Member News http://asiaoffshore.org Thu, 19 Oct 2017 17:48:23 +0000 Joomla! - Open Source Content Management en-gb Captive Insurance: A Viable Risk Management Tool for Asian Corporations http://asiaoffshore.org/index.php/news/member-news/item/128-captive-insurance-a-viable-risk-management-tool-for-asian-corporations http://asiaoffshore.org/index.php/news/member-news/item/128-captive-insurance-a-viable-risk-management-tool-for-asian-corporations

Labuan IBFC and LIIA to host inaugural Asian Captive Conference 2017, aiming to raise awareness of the role of self-insurance in Asia

Kuala Lumpur, 16 May 2017 – Labuan International Business and Financial Centre (Labuan IBFC) and Labuan International Insurance Association (LIIA) are jointly organising The Asian Captive Conference (ACC 2017) in SasanaKijang, Kuala Lumpur on 16 and 17 August 2017.

Themed ‘De-Risking Asia: The Growing Role of Self-Insurance’, ACC 2017 is aimed at enhancing the awareness of the role of self-insurance, specifically captives, in Asia. The Governor of Bank Negara Malaysia, Datuk Seri Muhammad Ibrahim is expected to deliver a keynote address during the event.

Other highlights of the event will be the unveiling of the findings of a research conducted by Captive Review entitled “Attitudes towards Captive Insurance in Asia”. It is worth noting that while captive insurance has been used as a risk management tool for decades, starting in the 1950s in the United States, this concept of captive insurance is still very nascent in Asia.

Labuan IBFC Inc CEO, Danial Mah Abdullah said: “The Asian market for captive is relatively unexplored and the potential for growth is immense. The penetration level is low at the moment with only 2.3% out of the total numbers of 6,939 captives established worldwide (according to Business Insurance 2016) and we believe the Asian captive market will continue to grow at a steady pace.

“The Asian corporations are viewing captives as a viable alternative of risk management tool and the number who appreciates this concept is growing.

“While many companies will continue to depend on traditional insurance, those with the know-how will explore greater business opportunities and risk management options through captives, especially when commercial premium rates make standard insurance untenable.”

He added that the ACC 2017 is timely as it will serve as an educational platform to raise awareness of businesses and corporates to use captive as a risk transfer tool as a complement to the traditional insurance.

“Labuan IBFC, for example, is a substance-enabling jurisdiction that offers captive as a business solution that is complemented by a competitive tax structure. In fact, there are currently about 39 captives in the centre and it is home to the world’s only takaful captive, introduced in 2015,” explained Danial.

The Labuan International Insurance Association Chairman, Raymond Wong Shu Yoon said, “Captives is a unique concept of self-insurance that allows corporations and businesses to enjoy greater protection with the flexibility of managing them to suit their needs. Naturally, this could be an attractive and cost-efficient business solution for many.

“We are pleased and honoured to have Labuan IBFC as a partner for this event and we are definitely excited about this collaboration and hope to receive positive response from the industry players.”

The conference will also discuss various key areas in risk management including insure tech and block chain and the effects of Base Erosion Profit Shifting and tax transparency in business. There will also be dedicated sessions on captives, including a case study on an existing captive.

The conference will feature speakers such as Steve Tunstall, General Secretary of Pan-Asia Risk and Insurance Management Association (PARIMA); George McGhie, Managing Director of Captive Practice, Willis Towers Watson; Kelvin Wu, Group Risk & Insurance Manager of International SOS, DatukMajidMohamad, Technical Advisor of LIIA; Michael Velten, Asia-Pacific Financial Services & Insurance Tax Leader, Deloitte and; Stuart Herbert, Senior Vice-President of Marsh Captive Solutions Group.

The event is open to all business owners, captains of industry, leaders of global corporations, corporate advisers and risk management professionals. Registration fee starts at RM205.

For more information about ACC 2017 and to register, please visit: www.theasiancaptiveconference.com

MEDIA CONTACTS:

Labuan IBFC

Farah Jaafar-Crossby

pressteam@libfc.com

Tel: +603 2773 8977 Mobile: +6012-326 1216

Audrey Liew

audrey@libfc.com

Tel: +603 2773 8975 Mobile: +6012-913 8979

Geraldine Lim

geraldine@libfc.com

Tel: +603 2773 8991 Mobile: +6012-253 8666

ABOUT LABUAN IBFC

ASIA PACIFIC’S MIDSHORE INTERNATIONAL BUSINESS AND FINANCIAL CENTRE

Labuan International Business and Financial Centre (Labuan IBFC) offers global investors and businesses the benefits of being in a well-regulated midshore international business and financial centre, which provides fiscal neutrality and certainty, in addition to being an ideal location for substance creation.

Located off the North West coast of Borneo, Labuan IBFC provides access to Malaysia's network of more than 80 double taxation agreements and boasts Asia’s widest range of business and investment structures for cross-border transactions, international business dealings and wealth management needs.

Well-supported by a robust, internationally recognised yet business-friendly legal framework, Labuan IBFC operates within clear and comprehensive legal provisions and industry guidelines, enforced by its single regulator, Labuan Financial Services Authority.

With a focus on enabling cross-border transactions, providing risk management structures, Islamic financial services, commodities trading incentives and wealth management vehicles, we offer solutions to regional businesses going global or global businesses looking at penetrating Asia’s burgeoning markets.

ABOUT LABUAN INTERNATIONAL INSURANCE ASSOCIATION

The LIIA has in excess of 200 members involved in many different aspects of insurance and reinsurance – from Life and Non-Life Insurance and Reinsurance Brokers, Insurance and Reinsurance Companies, including Captives, to related Management and Accounting Services. The LIIA membership is a requirement for all insurance and reinsurance related entities.

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pooja.ramchandani@asiaoffshore.org (Super User) Member News Mon, 05 Jun 2017 06:08:44 +0000
Minutes for Asia Offshore Association Meeting http://asiaoffshore.org/index.php/news/member-news/item/127-minutes-for-asia-offshore-association-meeting http://asiaoffshore.org/index.php/news/member-news/item/127-minutes-for-asia-offshore-association-meeting

 Place & Time

A meeting of the Asia Offshore Association was held on 27th of October at Grand Kempinski Hotel in Shanghai. It began at 5:00PM and was presided over by Matthew Sumner, Interim Chair. 

Announcements

  • Task asked from the members: (1) Support to draw attention to the industry of wealth creation in Asia, (2) Promote the AOA
  • Selection of the next annual conference location between Hong Kong, Jakarta, Malaysia (probably Kuala Lumpur), considering 80% of votes in favor of Hong Kong
  • New Board of Directors (BoD) members: Kenneth Camileri (Chetcuti Cauchi), Yuhaosheng Han (Loyal Bank), Leon Mao (TMF), Michael Liu (CIL), Jean Claude Tsang (ABC Global), Joseph Moynihan (CEO, RAK ICC)
  • AOA administration is working with a third-party provider for online communication of the Association (web workshop, membership information management, etc.). The final selection will be put to the board for final consideration.
  • AOA administration is in discussion with Chinese/Singaporean universities to prepare a certification course for intermediaries and members

 

Discussion

  • Question on training classes raised by Michael Liu, CIL: classes must be done by the right teachers and the location of the classes
    • Answered by Matthew Sumner: Hong Kong and Mainland China
  • Question on CPD points raised by Elise Donovan, BVI House Asia: what is the option to implement CPD for within AOA
    • Answered by [unidentified]: approval must be done by targeting the professional association at least 6 months on advance where as in Hong Kong there are three groups to target (accountants, bankers, lawyers)
  • Question on training classes raised by Elise Donovan, BVI House Asia: how these trainings will differentiate themselves with the high numbers of trainings already in place
    • Answered by Matthew Sumner and Elise Donovan: trainings with a larger perspective on "offshore"

 

Motion

  • Motion from Matthew Sumner to place Joseph Moynihan (CEO, RAK ICC) as BoD member in replacement of Peter-Michael Schuster (Former CEO, RAK ICC)
    • Vote: 5 in favor, 0 opposed, 4 abstained
    • Resolved: Motion carried

 

New Business

  • Request approval of Joseph Moynihan (CEO, RAK ICC) to take a position on the BoD

 

Meeting adjourned at 5:50 p.m. by Matthew Sumner, Interim Chair.

