Under a VISTA trust, the settlor may transfer ownership of assets to a trust while retaining operational control over the underlying company.
Legal framework
The VISTA trust was introduced by the Virgin Islands Special Trust Act 2003.
The structure of the VISTA trust involves an underlying company incorporated under the laws of the British Virgin Islands, whose shares — the “designated shares” — constitute the trust fund and are held by a trustee, the Private Trust Company (the “PTC”) (Section 2 VISTA).
The main features of the VISTA trust are as follows:
- the trustee is relieved of the duty to manage the trust assets, which are administered and managed by the underlying company (Sections 3(b) and 6(2)-(3) VISTA);
- the PTC may not itself use its shareholder rights to interfere with the administration and management of the underlying company. The trust deed may, however, confer on the trustee (the PTC) the right to appoint and remove the directors of the underlying company and to determine their remuneration (Office of Directors Rules) (Sections 6(2)-(3) and 7(1)-(2) VISTA);
- the persons interested in the trust — primarily the beneficiaries and the protector — are entitled to require the trustee (the PTC) to intervene in the management of the underlying company by taking, in particular, the following steps: (i) replacing the directors, (ii) causing the company to recover the losses caused by the acts or omissions giving rise to the claim, and (iii) requesting assistance regarding the claim and the manner of responding to it (Section 8(1), (3) and (4)(a)-(c) VISTA);
- the persons interested in the trust may require the trustee to inform them of the business conducted by the underlying company (Section 8(8)(a) and (c) VISTA);
- the shares of the underlying company held by the PTC may not be disposed of without the prior approval of the directors of the underlying company (Section 9(3)(a) VISTA);
- the persons interested in the trust are entitled to seek the intervention of a court, which may in particular issue injunctions to the trustee or order the sale of the shareholdings held by the trustee, in particular where their continued retention by the PTC is no longer consistent with the settlor’s wishes (Sections 10 and 11(1) VISTA).
In practice
A VISTA trust involves:
- a private trust company (PTC) acting as trustee of the relevant trust; and
- a company incorporated under the laws of the British Virgin Islands and held by the PTC.
The settlor first transfers the assets that he wishes to place in trust to the underlying company previously incorporated. In a second step, the settlor transfers the shares of the underlying company to the trustee under the trust deed and issues the direction provided for in Section 4(1) VISTA, which confers on those shares the status of “designated shares” and triggers the application of the VISTA regime.
In sum, under a VISTA trust, the trustee’s role is essentially custodial: it holds the designated shares but bears no responsibility for the management of the underlying company, which rests entirely with its directors. The trustee nevertheless retains its powers with respect to distributions to be made to the beneficiaries.
The VISTA trust may be revocable or irrevocable. The settlor may also be a beneficiary of the trust. The VISTA trust is generally discretionary. By means of a letter of wishes, the settlor may express his wishes to the trustee as to the exercise of the trustee’s discretionary powers, in particular with respect to distributions.
The defining feature of a VISTA structure is that it separates the ownership of the assets from their day-to-day management. The financial assets are held by the underlying company, which the settlor may continue to manage, making the investment decisions taken in the ordinary course of business. The shares of the underlying company are, however, held by the trustee as part of the trust fund: the trustee remains the legal owner of those shares and administers the trust in accordance with its terms and for the benefit of the beneficiaries. The purpose of the VISTA regime is precisely to allow the directors of the underlying company to retain control over its management without requiring the trustee to intervene in every business decision; it is therefore particularly well suited where the settlor wishes to continue managing his own investments.