, whether the shareholders’ agreement, the trust deed, the partnership agreement or the constitution, is carefully drafted to align with the family’s common objectives and expectations. That governance structure will be the lifeblood of the family office.
How do jurisdictions support family offices?
Jurisdictions support family offices generally by having a robust network of professionals to provide the skills required by the families, a business environment that offers a variety of vehicle types and facilitates the ease of doing business, a regulatory framework that is compliant with global standards, resilient and modern but not over-burdensome.
Luxembourg, for example, has specific legislation relating to family offices and seeks to regulate multi-family offices, which can only be operated by certain kinds of professionals, such as lawyers or investment advisors. They do not, however, regulate single-family offices. Singapore, on the other hand, regulates single-family offices by way of regulatory exemptions if they meet specific conditions, including being wholly owned and controlled by members of the same family, which may entitle the single-family office to benefit from certain tax exemptions.
Although Bermuda, Cayman and the British Virgin Islands do not have specific legislation relating to family offices, they provide a supportive regulatory framework by focusing on particular matters relevant to family offices, such as special work permit arrangements, flexible corporate and trust structures, simplified licensing procedures and dedicated government support for approvals. The United States, Jersey and Hong Kong also have no specific legislation but expressly exempt the management of the wealth of one family from the usual investment licenses required by their applicable regulator.
What does Jamaica have to offer?
Jamaica has the professionals and legislation in place for various types of vehicles needed to support the establishment and operation of family office structures, such as the recently modernised Trusts Act. Some of the legislation for these vehicles, however, such as those dealing with modern partnerships and segregated account companies, although passed, are either not yet in force or not yet fully operationalised. Bringing these fully on board and looking at specifically exempting family offices from regulation under the Securities Act may go some way to support and encourage the establishment of family offices in Jamaica.
Hilary Reid is a Partner at Myers, Fletcher & Gordon, and is a member of the firm’s Commercial Department. Hilary may be contacted via [email protected] or www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.
Syndicated from Our Today · originally published .
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