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pooja.ramchandani@asiaoffshore.org (Super User) Member News Mon, 19 Dec 2016 11:43:21 +0000
Selection and Application of LLC in the Investment and M&A in the U.S. http://asiaoffshore.org/index.php/news/member-news/item/126-selection-and-application-of-llc-in-the-investment-and-m-a-in-the-u-s http://asiaoffshore.org/index.php/news/member-news/item/126-selection-and-application-of-llc-in-the-investment-and-m-a-in-the-u-s Selection and Application of LLC in the Investment and M&A in the U.S.

The design of transaction structure plays a critical role in the scheme of overseas merger and acquisition (M&A), while the establishment of special purpose vehicle (SPV) is an essential part in the design of transaction structure of overseas M&A. Key factors that need to be considered in the process of establishing a SPV include establishment procedures, company management, taxation, acceptance of investment, etc.

For the investment in the U.S., Limited Liability Company (LLC) is an important form of organization. 

  1. Overview of Limited Liability Company (LLC)

Limited Liability Company (LLC) is quite different from the company we usually call limited company. LLC is usually considered as a unique legal entity with the right to sign contracts, hold properties, and file and respond to suits independently. Its owner or contributor is legally referred to as member rather than shareholder. Just like joint-stock company, LLC has the advantage that its owner only undertakes limited liability. In terms of taxation, however, LLC may choose to pay taxes as a partnership to avoid the double taxation on its revenue. Besides, LLC features extremely flexible organization, administration and management. LLC is an important option for foreign investors to invest in entities in the U.S.

  1. Origin and Development of Limited Liability Company (LLC)

LLC has a history of only 40 years in the U.S. In 1977, the first LLC in a real sense in the U.S. was legally incorporated in Wyoming. Then, it was gradually spread to other states and accepted by the laws of different states in the U.S. The one closely followed Wyoming was Florida. However, in the next ten years, the legislation on LLC was at a standstill. That’s mainly because it was still not clear whether LLC can enjoy the tax treatment of partnership. In 1988, Internal Revenue Service released a loose interpretation on the tax exemption conditions of LLC. Such a decision caused enormous response and became the strong driving force to accelerate the legislation on limited liability company in all states.

In 1994, a model law named Uniform Limited Liability Company Act (hereinafter referred to as ULLCA) was established in the U.S. In 1996, some important amendments to this model law were promulgated. By then, limited liability company, as a new organizational form of enterprise, has fully consolidated its position in the U.S.

III. Advantages of Limited Liability Company (LLC)

The significant development of LCC in recent 30 years is inseparable from its unique advantages over other forms of enterprise. The advantages of limited liability company mainly include:

(1) Flexible operating mode

The operating mode of LLC is relatively flexible and different from either company or partnership. It can be classified into LLC operated by member and that operated by manager. In the so-called LLC operated by member, the business of the company is directly operated by the members. Each member is its representative with the same right to manage and execute the business. Unless specifically mentioned in law, any problem related to the company business should be decided by the majority of members. This is actually the business mode of partnership. In the LLC operated by manager, it is the manager’s exclusive authority to execute the business of the company. The manager here could be either a member of LLC or not. Except for things which have to be determined by the majority of the members according to the law, any matter related to LLC business can be solely determined by the manager. If there is more than one manager in LLC, the decision should be made by the majority of the managers. In the LLC operated by manager, normally, the member doesn’t have the right to operate business. If any member operates business on behalf of LLC without authority, LLC is entitled to deny it. In this case, LLC shall not be held accountable for the damage of third parties. Therefore, it is necessary to be stated in the Articles of Association of LLC that whether the company is operated by member or manager. Otherwise, it shall be presumed as being operated by member to protect the interests of the bona fides third party.  

So from the perspective of internal management, LLC is the freest form. The member of LLC can choose whether the company is operated by all members or by manager. As to corporation, according to the principles to separate the operating right and management right, shareholders need to transfer the management right of the corporation to directors. LLC has no arrangements on the board of directors or the board of shareholders. LLC members are not required to hold plenary meetings on a regular basis. It requires at least one officer and one manager to set up LLC. A person can be appointed as both the officer and the manager at the same time. It is not required to appoint a secretary. The above-mentioned staff members don’t have be local residents. People with an address in local state to receive possible legal instruments are qualified. LLC is simpler and more convenient for the management of operation.

(2) Limited liability of member

The establishment of LLC enables the properties of the member to be independent of the properties of the company. The member only needs to undertake limited liability within the amount of contribution. Just like the shareholder of company, member of LLC doesn’t undertake direct liability for the debts of the company. However, the two have obvious differences: shareholders have to strictly abide by legal procedures of operation and are not allowed to directly take part in the corporate affairs. In LLC, there are no requirements on the operators (both member and manager) of LLC in terms of operation procedures. ULLCA particularly emphasizes that: failure to abide by normal legal operating procedures is not the excuse for the member or manager of LLC to undertake personal liability. It means that the member of LLC enjoys more privileges and preferences than shareholders of ordinary company. In fact, member of LLC directly operates the corporate business like partnership. This is one of the main reasons to develop LLC as a new form of business organization.

(3) LLC has flexible options of taxation

Another feature of LCC relies on its taxation system. According to the U.S. tax code, LCC can choose to pay taxes as a corporation or a partnership. In 1996, Internal Revenue Service modified the taxation system of LLC and granted LLC the right to choose to pay taxes as a corporation or a partnership according to the tax code. If the former is chosen, LLC shall be subject to double taxation, but it can be engaged in open transactions in the open market, like fund raising and assignment of shares. If the latter is chosen, LLC can enjoy the single tax as a partnership, but it is not allowed to be engaged in open transactions. Seen from taxation, LLP and LLC are both pass-through entities. Taxes are only collected from partners of LLP and members of LLC rather than the enterprise level. Therefore, it is single tax. In corporation, the taxes are collected from both enterprise and shareholders. Therefore, it is double tax.

  1. Establishment of Limited Liability Company (LLC)

According to the ULLCA, one or more people can submit the Articles of Association to the Secretary of State for filing and establish LLC with one or more members. Once LLC is established, it becomes an entity independent of member and enjoys independent property ownership right. To establish LLC, there should be public articles of association to prove its status. Meanwhile, member of LLC can sign internal operation agreement. In case there is a conflict between the articles of association and the operation agreement, the internal operation agreement prevails for assignees of internal relationship and member interests; the articles of association prevail for external parties. Besides, the law endows the operation agreement with great autonomy in operation. Unless otherwise restrained by the law, legal regulations on LLC can be modified. In a certain sense, ULLCA is only the default rules or supplementary rules when there are no regulations in the agreement.

Taking California for example, the procedures to incorporate a LLC in California are: filling a LLC-1 Form and submit it to the state government of California and a LLC-12 Form; apply for a Tax ID number with Internal Revenue Service (IRS); apply for opening a bank account after obtaining a certified copy of the company. The incorporation of LLC requires an agent with California Address to receive possible legal instruments. Agent can be an individual or a company in a certain range.

According to the Uniform Limited Liability Company Act, one or more people can submit the Articles of Association to the Secretary of State for filing and establish LLC with one or more members. Seen from the legislations of most states, there are no special restraints on the qualification of LLC founder, who can be any person with legal capacity or agent of the member of proposed company. There are no restraints on the quality of LLC member. Either natural person or legal person, either person from local state or person from other state and even foreign country is qualified. There are also no restraints on the number of members when LLC is founded. It is feasible for a LLC to have only one person. Therefore, sole proprietor can also use the form of LLC.

Generally speaking, among all forms of enterprises, LLC has the minimum restraints on the conditions of foundation, so it is also a form of enterprise with the broadest applicable scope. By far, LLC is deemed as the perfect form of enterprise to combine the limited liability barriers of traditional corporation and the flexible management and tax treatment of partnership. Therefore, the organizational form of LLC is neither a company nor a partnership. As a “hybrid” which combines the corporation system and partnership system, it is the “third path” combining the advantages of both systems.

