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"THE USE OF FOUNDATIONS OF PRIVATE
INTEREST IN OFFSHORE TRANSACTIONS: WHY
SHOULD WE PREFER THEM OVER OFFSHORE COMPANIES
AND TRUSTS "
By Ramón Anzola, Esq.
SUCRE, ARIAS, CASTRO & REYES
© 2000, All rights reserved.
I. A BRIEF HISTORICAL PERSPECTIVE.
II.
ADVANTAGE FOUNDATION.
III.
ANATOMY OF A TYPICAL FOUNDATION.
I. A BRIEF HISTORICAL PERSPECTIVE.
At the end of the nineteen thirties the Swiss
Community, visualising the world-wide political
crisis that was about to take place, created
the mechanisms necessary to establish a secure
environment in which to attract members of the
private banking sector.
Its proximity to Switzerland, prompted Liechtenstein
to actively participate in the task proposed
by the Swiss Community. This participation included
the approval of laws, which would lead to the
creation of three entities, designed to allow
individuals to delegate the administration of
their assets to third parties, without having
to reveal their identity to any governmental
authority and with a level of confidentiality
which was almost impenetrable. With the passing
of time, these three figures developed into
the Private Interest Foundation or Stiftung,
as it is known in German.
But why create a new investment vehicle so
similar in structure to the Trust? The need
arose mainly because the figure of the Trust
had practically disappeared from the European
Continent by this period. Although it is true
that the Trust was an instrument that had been
widely used in Europe since the Middle Ages,
it was abolished during the French Revolution
being considered as an instrument used for the
benefit of the Nobility to perpetually protect
their assets.
As a result of Napoleon’s conquest of Europe,
the ordered codification of Roman Law spread,
mainly within Central Europe, rendering the
Trust practically non-existent and viewed as
an outdated Anglo-Saxon instrument. From
this point on the preference of the Foundation
over the Trust in the use of structures for
the protection of assets and inheritance planning
began to spread throughout Europe.
As a result of the attempt to create an instrument,
which would facilitate the financial operations
carried out from the Swiss Community, the Liechtenstein
Stiftung was born and used as a substitute for
the Trust.
Aside from its wide popularity in Europe, owing
largely to the fact that its origins were European,
the Foundation has been recognised legislatively
and by courts in various jurisdictions.
It has been recognised in legislative form by
the governments of Liechtenstein, the Dutch
Antilles, Holland, Austria and Panama, all of
which have passed laws regulating the same.
Just as well, traditional Common Law Trust jurisdictions
such as The Bahamas are currently considering
enacting Foundation legislation.
Foundations have also been recognised by courts
in countries such as The United States, England,
Canada and Australia, adding in turn credibility
to its structure and operation, and confirming
that any revision that is made to its structure
should be adjusted to the law of the jurisdiction
where it originated.
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