Fiduciary Ownership

Foundation: the concept and advantages

Private foundation as a legal entity with an independent capital can be an effective legal entity for corporate governance, asset structuring and protection.

Swedish foundation (Stiftelse):
a legal entity formed by a written deed of foundation signed by a founder or founders which direct their assets to permanent administration as an independent capital to pursue a specific purpose of foundation.
The foundation assets are considered to be separated from the founder(s) when a third party manages them in accordance with the deed of foundation.
A foundation has no owners or members, the foundation assets are managed as an independent capital.

Dutch trust foundation (Stichting Administratiekantoor, STAK):
a legal entity with no partners or shareholders - no one can be the owner from a legal point of view. The foundation issues depository receipts, which affirms the right to receive income. The register of depositary receipts is non-public and maintained only by the STAK director / board of directors.
Voting and economic rights become separated by issuing depositary receipts.

Both Swedish and Dutch foundations are very flexible legal structures for the purpose of asset protection and limiting the disclosure of ownership

Fiduciary ownership: how it works

In general, direct ownership means the business owner hold the shares in the company in his/her individual capacity.
With direct ownership the business owner take all the risks with the unwanted claims on shares, compliance issues with the national and international treaties, regulations regarding to the majority ownership in the company. Moreover, direct legal ownership potentially poses a threat for the shares and its owner:
an aggressive actions of business partners or lenders, corrupt motivated actions by authority representatives, former spouses claims and actions, etc.

The purpose of the foundation is to be the fiduciary ownership entity for the company shares.
In legal terms, the foundation is becoming the controlling shareholder of the company. By transferring shares to the foundation the business owner will get all legal benefits from no longer owning the shares, but in the same time have a right to transfer assets back at any convenient time by exercising the call option. The option holder may have no direct ownership in the company or may own minority stake of shares with preferential right to receive dividends.

The foundation as fiduciary ownership entity is a reliable solution for clients looking for an option to structure their business in order to comply both with international tax treaties and national controlled foreign company (CFC) rules.