By Yang Feixiang  

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editorialuser2@mxmedia.com.hk (stacy) Member News Tue, 29 Nov 2016 07:01:56 +0000
The Family Trust: Keep jewels in a cage under proper management http://asiaoffshore.org/index.php/news/member-news/item/125-the-family-trust-keep-jewels-in-a-cage-under-proper-management http://asiaoffshore.org/index.php/news/member-news/item/125-the-family-trust-keep-jewels-in-a-cage-under-proper-management The Family Trust: Keep jewels in a cage under proper management

Introduction:

With the increasing demand for risk control and family inheritance, the family trust, which is long-standing and well-established in foreign countries, has begun to attract Chinese entrepreneurs. With thorough planning, it addresses the highest-level demands of a family, and effectively solves problems related to preservation and family wealth inheritance as top levels in the structure of the family wealth management system.

From the perspective of family wealth management, banks take charge of cash flow; insurance companies are responsible for capital management related to the life, time and value of family members; family trusts administer family wealth passed from generation to generation with more rigorous, meticulous and customized planning, establishment and operational requirements.

Understanding How Family Trusts Work in China

The Chinese trust market is still in its initial stages of development. Most people do not have a thorough understanding of family trusts and tend to confuse them with trusts and financial products, so at the beginning, they tend to ask questions about how much should be invested, or whether the income is guaranteed. People compare different trusts and financial products by their return rates. It seems to be straightforward but, in fact, different products may consist of different contents due to their different assets, and they cannot be compared with each other.

While designing clauses for family trusts, most clients and trust institutions place exclusive emphasis on expenditure, such as offering beneficiaries educational expenses, or initial expenditure for starting businesses, or funds for marriage. It’s nothing but a series of cash outflows. Few take into full account how to ensure the family trusts’ sufficient cash inflow to compensate for all possible expenditures arising from an increase of family members, tax increases, etc. Once the cash flow is interrupted, the family trust may come to an end quickly.

As for family trusts, we must understand that they are not designed in nature as a financial product to help clients gain benefits, but as a financial tool to isolate wealth from risks and to implement long-term management and the reasonable allocation of wealth. Besides, a single trust product cannot solve complicated family wealth problems. Instead, the family office offers clients a set of family trust system solutions to satisfy demands, integrate resources and form a sound cycle.

How can one ensure the smooth operation of the family trust system and sustain a family’s prosperity under guidance based on understanding? This topic will be further discussed below.

  1. Demand-oriented structured thinking and flexible combinations

For high net-worth clients with a certain extent of asset accumulation, the return rate for family wealth management is only a shallow demand because their ability to create wealth is much better than financial products. Entrepreneurs prefer family trusts mainly because they can satisfy many of their practical demands, such isolation of risk, confidentiality of properties, reasonable tax savings, flexible allocation, arrangement of inheritance, and charity planning.

If you compare the family wealth of a client to a “capital pool”, trusts and financial products from different financial institutions are like “containers” with fixed structures. Financial advisors use such “containers” to constantly “fetch water” from clients’ capital pool. Due to limited capacity, however, the demands of clients cannot be always satisfied. Besides, all financial institutions sell products as “sellers”, so it is hard to carry out systematic management of the demands of clients.

Compared with trusts and financial products, they boast an infinite capacity, and family trust structures with demand-based flexible combinations have significant advantages. To make plans for a customized family trust based on well-structured thinking, one should take into account factors like the establishment objectives of the client, the specific situations of the family, requirements for allocation, and the balance of benefits between trust-related parties. Based on the integration of all clients’ demands, different types of assets – such as real estate, stocks, equities, insurance and cash – are placed in the family trust structure in a logical manner, thus creating good synergy. The family trust architecture expands the capacity of assets and creates greater potential for extension and flexibility. And, most importantly, clients’ demands are satisfied all round.

High-quality family trust structures can also result in other positive effects. For example, reasonable insurance planning can be introduced into the family trust structure. Through such insurance, the time values of the family members of each generation will be realized and returned to the family trust structure for the allocation of expenditure for the next generation. These close ties to capital lay a firm foundation for the long-term operation of family trusts. From the perspective of a service provider, it not only facilitates a long-term stable relationship among family members from different generations, but also offers more customized services.

  1. Logic-based, refined planning and accurate services

An outstanding family wealth planner can offer high-end clients individualized services – not as products or institutions – as a unique experience. He or she can clarify the logical planning of family trusts at all levels and then develop refined strategies for different types of assets. This is also the core of their competitiveness. After all, tools are inflexible. Only by following a logical system can tools be effectively implemented. This shall be briefly illustrated below.

  • Asset class: stocks
  • Logic to follow: lead future cash flow directly to other areas to defer taxes and to reasonably avoid taxes.

What bothers many listed companies the most is paying income taxes on dividends every year. Major shareholders have to pay income taxes after having obtained dividends. According to my years of experience in the service industry, many high net-worth clients don’t need to use these yearly dividends, and even plan to accumulate them for descendants.

We have to be careful that, if a gift tax is introduced in the future, this tax may be at a rate as high as 40-50%, which could be deducted when such dividends are passed on to the next generation. So only half the value would actually be delivered, at most. Therefore, to prevent such a risk, it would be wise to funnel such dividends directly into a family trust and then distribute them to the next generation after a certain period of time. This will not only deter individual income tax, but also decrease the tax base, thus reasonably saving taxes. Of course, family trusts are not established to avoid taxes, but to reasonably save taxes through sound trust structures.

Theoretically, placing assets within a family trust structure will create certain costs. However, depending on the timing of placements, the costs may vary greatly. At present, assets are mostly transferred from a client to a trustee via gifts or sales agreements. With neither inheritance tax nor gift tax introduced, the client only needs to pay a small proportion in commission. If their assets increase in value rapidly before they are placed into trusts in the future, it may mean the asset base is enlarged. Besides an increase in commission, the client may also face the risk of high inheritance tax or gift tax, which makes it even worse. Therefore, seen from the perspective of long-term planning, the cost of prevention is much lower than the cost of asset management later.

  1. Reach a consensus based on quantified data and repeated calculations

During initial communication about the expectations of a family trust, most clients express their demands based on individual preferences and priorities. For example, to encourage the education and development of talented family members (in the context of family trusts) how much should be awarded from the trust to descendants who pass entrance examinations at the top 50 universities in the world? Clients can only propose an approximate figure at the very beginning, such as 200,000 or 300,000. If such a trust aims to cover the future five generations, what is the estimated increase in family members (according to the fertility coefficient of each generation)? If all new members pass such examinations, and inflation is a considered factor, how much should be invested at present? How much cash will be generated each year to compensate such awards? Clients have no real idea about such significant problems. Therefore, personal thoughts or feelings must be turned into rational data to enable clients to understand the expected functions of a family trust and to reasonably measure the current investment scale and portfolio planning necessary.

Panhe Family Office has set up an exclusive Family Trust Career Cash Flow Statement for clients, which simulates the amount of asset input required to ensure sufficient cash inflow for trust structures to cover future expenditure based on a rigorous actuarial model, according to the objectives and the appeal of family trusts.

The most direct quantification of the personal demands of the family trust is “how many people do you want to prepare funds for?” Starting from such a demand, the corresponding consideration within the Family Trust Career Cash Flow Statement is “how much money is needed to solve how many demands of how many people?” Taking this as a logical thread for family trusts, family trust cash flow management and control systems with dynamic adjustment functions are established. Panhe Family Office makes exclusive cash flow statements for each family trust client, so the status of each family is unique.

Based on the assessment of external environment factors and internal family factors, the cash flow statement incorporates variable elements such as inflation rate, discount rate, gap between generations, and life expectancy. Using different portfolios and different variable inputs, the internal rate of return (IRR) of the cash flow system for different combinations is calculated. If the functional expenditure on certain aspects is too much or too little, clients may also use this statement to calculate and request suggestions from a professional team to understand how to reach a balance.

Family trusts are mainly set up to take care of descendants and to ensure the sustainability of a family, so they emphasize stability rather than risky increases in value. With the help of the professional team at Panhe Family Office, clients may use this exclusive Family Trust Career Cash Flow Statement to make multi-dimensional estimations and calculations by inputting different parameters, striving to reach a consensus on risk preference, existing investment ability and future bearing capacity, and eventually to discover optimal planning for family trust structures based on these comprehensive considerations. These family trusts are what clients are longing for the most. 

