Trustee licensing: A comparative look at the advantages and a summary of the licensing regime in the BVI and the Cayman Islands

• Good regulatory oversight: In both the BVI and the Cayman Islands, licensed trustees operate under the supervision, monitoring, and control of well-established and regarded financial services regulators, the BVI Financial Services Commission and the Cayman Islands Monetary Authority, respectively. This means that licensed trustees operate and adhere to strict regulatory standards and conduct of business guidelines, ensuring that clients of licensed trustee companies can place trust and confidence in both the licensed trustee and the jurisdictions when conducting their business.
• Professional expertise: Having a licensed trustee on board with specialist knowledge, through the management and other senior officers, ensures that clients get the best support possible in complex trust structures and compliance with regulatory legislation with which both the licensed trustee and underlying clients need to comply. Licensed trustees can provide regulatory and other support to specialised and sophisticated types of trust structures eg the VISTA trust in the BVI and the STAR trust in the Cayman Islands.
• Asset protection and estate planning: Licensed trustees can facilitate asset protection and various forms of efficient and effective estate succession planning by assisting clients in avoiding delays in personal representation grants and reducing exposure to legal claims.
• Tax neutrality and stable political environment: Both the BVI and the Cayman Islands are tax-neutral jurisdictions with a framework of asset protection laws, which is ideal for allowing trustees to safeguard trust assets from creditors, circumstances where there could be forced heirship, or in situations where there is latent or patent political risk.
• Regulatory safeguards: Licensed trustee companies offer comfort to clients since they provide some form of continuous institutional expertise provided on a fiduciary basis. They ensure regulatory compliance, which bolsters long-term clients with complex trust arrangements. Due to the regulatory rules that licensed trustees need to comply with, this ensures that trust business is handled efficiently, including compliance with both domestic and international regulatory requirements.
• English legal system: In instances where disputes arise, both the BVI and the Cayman Islands have the English common law legal system applicable to them ensuring a track record of precedent and decision making that is binding and known.
• Privacy protections and fairness requirements: In both the BVI and the Cayman Islands, licensed trustee companies serve as entities that ensure procedural fairness standards are upheld therefore balancing transparency requirements against client privacy.
• Consolidation of business: persons who already have trustee business split between different service providers and looking to consolidate their business into one regulated business would find both the BVI and the Cayman Islands worthwhile jurisdictions to establish a licensed trustee company for the various reasons set out above.

The remainder of this article provides a comparative overview of the trustee licensing regime in the BVI and the Cayman Islands.

1. There is also a private trust companies’ regime in the BVI under the Financial Services (Exemptions) Regulations (Revised Edition 2020). Private trust companies in the BVI are not subject to the licensing regime under the BVI BTCA. However, they must comply with stringent conditions under the regulations to benefit from the safe harbour to licensing.
2. The terms “company management” and “company management business” are statutorily defined terms in the Company Management Act (Revised Edition 2020). “Company management business” means the provision of company management services for profit or reward. “Company management” means: (a) the formation of BVI companies, including the continuation of companies as BVI companies, (b) the provision of registered agent services, (c) the provision of registered office services, (d) the provision of directors or officers for companies, whether such companies are BVI companies or companies incorporated or registered in a jurisdiction outside the BVI and (e) the provision of nominee shareholders in companies, whether such companies are BVI companies or companies incorporated or registered in a jurisdiction outside the BVI.
3. There are instances when an application can be made to exempt the licensee from the requirement to have a compliance officer under the Financial Services (Miscellaneous Exemptions) Regulations (Revied Edition 2020). However, even if an application is successful, the senior management of the licensee will still be required to designate someone from within the licensee to undertake oversight of the compliance obligations and ensure that the reporting is complied with.