The Seychelles’ Foundations Act 2009 (the Act) was enacted in late December 2009 and provides for an exciting new addition to Seychelles’ financial services product portfolio – Seychelles foundations. While foundations continue to be used worldwide for charitable objects, private foundations are increasingly being used for wealth management purposes. While use of foundations for such purposes was pioneered in civil law jurisdictions (including Liechtenstein, Panama and Austria), in recent years a growing number of common law jurisdictions have introduced foundation legislation (most notably Jersey in mid-2009). Interest in foundations is definitely on the rise.
A Seychelles foundation is established by a charter made in writing and signed by one or more founders and on the issuance of a certificate of registration by the Seychelles International Business Authority (SIBA) upon registration of the foundation under the Act. The sole document to be filed when applying for registration of a Seychelles foundation is the foundation’s charter. On registration, a foundation is a separate legal entity. A competitive fee of USD200 is payable to SIBA on establishment of a Seychelles foundation. An annual renewal fee of USD200 is payable annually thereafter to the Registry (due on the day before the foundation’s initial registration anniversary date).
The assets of a foundation shall be of a value of not less than USD1 or the equivalent in any other currency. The initial assets may be endowed after registration of a foundation. Unlike in other foundation jurisdictions, it is not mandatory to state in the charter, or to otherwise file at the Registry, the names of the councillors of a Seychelles foundation. This preserves privacy, in that the filed charter is accessible by public search. Likewise, it is not obligatory to state in the charter, or to otherwise file at the Registry, the names of the beneficiaries. While the charter of a foundation is required to be filed at the Registry, there is no requirement to file a foundation’s regulations. While a foundation must have a charter, it may adopt regulations. A foundation will commonly adopt regulations, to ensure that matters pertaining to foundation beneficiaries and distribution entitlements remain non-public.
The objects of a Seychelles foundation may be charitable, non-charitable or both, and may be to benefit a beneficiary or beneficiaries, or to carry out a specified purpose, or to do both. A foundation’s objects must include the management of the foundation’s assets and income and the distribution thereof, as the council may by resolution of councillors determine pursuant to the charter or regulations, to the beneficiaries of a foundation or, in the case of a foundation which has a specified purpose or purposes, in fulfillment of that specified purpose or purposes.
A foundation’s Council manages the foundation and is responsible for the administration and distribution of the foundation’s assets and carrying out the foundation’s objects. A Seychelles foundation must have a minimum of one councillor, who may be a natural person or corporate entity. A founder may be a councillor, but a founder cannot be a sole councillor. A protector of a foundation may be a councillor, but a protector cannot be a sole councillor. There is no mandatory requirement for the appointment of a Seychelles resident and licensed councillor, although such appointments are likely to be common in view of tax planning reasons. It can be noted that a Seychelles foundation must have a registered agent in Seychelles, being a company licensed by SIBA to conduct foundation services.
A foundation is exempt from Seychelles business tax on its income and is exempt from Seychelles withholding tax, social security contributions and stamp duty (except in relation to any permitted lease of Seychelles real estate for own office use). A foundation may own assets worldwide. However, the assets of a foundation may not include any Seychelles real estate or other Seychelles property (subject to various exceptions under the Act, including shares in Seychelles IBCs, interests under a Seychelles trust, limited partnership or another foundation, or a Seychelles bank account, etc).
The founder of a Seychelles foundation is the person who subscribes his or her name to the charter establishing a foundation, acting either on that person’s own account or on behalf of another, and who endows the foundation with its initial assets. Consequently, nominee founders are permissible. In common with other foundation jurisdictions, it is mandatory to state the name of the founder in the charter. As a foundation’s charter is filed at the Registry (and is therefore publicly accessible), a nominee founder is commonly used to enhance privacy.
A founder may be a natural person or a corporate entity, and a founder may be a foundation beneficiary but not the sole beneficiary. A founder may reserve, in the foundation charter or regulations, to the founder or for other persons, various rights – such as the right to approve investment activities of the foundation and the right to appoint or remove councillors, protectors and beneficiaries. The founder may, in the foundation charter or by written instrument, assign or transfer all or any part of his or her rights, powers and obligations as founder to such person or persons as the founder shall determine.
The appointment of a protector (otherwise known as a guardian) is optional. A protector may be a natural or legal person. Typically, where appointed, a protector is given limited veto power in that the protector’s prior approval will be required in respect of certain foundation decisions, such as the addition or removal of a beneficiary or councillor. A founder, beneficiary or councillor of a foundation may be appointed as a protector, but a sole councillor or a sole beneficiary may not act as a protector. If required, the appointment of a protector may be effected by a foundation’s regulations, so that the protector’s identity is not publicly accessible (as a foundation’s regulations, unlike its charter, are not filed at the Registry).
Seychelles foundation assets are the property of the foundation only, that is, neither the founder nor the beneficiaries have any ownership interest in foundation assets. Once a founder has transferred assets to a foundation, such assets belong solely to the foundation and cease to be property of the founder. Foundation assets do not become the assets of a beneficiary unless distributed in accordance with the provisions of the foundation’s charter or regulations.
The Act provides for strong foundation asset protection, including as follows:
While a Seychelles foundation is required to keep proper books of account and records as its council considers necessary in order to reflect the financial position of the foundation, it is not subject to a mandatory annual audit requirement or to any requirement to file financial accounts or annual return in Seychelles. The Act provides for continuation of foreign foundations in Seychelles and for continuation of Seychelles foundations overseas. The Act also provides for two or more existing foundations to consolidate into a new foundation and for an existing foundation to merge into another existing foundation.
Simon Mitchell, Seychelles Attorney-at-Law and Consultant to Mayfair Trust Group Limited, Seychelles