  1. Systematic management, regular reviews and reasonable adjustment

Family trusts that are set up to benefit a family’s future generations cannot be operated as independent projects. Instead, they should be followed up as a systematic project closely linked to the family’s development, and be monitored, evaluated and improved on a regular basis. To set up a family trust is a good start, but whether it may be fully implemented to achieve positive effects depends on long-term management and maintenance.

The family is an ecological system undergoing long-term development and changes, such as an increase of family members, changes in marriage, adjustments in tax and nationality, as well as external changes in market environment and economic policies. Therefore, a project team has to be set up to manage, regulate and control it in the long term. Abiding by such a philosophy, Panhe Family Office carries out systematic reviews of clients’ family trusts on a regular basis, integrates the investment statements of several financial institutions, provides clients with overall analysis reports, oversees whether major financial institutions operate according to the agreed structure, makes reasonable adjustments according to clients’ wishes and the demands of relevant family members, and strives to ensure the long-term sound operation of family trusts in accordance with clients’ intentions.

Besides regular monthly reviews and annual reviews, Panhe Family Office also sets up emergency reviews and coping mechanisms. For example, in case of large-scale black swan events like Brexit, a professional planning team will offer clients suggestions on adjustments according to the level of asset risk and future trends, and make great efforts to create a family trust engineering system with both strong anti-risk capabilities and flexibility to comply with potential developments and changes in the future, so as to maintain the sustainable development of a family.

By Andrew Yen

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editorialuser2@mxmedia.com.hk (stacy) Member News Tue, 29 Nov 2016 06:56:30 +0000
Taking a closer look at Liechtenstein http://asiaoffshore.org/index.php/news/member-news/item/123-taking-a-closer-look-at-liechtenstein http://asiaoffshore.org/index.php/news/member-news/item/123-taking-a-closer-look-at-liechtenstein Taking a closer look at Liechtenstein

When you are looking for a strategic country for economic activities in Europe and Worldwide, a place for asset protection and wealth planning or a new residency you should have a closer look at the Principality of Liechtenstein in the heart of Europe.

The Principality of Liechtenstein is a constitutional hereditary monarchy based upon democratic-parliamentary principles. The small state is located between Austria and Switzerland, with which it has a customs and currency union.

It has 37,000 inhabitants, the capital is Vaduz, the official language is German, and the business language is English. Travelling there is easy as the international Zurich airport is within a one-hour radius (115 KM).

The Principality is independent, and following the customs treaty with the neighbouring country of Switzerland in the year 1923, it has close administrative and economic ties with Switzerland. In addition, it also has a currency union with Switzerland. Liechtenstein is a member of the United Nations (UN) and of the European Economic Area (EEA), although, like Switzerland, it is not a member of the European Union (EU). In November 2013, an international convention to prevent tax evasion ("OECD/Council of Europe Convention") was signed.

International Liechtenstein is most known as an offshore place but in fact is one of the most highly industrialised countries in the world. Through its customs treaty with Switzerland and the membership in the European Economic Area (EEA), Liechtenstein and in the country established companies are in a very comfortable economic situation.

When talking about Liechtenstein also the very stable economic and political situation of Liechtenstein has to be mentioned. All over the world states have to deal with political and economic crises and banks all over the world have problems with bad loans. While the Principality can refer to its triple A rating of S&P, which was just confirmed in July 2016. Also there is no public dept and the banks can refer to its good ratings.

Other location factors beside the stable social, legal and economic order and the high level of political stability and continuity are the liberal company law, liberal economic policy, good infrastructure, stable Swiss franc as official currency, the little bureaucracy and direct administrative channels.

Liechtenstein, a place for business activities and asset protection

Liechtenstein succeeds in doing the split being a place for business activities as well as a safe haven for asset protection over generations. The Liechtenstein Persons and Companies Act (Personen- und Gesellschaftsrecht – "PGR") and the Trust Enterprise Act (Gesetz über das Treuunternehmen) establish a liberal, flexible statutory framework that is characterised by the spirit of entrepreneurial freedom and facilitates various company forms and asset holders; the trust (Treuhänderschaft) as well as the trust enterprise (Treuunternehmen/Geschäftstreuhand) are also enshrined in law. 

While the stock corporation is an ideal vehicle for commercial activities, foundations are established to pursue common-benefit objectives, holding foundations (succession arrangements for companies) or as family foundations (estate planning, protection of family assets). The Liechtenstein trust can pursue similar purposes. This is closely based on the English common law model.

Liechtenstein Holding Company for Swiss companies

The Principality of Liechtenstein has established double taxation conventions and treaties on the exchange of information for tax purposes with a number of states. For example there is a TIEA (Tax Information Exchange Agreement) with China and a double Taxation Agreement with Hong Kong.

Of interest is the Double Taxation Treaty with Switzerland that is set to come into force on 1 January 2017. This means Swiss withholding tax (35%) will be entirely waived on interest payments to natural persons or legal entities domiciled in Liechtenstein, and the tax rate on dividends will be reduced to 15% or will be entirely waived, depending upon the size of the shareholding. An effective option may consequently be a Liechtenstein holding company for Swiss companies or a corporate holding foundation for long-term corporate succession arrangements.

Modern Tax Law in Liechtenstein

The uniform tax rate for legal entities that are not covered by the special arrangement for private asset structures (Privatvermögensstrukturen - "PVS") is 12.5% of net earnings. A number of special aspects are applicable when determining net earnings. For example, earnings and profit shares (dividends) from participations are not subject to tax, and an interest deduction of 4% may be made on operationally necessary equity capital. Dividend distributions are tax-exempt.

Asset management foundations, establishments and fiduciary companies, in accordance with the rules governing private asset structures (Privatvermögensstrukturen – "PVS"), subject to certain preconditions (in particular: no economic activity as well as asset management by an independent third party), may choose to be taxed at the minimum income tax rate of CHF 1,200.00 per annum. Trusts are subject exclusively and without further conditions to the minimum income tax rate amounting to CHF 1,200.00 per annum. Although the Liechtenstein Parliament wants to increase the minimum tax to CHF 1’800.00 per annum it’s still very attractive.

Why Interadvice Anstalt?

On the landscape of professional Liechtenstein Trustee Offices, Interadvice Anstalt is not the biggest player but a very old reliable company, which started its activity in 1922 by the great-grandfather of the author. Interadvice focuses on the core business of trustee services which is developing tailored and long-term solutions in a specialised team for selected private and business clients. The client’s interest has always first priority. We see ourselves as a provider of family office services and solutions.

Thanks to our cooperation with law firms and fiduciary offices, asset managers and consultants in a wide variety of countries, we are able to clarify complex questions or to refer clients to precisely the right specialists. This cooperations keep us self independent and the solutions are always in the best interest of the clients.

If you are looking for a Trust Company in Liechtenstein which is interested in long term relationships and respectful and efficient cooperation we would like to offer you our services.

Philipp Kieber, Interadvice Anstalt, Landstrasse 25, 9490 Vaduz, www.interadvice.li

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editorialuser2@mxmedia.com.hk (stacy) Member News Tue, 29 Nov 2016 06:50:13 +0000
In the context of global transparency, how should we complete the top-level structural design of offshore wealth management? http://asiaoffshore.org/index.php/news/member-news/item/122-in-the-context-of-global-transparency-how-should-we-complete-the-top-level-structural-design-of-offshore-wealth-management http://asiaoffshore.org/index.php/news/member-news/item/122-in-the-context-of-global-transparency-how-should-we-complete-the-top-level-structural-design-of-offshore-wealth-management In the context of global transparency, how should we complete the top-level structural design of offshore wealth management?

Transparency is a growing trend.

We have to admit that without the current digitization of information in the world, it would be really hard to truly implement anti-tax avoidance agreements like TIEA, ATIEA, FATCA and the most recent CRS. From the earliest TIEA, we have noticed that several of the largest countries in the world have reached a consensus on anti-tax avoidance in political, economic and financial arenas. That’s because it benefits all stakeholders.

The intentions are clear and definite, so only technological problems are left unsolved. It is digitization’s applications that eliminate all technical obstacles. Why? Because any government taxation authority – whether it’s the privately-run IRS in America or the Chinese Tax Bureau supported by national finance – has cost problems. Therefore, they have to consider how much it costs to collect extra taxes of 10,000 U.S. dollars. Surely, they have other problems. Regardless, digitization and networking results in a significant decrease in costs. Intentionally screening “big taxpayers” by collecting and analyzing information will surely lead to the maximizing of taxation efficiency.

The digitization of financial institutions is unavoidable. Even a financial institution can avoid digitization, but it comes at a high cost and is still not accepted in the broader environment. For example, CRS itself is an all-electronic information collection system. Without such a system, how can you become a qualified financial institution? I have personally witnessed the closely guarded and strongly fortified office building of a peer in Luxembourg. Security such as this is somewhat ridiculous because those who want to steal data from the company don’t need to overcome such measures. Thieves who consider themselves to be heroes already exposed the privacy promised by banks in Europe and law firms in Panama. Such privacy is supposed to be exposed.

In a word, the prevailing trend in the world is that privacy is extremely relative. For both legitimate privacy and hidden privacy, protection is only a little better than nothing.

Are there any countries that don’t sign such agreements? Certainly, there’s North Korea. The conclusion is self-evident. Besides, some countries with unyielding integrity still want to resist it, such as Panama. However, soon after this leakage incident, an agreement was signed by Panama (what a coincidence). Another example is Mauritius, which signed this agreement at first but later backed out. But their offshore accounts cannot make direct transactions with the U.S.

The signatory countries of anti-tax avoidance agreements have achieved a high degree of professional proficiency. It is the national tax bureaus of countries that have signed the CRS agreement. The standards arising from such an agreement have become part of the tax laws of relevant countries. A modern government in the world must have unified taxation at first. This is a trend that cannot be ignored.

Tax driving through privacy is gradually dying.

All designers of wealth management structures must understand that we are experiencing a turning point in history. Before the fate of worldwide transparency is finalized, it is hard for us to decide what the future holds.

We have already seen that the implementation of FATCA has not led to more effective structures of privacy, because such privacy structures are not valid in the framework of FATCA. In the near future, the implementation of CRS signifies the extinction of more structures of privacy. That’s because, for the sake of their own survival, financial institutions shall never accept such an extremely high penalty for a single client. However, compliance has its costs. At least, because of FATCA, many institutions have directly abandoned clients who are related to the U.S. CRS is the global version of FATCA. You cannot give up all the clients on Earth, because there are no clients from Mars. Therefore, CRS will lead to the further upgrading of compliance standards.

The structure of privacy will not change too much, so how do clients who need privacy deal with it? Most people don’t choose to follow compliance systems, but on a simple, crude and effective method that takes effect quickly. Firstly, they bury their heads in the sand and just don’t declare their assets. For example, thousands of rich Chinese immigrants in America and Canada (not only high net worth individuals, but also a great number of middle class immigrants) own properties which are worth RMB 20 to 30 million Yuan, equivalent to 3 to 5 million U.S. Dollars, in their hometowns. Such properties are connected to their Chinese ID cards which became invalid when they became citizens in North America.

Secondly, the assets, including stocks or equity and real estate, are held by their relatives on behalf of them. It evades the problem of transparency, but it also causes great hidden danger for inheritance. For example, if you hold properties in your own name and want to transfer them to your children (without having declared them), this is very difficult to deal with. Or, if equity is held by someone else and you want to transfer it to your children, how can you ensure a smooth handover while avoiding potential tax problems? If those who own properties die or suffer from mental disabilities, the consequences would be unbearable.

Return to the first essential element: inheritance.

During interviews with clients in the last two years, I have gained a profound understanding of tax avoidance. In particular, tax avoidance realized through privacy or concealing information is not what clients pay close attention to. Once they’re aware of the fact that privacy is not legitimated or that privacy will harm the stability of a trust structure, clients soon shift their focus to inheritance. The reason is very simple. The sustainability of wealth is realized by people. If corporations and wills can handle the handover of wealth, there has been no place for trusts for some time.

The wealthy love their children and hope that the value of their wealth can grow and their family business will remain sustainable. The philosophy of the last generation on wealth allocation and family business administration can be inherited. This is the core which clients must focus on most. For example, when establishing compulsory provisions such as the stock equities of company that can never be sold, children should not be allowed to have voting rights and certain children should not become beneficiaries until he/she meets certain conditions. You have to take trusts as part of the philosophy of inheritance and, for clients, this should be of paramount consideration.

Return to the second essential element: safeguarding.

Safeguarding is closely related to inheritance, though they are not exactly the same. Avoiding problems caused by the publicity of wills is surely related to inheritance. In many circumstances, however, it is not linked to inheritance. The avoidance of marriage risks, debt risks, children’s squandering or political risks is an important part of safeguarding. In the context of transparency, the safeguarding function of the trust is not lost with a lack of high-level privacy. The right reserving function for offshore trusts makes it convenient for trust founders to be further engaged in management and investments. Meanwhile, the offshore trust also realizes the separation between the ownership and the beneficiary right, thus effectively isolating risks from mainland China where the clients reside. Such a function can only be truly realized via an offshore trust.

Due to increasing transparency, to realize true safeguarding it is necessary to enhance the level of conformity and to ensure the effectiveness of an injection of assets into a trust, or the effectiveness of the trust as a whole. In such a way, the interests of clients can be guaranteed to the greatest extent in case of transnational judicial conflict.

Besides, the trust of each judicial territory has its own prescribed period for litigation, from 1 year to 6 years. In other words, trusts should be planned as soon as possible. When such a period expires, the creditor of the client cannot claim assets from the trust.

Return to the third essential element: charity

Besides passing on their businesses, wealth and philosophy (via inheritance) and ensuring security (safeguarding), rich people also care about something beyond family interests, i.e. charity. They make donations to charity for public benefit, religious objectives or other arrangements beyond family interests. After two generations, rich Chinese people have gradually formed their own concept of charity. To whom should one donate? How can one go about it? And how can one do it effectively? These are what charitable trust founders care about. If the beneficiaries are in China, it is ideal to set up a charitable trust in China. However, due to high thresholds, long examination processes, too many limiting conditions and unreasonable mandatory operating mechanisms, it is a good option to set up an offshore charitable trust and then work through licensed institutions in China or do everything possible with capital from a charitable fund.

At present, there is still a shortage of talents who specialize in the structural design of global philanthropy. China also needs to learn more from mature communities in the west.

Ensuring compliance is the focus of service.

As repeatedly mentioned above, transparency will surely lead to pressure to undergo compliance procedures. After being involved in money laundering accusations, HSBC greatly increased (and reputedly doubled) the number of employees who are engaged in compliance on a global scale. As the designers of wealth structures, we have to clearly understand that in the new system of transparency, vague things, and things which could previously be protected and concealed in privacy should now be exposed, and we should deal with the multiple challenges coming from tax bureaus, litigations during marriage, or creditors. CRS rules will not directly lead to the publication of data, but free moving information and digitization enables tax authorities, banks, judicial departments and public security departments to obtain more information with less effort. In an era of full transparency or at least semi-transparency, one of the key problems is how to ensure the anti-risk capabilities of clients’ asset structures.

Chinas responses to CRS.

Since the implementation of CRS, which China has already signed, clients in China have had different responses. Most of them are on the fence and only a few make active responses. What surprises me is that Chinese lawyers know very little about CRS. As for accountancy teams, only large accounting firms like the four giants understand it.

I suggest that clients who have asset structures should reexamine these in accordance with CRS and FATCA standards and make new decisions according to professional reports. As for clients who need to set up new structures, it is suggested that they find a professional team to conduct accurate risk analysis and then make decisions.

By Michael Liu

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editorialuser2@mxmedia.com.hk (stacy) Member News Tue, 29 Nov 2016 06:48:11 +0000
The Consequences of Brexit for Chinese Investors and the Key Role of Consultancy http://asiaoffshore.org/index.php/news/member-news/item/120-the-consequences-of-brexit-for-chinese-investors-and-the-key-role-of-consultancy http://asiaoffshore.org/index.php/news/member-news/item/120-the-consequences-of-brexit-for-chinese-investors-and-the-key-role-of-consultancy The Consequences of Brexit for Chinese Investors and the Key Role of Consultancy

The UK referendum of 23rd June 2016 ratified the UK’s decision to exit the European Union and to undertake a new and alternative path towards prosperity and growth. Contrary to the forecasts shown by the opinion polls carried out in the days preceding the referendum, the remain vote invoked by the ex-Prime Minister David Cameron, by the British financial sector and by numerous foreign countries was unexpectedly defeated, with a minority of only a few thousand votes. The leave faction won with 17,410,742 votes, representing 51.9% of the total.

The reaction of the international community, of the financial markets and of the economic operators was immediate, spreading panic throughout the world’s stock markets, all of which registered significant losses  on the following Friday. The European stock markets lost Euro 637 billion of capitalisation, representing the worst crash since the summer of 1981, worse even than those of the Lehman Brothers and of the Twin Towers. The Tokyo Stock Exchange registered a drop of approximately 8%, Shanghai and Hong Kong also recorded significant losses, as did New York. The effects of the leave vote have transcended national and European borders, reverberating in numerous countries throughout the world.

After several months from the June vote, it is clear that Brexit has contributed another element of uncertainty and instability to the political and economic panorama, and governments and economic operators must take this into account in their decision-making.

Deliberately leaving aside the political aspects of this rising uncertainty, and concentrating our analyses on a market which is of particular interest/importance to the Fidinam Group, we focus on the consequences that Brexit could have for Chinese economic operators and, in particular, for Chinese investors.

According to the latest estimates, the European Union is China’s largest trading partner, even ahead of the USA; and the UK, an important member country of the European Union up until 23rd June 2016, plays a key role, accounting for 15% of the total trade with Europe. Figures show that between the years 2000 and 2015 Chinese investment in the UK reached a total of Euro 15.1 billion, representing 25% of total Chinese investments in Europe. Furthermore, it must be stressed that the UK often represents the gateway for Chinese investors into Europe.

However, the UK could quickly lose its attraction for these investors and Europe could also suffer the consequences thereof. In order to avoid such risk, the international community, the UK government and the European Union shall all require to provide clear answers regarding the fundamental issues such as London’s future status as a global financial centre, the future trade and financial relationships between the UK and Europe, Europe’s ability to prevent a domino effect with other countries following the UK example and also choosing to exit the European Union.

Chinese government sources state that interest in investment abroad remains extremely high despite Brexit, but that, however, the target countries could change depending on their different levels of uncertainty. Significantly, statistics show that Chinese foreign investment increased by more than 60% during the year 2016, but that Chinese investment in Europe fell by approximately 15% during the same period.

Other countries outside of Europe could benefit from the change in the destination of Chinese capital.

The main reasons that encourage Chinese investors to invest abroad are related to the different and more mature approach to portfolio allocation choices; the diversification of investments, the search for returns in line with expectations and, most importantly, the management of risk appear to be increasingly relevant aspects that determine investment decisions.

This trend is confirmed by numerous factors that analyse investor behaviour. We would point out that, as from 2011 onwards, there has been a significant growth in foreign investment by the Chinese private sector, and not only by the state sector, which normally follws a different logic. Investment in real estate projects reached a record level of Euro 18 billion in 2015. Hong Kong, the USA, Australia and Singapore represent the most important destinations in numerical terms.  In different ways and for various reasons, these countries offer returns in line with investors’ expectations together with very low levels of risk.

Chinese investors have also shown increasing interest in setting up manufacturing or commercial companies in the USA, in many cases linking these investments to programmes which include the possibility for the Chinese entrepreneur and his family to obtain residence in the USA.

In line with the latest trends observed, the Chinese investor is increasingly open to the possibility of transferring the centre of his interests abroad.  The preferred destinations are the USA, Canada and Australia. The most popular destination within Europe remains the UK, whose attractiveness could be diminished however as a result of Brexit and of the failure of the UK government to provide clear solutions to the problems mentioned above.

As was the case in the past with other countries, we are now seeing an opening up on the part of the Chinese investor towards the international market. This opening up, caused by the search for favourable macro-economic conditions and investment opportunities no longer available in the domestic market, is bound to benefit both the investors themselves and also the markets in which the relative capital is invested.

The Fidinam Group, which has been operating for over fifty years in the international, corporate and inheritance tax planning consultancy sector, has assisted clients from numerous countries in the internationalization process. We know, from the past experience matured alongside our clients, that these projects related to investments, acquisitions, the establishment of production activities, the marketing of products or services, the transfer of persons abroad, can only be completed successfully if they are planned in minute detail and are subsequently monitored throughout their various phases of implementation by experienced professional consultants.

In an environment characterized by an increasing degree of uncertainty and continuous systemic changes, consultancy services in the various areas of activity can represent an increasingly important factor of success and can have a profound effect on the outcome of each operation.

The Chinese investors, at one time reluctant to rely on consultants for their international, corporate and inheritance tax planning, have learned to appreciate the importance thereof and now frequently turn to financial experts for advice on the optimization of their wealth.

By Paolo Balen

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editorialuser2@mxmedia.com.hk (stacy) Member News Tue, 29 Nov 2016 06:42:24 +0000
Localization development of family offices in China http://asiaoffshore.org/index.php/news/member-news/item/119-localization-development-of-family-offices-in-china http://asiaoffshore.org/index.php/news/member-news/item/119-localization-development-of-family-offices-in-china Localization development of family offices in China

With family trust and family assets management becoming popular topics, family offices are also springing up in China. Although most family offices mainly focus on the preliminary consultation about family wealth management and the configuration and promotion of insurance and financial products, their toes are being more and more extensively dipped into the field of family wealth management.

However, others argue that, in practice, the current wealth management environment and legal system basis in China determine that family offices exist only in name. Aiming at this point and based on an overview of foreign family offices, the author has explored the necessity of developing family offices domestically and their path of localization.

Overview of foreign family offices

Aiming at managing family wealth and family trust, family offices proceed from the standpoint of wealth owners to provide all kinds of professional management consultation and operation services for them. A family office is usually composed of experts from different fields and industries, and it monitors and manages the finance, health, risk management, education, development and other aspects of the entire family, with the purpose of assisting the family in achieving further success and development through exploring models of managing and protecting family wealth.

(I) Model of foreign family offices

Tracing back to their early stage, family offices can be roughly classified into two types. The first type covers the single family offices (SFOs) which, as agencies mainly serving family clients, only manage and monitor the wealth of one single family. Depending on the needs and preferences of these wealthy families, SFOs can have either a simple or a complex structure, and, without a unified organizational structure, they either consist of some professionals specialized in assets investment, or consist of fully-functional large-scale teams devoted to building management platforms with comprehensive contents and a wide service scope.

With the further development of SFOs and the further increase of experts, the operating expense of maintaining a single fully-functional family office is constantly on the rise, so some SFOs have begun to open their services to more family clients, as a result of which the second type of family offices, multi-family offices (MFOs) characterized by rich experience and diversified staff composition, come into shape.

Meanwhile, in the course of development, family offices have presented diversified subject forms. New independent family offices can be established, and cooperate with other experienced agencies; relatively mature family offices in the current market can also be acquired to build family offices based on the specific needs of clients.

(II) Composition of foreign family offices

A family office usually appoints a manager for the single family served by it, and the manager is required to have a broad investment vision and rich experience in assets management, assets allocation, financial management and so forth and to be capable of dealing with all kinds of complex assets management practices.

At the same time, a family office must also staff itself with experienced professionals as its team members. Depending on its focus, a family office team usually consists of 10-30 members, and should at least include:

(1) Professionals in the fields of investment and wealth management to meet the needs of wealth inheritance and trust planning;

(2) Professionals in the fields of risk management and legal compliance to perform the compliance management of trust framework;

(3) Professionals in the fields of finance, taxation and budgeting to conduct tax planning;

(4) Professionals in the fields of engineering and IT to satisfy the needs of international information platform building and daily assets maintenance;

(5) Professionals in other fields (when needed).

A full-staffed and well-managed family office may also have its internal investment decision-making committee, external consultants, external emigration affairs consultants and so forth, so as to guarantee its diversity, objectivity and accuracy.

Localization development of family offices in China

(I) Existing “rudiment” of family offices in China

Nowadays, notwithstanding the broad space and potential possibilities presented in the Asian market, especially in the Chinese market, the development of family offices is still very slow, or even comes to a halt.

At present, there is not yet any mature SFO in China. Depending on the types of initiators, the agencies or organizations conducting activities in the name of family offices in the current stage can be generally categorized into the following:

(1) Strategic investment departments established by family companies; investment companies affiliated to family companies; family offices founded by professionals under the support of families

Offices of this category are only at the preliminary stage of their development, and, headed by a family member, the chairman or a professional trusted by the CFO, they are mainly engaged in investment in a non-core business field of their parent companies, so they represent the initial form of SFOs.

(2) Family offices established by trust companies based on the innovation department

The family offices established by trust companies mainly provide services to meet the personalized needs of their clients through the trust framework, mainly including the isolation and protection of wealth, the preservation and appreciation of wealth and the assets planning based on the specific needs of clients. The family offices established by trust companies are different from family offices established by private banks, as, instead of focusing on the simple appreciation of family wealth, they aim at introducing the customization of family trust into the inheritance of family wealth and completing the transfer of money and wealth for entrepreneurs.

As far as the trust companies currently engaged in the business of family trust or about to set foot in this business, each of them is exploring and promoting a trust model of its own characteristics based on its business preferences. Developing the family trust business is currently a need of strategic transformation for trust companies, and is still in the stage of exploration and innovation.

(3) Family offices established by the private bank department of commercial banks

The “rudiment” of family offices established by commercial banks in China usually evolves out of the high-end wealth management department, and their clients are high-end private clients retained in the retail business. Due to the diversification of the banking business and the assets management demand of clients, these family offices tend to focus on the preservation and appreciation of assets.

At the same time, adopting product sales as their primary objective, private banks usually attach great importance to sales performance in their internal assessment, for which, to a certain extent, sales account managers focus more closely on product sales, instead of client-oriented wealth management. Further efforts are needed to explore the inheritance management specific to family trust.

Apparently, as far as the current situations in China are concerned, there is no practical significance in probing into MFOs.

(II) Localization development of family offices in China

Domestic family clients are different from foreign ones, and the cultural, political, economic, and other differences between China and foreign countries have determined that we cannot just mechanically copy the mature foreign family office models which have gone through hundreds of years of development. On that account, starting with the current situations and national conditions in China and partially borrowing foreign experience, the author has put forward the following suggestions:

(1) The building of family offices should rely on family trust funds, and encourage the “indigenous” model.

Depending on the nature of the party who dominates the establishment of family offices, family offices can be classified into two models, i.e., the “indigenous” model dominated by family members, and the “exogenous” model dominated by professional agencies. Due to the imperfection of trustee market in the field of private wealth management in China, the “indigenous” model can more closely adapt to the needs of family assets management, and thus is more acceptable to the actual controller of family assets. In the current legal environment and under the current wealth management system, it’s still relatively difficult for “exogenous” family offices to provide family assets management services to ultra-wealthy families.

Seen from the restructuring, isolation and holding in trust of family assets and the establishment and operation of family funds, each link requires the intervention and participation of core family members, so it’s more practicable to pick the core members of a family office from inside the family team.

(2) Adopting a “compact” model tallies with the entrepreneurship characteristics of first-generation entrepreneurs.

For entrepreneurs with a real consciousness of inheritance, an arduous entrepreneurial journey is inevitable, which explains why they still budget strictly even after they have become ultra-wealthy individuals. In this regard, the family offices providing butler service for family wealth management should advocate an economical and compact pattern, as any luxurious arrangement would be probably rejected by the actual controller of family businesses.

The team structure of family offices should be pragmatic and uninterested in luxury. The governance structure of many family businesses usually includes a strategic investment department and an investment company, which frequently undertake some functions of assisting the actual controller in managing family assets. The chairman, investment department director, CFO, and legal consultant are regular participants in this respect. It’s usually a pragmatic choice to first gradually create an “indigenous” family office from its “rudiment”, and then equip it with necessary external consultants. The first step here is to complete the structural restructuring of family assets and the building of family funds, based on which the family office can be gradually perfected, otherwise the so-called family office would become a castle in the air.

(3) The starting point of family trust should be lowered to match it with the “accompanying” model.

Different from the high starting point of family trust abroad, the starting point of family trust in domestic must be lowered to land it on the ground, as domestic family businesses are still “testing the waters” when it comes to family wealth management. This also gives entrepreneurs a process of understanding and accepting family trust. In this process, the domestic trustee market will be gradually developed, and the supporting legal system will also witness a gradual perfection.

Considering the significant characteristic needs of domestic family businesses, the members of family offices can start with the perspectives of emigration, marriage, children’s education, inter-generational inheritance and wealth preservation and appreciation to launch family trust plans meeting single functional needs and target the practical needs of family wealth management; based on the target appeals of family wealth inheritance management and the type, structure and regional distribution of family assets, the building of family trust funds can be perfected step by step and stage by stage. In this course, an exclusive and professional family office team can be gradually built according to the “accompanying” model.

(4) Based on a cross utilization of domestic and foreign trust systems, the “hybrid” model is followed to plan the family wealth management of domestic wealthy families, and to perfect the decision-making and consultant structure of family offices.

Comparatively speaking, many offshore jurisdictions already have a relatively sound, mature and stable trust system, and creating an offshore trust to hold domestic and offshore assets has become one of the important means of family assets management. However, when it comes to domestic trust system, many agencies and domestic entrepreneurs still have their doubts. In particular, creating a family trust with domestic non-cash assets faces a series of problems, including the cost problem and the problem of uncertainty. Under this circumstance, the building of family offices requires an international vision and a cross utilization of domestic and offshore trust system to create family trust funds in a pragmatic manner, and to construct a rational legal structure arrangement between domestic trust and offshore trust.

Meanwhile, when it comes to the building and operation of family trust funds, pragmatic considerations must be given to both the combination of public interests and private interests, and that of cash-equivalent family trust management and non-cash (immovable, movables, stock rights, etc.) family trust management.

(5) The “butler” model of family offices should be constructed to avoid the commission model of profiting in both ways, and to truly start with the sole aim of serving family wealth management, so as to match the building of family offices with the establishment of professional norms for the members of family offices.

By Xu Haibo, Liu Dongming

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editorialuser2@mxmedia.com.hk (stacy) Member News Tue, 29 Nov 2016 06:38:16 +0000
Labuan FSA PRESS RELEASE http://asiaoffshore.org/index.php/news/member-news/item/117-labuan-fsa-press-release http://asiaoffshore.org/index.php/news/member-news/item/117-labuan-fsa-press-release

LABUAN INTERNATIONAL BUSINESS AND FINANCIAL CENTRE PERSEVERES AMIDST GLOBAL CHALLENGES AND BROADENED ITS FOOTPRINT IN THE ASIA PACIFIC REGION

LABUAN IBFC: “25-YEAR JOURNEY AND CONTINUED GROWTH”

Labuan, 18 July 2016 – The Labuan Financial Services Authority (Labuan FSA) announced the release of its Annual Report for 2015 (AR2015) which highlighted Labuan International Business and Financial Centre’s (Labuan IBFC) continued growth trajectory in 2015 and its strengthened position as a viable IBFC in expanding its foot print in the Asia and the Pacific region. The AR2015 also reported on Labuan FSA’s financial position for the year ending 31 December 2015.

Amidst a modest global economic recovery, Labuan IBFC achieved another year of growth momentum, albeit at a lower growth rate, fuelled by robust business policies and continued intermediation enabling investors to tap into the business opportunities in the ASEAN market, strategically positioning Labuan as the investment gateway to the region. While Labuan IBFC operates in a conducive business environment, Labuan FSA ensures that the laws and regulations governing the IBFC are in conformity with internationally recognised standards on transparency and sound regulatory requirements, maintaining a well regulated environment for legitimate and genuine businesses to operate in.

In the course of 2015, the centre achieved several notable achievements highlighted below:

Deepening and broadening its footprint in Asia and the Pacific region

• A total of 836 new companies were incorporated for the year under review. More than 70% of the companies originated from Asia reflecting that Labuan IBFC remains a favorable destination for multinational companies looking to expand into the AsiaPacific markets;

• Two new banking licences were granted in 2015. The banks’ total deposit rose 17.9% to USD10.8 billion, signifying investors’ greater confidence in placing funds in Labuan IBFC while Islamic financing increased significantly by 55% to USD1.8 billion compared to USD993.3 million a year before. Non-residents dominated 77.3% of total 2 Islamic financing. The banking sector boosted its profit before tax to USD620.6 million, an increase of 34.6% from 2014;

• A total of 16 new insurance and insurance-related licences were approved, including entrance of insurance entities from the Middle Eastern countries of Qatar and United Arab Emirates, as well as Switzerland. Overall, the Labuan insurance sector has a strong margin of solvency of 5.7 times above the minimum regulatory requirement and the industry capitalisation also increased to USD832.3 million from USD783.3 million with 74% dominated by foreign entities;

• The capital market sector continued to grow with private fund size increasing by 0.9% to USD12.3 billion. In geographical distribution, 58.5% of the private funds originated from the ASEAN region;

• The Labuan International Commodity Trading Companies (LITCs) sector fared well with eight new approvals granted, bringing the total to 43. About 79% of these companies originated from the Southeast Asia region. For Labuan’s leasing business, 45 new companies and 60 subsequent leasing transactions were granted approval. Total assets leased grew to USD51.8 billion where 73% derived from the oil and gas industry and 25.2% from aviation sector;

• Wealth management remains one of the high growth sectors in Labuan IBFC with nearly 28% increase in the number of Labuan foundations, bringing the total to 166. The growing trend shows that Labuan’s comprehensive wealth management instruments continue to entice the interest of high net-worth individuals. More than 77% of Labuan foundations originated from Asia and the Pacific region. Labuan IBFC is also leading in Islamic wealth management where the Authority introduced the Labuan international waqf guidelines in 2015, placing Labuan as the first IBFC to facilitate the establishment of a waqf under common laws.

Conforming with international standards on transparency & regulatory compliance and Advancing regional and international relations

• Malaysia (including Labuan IBFC) was one of the early jurisdictions to undergo the APG mutual evaluation exercise under the new methodology to ensure the adoption, implementation and enforcement of internationally accepted standards against money laundering and the financing of terrorism. The admission of Malaysia as a member of the FATF in February 2016 is a testament of its commitment to standards and practices in AML/CFT;

• During the year, Labuan FSA continued to advance in supervisory cooperation with international regulatory authorities through the exchange of information with counterparties. A total of 42 requests for exchange of information were facilitated by Labuan FSA in 2015 and one new MoU was sealed with the Cayman Islands Monetary Authority to foster greater efficiency in mutual assistance.

• Labuan FSA was also re-elected as the representative for the Pacific Region in the Group of International Insurance Centers Supervisor to represent the common voices of the financial centres in the Pacific region.

Advocating investment in capacity and capability building

• The talent development initiatives were designed to link with IBFC business strategies and to ensure the talent proposition remains relevant, competitive and be able to keep pace with the constantly changing financial landscape. High priority was placed on close collaboration with the industry and professional training institutions to provide professional certification programmes and target technical training programmes to build technical competencies of the staff of Labuan FSA and IBFC industry workforce. Labuan FSA is also committed to providing a conducive learning environment for the local Labuan community at large through its contribution to the Labuan International School. In 2015, the Olympic-sized swimming pool and hostel blocks were completed to cater for the increasing student intake.

Established in 1990, Labuan IBFC celebrated its silver jubilee in 2015. Labuan has demonstrated great agility in shifting into a reputable international and business financial centre with wide international and regional linkages in its 25 year journey. Moving forward, Labuan IBFC will continue to be shaped by the shifting financial market dynamics and financial regulation development globally. Underpinned by the ASEAN Economic Community integration with new business opportunities opening up for investors, Labuan FSA is confident that Labuan IBFC has the potential to fulfil the financial and business needs of the regional economic community. For the financial year ending 31 December 2015, Labuan FSA recorded an increase in operating income to RM53.9 million compared to RM52.7 million in 2014, while its total reserves also increased to RM59.6 million from RM52.4 million.

Labuan Financial Services Authority 18 July 2016

FOR FURTHER INFORMATION, PLEASE CONTACT: Corporate Communication & External Relations

Unit Tel: +60 087- 591200
Fax: +60 087- 428200
E-mail: communication@labuanfsa.gov.my

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editorialuser2@mxmedia.com.hk (stacy) Member News Wed, 27 Jul 2016 21:55:22 +0000
Pafilia is proud to announce its new flagship development ONE. http://asiaoffshore.org/index.php/news/member-news/item/115-pafilia-is-proud-to-announce-its-new-flagship-development-one http://asiaoffshore.org/index.php/news/member-news/item/115-pafilia-is-proud-to-announce-its-new-flagship-development-one Pafilia is proud to announce its new flagship development ONE.

ONE enables residents to command the horizon with uninterrupted views from the tallest residential seafront tower in Europe!  ONE gives the Limassol skyline a striking new definition. The tallest building in Cyprus, ONE is a landmark of progress, recognisable from anywhere in the city.

ONE is situated on 28th October Avenue - Limassol’s prime seafront boulevard with its vibrant business, leisure and social amenities. At 37 storey’s, the monumental height of ONE redefines the ultimate Limassol view - it has the greatest perspective on the city and is an altogether elevating prospect.

ONE is a visionary development which is creating a new category of elite living in Cyprus; it demonstrates the potential of architecture and design while also reinforcing the image of Limassol as a premium destination in which to invest.

ONE comprises 83 ultra-luxurious residences.  With a maximum of just three apartments per floor, every residence at ONE offers unrivalled sea views. Residences offer uplifting levels of light, open, generous space and the refinement of detailing.  Apartments have been ingeniously designed with uninterrupted flow of space running from one side of the tower to the other, with privileged views over the city and to the Troodos Mountains beyond.

 The elegance of the interior design offers a contemporary interpretation of aspirational living in the region. It responds to the confident tastes of sophisticated people who will choose to make their Mediterranean seafront home on the Limassol Riviera.  Finishes including Bulthaup kitchens, Dornbracht sanitary fittings and Lutron / Crestron for smart home technologies are some of the leading names in each category.  The development also incorporates the latest technology in air management systems, lighting and plumbing with emphasis on economy, efficiency and acoustic performance within each apartment. In fact, Pafilia has given great emphasis to such equipment to ensure that residents enjoy ultimate comfort and convenience in their home. 

ONE is a world unto itself offering residents exclusive access to exceptional amenities, facilities and service including a spa, fitness centre, pool and voluminous sun decks. Residents will enjoy 24 hour comprehensive service, while two floor of retail provide instant access to premium dining and shopping.

ONE is unlike any other. It creates a new category of luxury - presenting the singularity of a central location, and a unique character.  It offers residents all the advantages of esteemed hotel service in the comfortable embrace of a secure, private residence.  It marries the sanctuary of home with the spirit of a remarkable hotel.

 A collection of the world’s most renowned architects, designers and engineers have been brought together to originate ONE. They share an affinity for the exceptional, the unique and the genuine.  In addition to Pafilia, the team consists of internationally acclaimed Atkins, WKK, Buro Happold and HBA. Respect is the foundation of design to which they adhere, every aspect of the building’s structure, detailing and finish plays to the location’s natural advantages.  

Construction works commenced on 21st March 2016 with initial works including cleaning and levelling of the plot, excavation and the construction of the boundary diaphragm wall. Pile tests have also been completed and the results were excellent. ONE will be completed in December 2018.

PAFILIA PROPERTY DEVELOPERS LTD

Barry Winter – Director South East Asia

0084 1227686019

00357 99 381 684

Website: www.pafilia.com Email: b.winter@pafilia.com

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editorialuser2@mxmedia.com.hk (stacy) Member News Sun, 17 Jul 2016 20:23:38 +0000