Daniel Channing, Group Head of Private Client, discusses three key practical aspects for families to consider when implementing a Family Investment Company (FIC).
๐ฆ๐ต๐ผ๐๐น๐ฑ ๐ฎ ๐ฑ๐ผ๐บ๐ฒ๐๐๐ถ๐ฐ ๐ผ๐ฟ ๐ป๐ผ๐ป-๐ฑ๐ผ๐บ๐ฒ๐๐๐ถ๐ฐ ๐ฐ๐ผ๐บ๐ฝ๐ฎ๐ป๐ (๐ผ๐ฟ ๐ฎ ๐ต๐๐ฏ๐ฟ๐ถ๐ฑ) ๐ฏ๐ฒ ๐๐๐ฒ๐ฑ
Domestic companies provide the family with the ability to both control and carry out much of the operation and administration of the company.
Non-domestic companies will provide the ability to choose the most suited companiesโ law and may provide optionality and flexibility should the family, or individual members of the family, move jurisdictions.
Hybrid, or overseas incorporated but domestically managed companies, can provide a combination of benefits allowing the family free choice of legal framework combined with the ability to actively manage elements of operation themselves.
The choice will often come down to the specific requirements and circumstances of the family and professional legal and tax advice is critical.
๐๐บ๐ฝ๐น๐ฒ๐บ๐ฒ๐ป๐๐ถ๐ป๐ด ๐๐ต๐ฒ ๐ฐ๐ผ๐ฟ๐ฟ๐ฒ๐ฐ๐ ๐น๐ฒ๐๐ฒ๐น ๐ผ๐ณ ๐ด๐ผ๐๐ฒ๐ฟ๐ป๐ฎ๐ป๐ฐ๐ฒ
Simple governance can ensure simplicity in operation, agility and allow all members of the family to participate in an element of control or operation subject to taxation considerations.
More sophisticated governance, such as shareholder agreements or bespoke articles,ย have the benefit of providing a more controlled environment in relation to control and/or beneficial interest amongst family members.
Often engaging a professional fiduciary to help the family administer the operational aspects of the governance can increase effectiveness and support the family with the more granular burden of operation and this might be especially important when taxation is a consideration.
๐๐ผ๐ ๐๐ฐ๐ฎ๐น๐ฎ๐ฏ๐น๐ฒ ๐ถ๐ ๐๐ต๐ฒ ๐๐๐ฟ๐๐ฐ๐๐๐ฟ๐ฒ
Often a single FIC can house a diverse range of family asset classes. Keeping things simple brings efficiency of operation and reduced cost.
There are however times when specific assets require segregation; either for tax, legal, risk contagion or beneficial interest reasons. Scalability and flexibility are key components of a well-designed model and allows the structure to cater for the familyโs needs as circumstances change.
FICs remain a hugely useful succession planning tool for families. With the right thought process and supporting advice, a FIC can be utilised to fulfil a variety of asset protection, succession or family governance requirements.
Whitmill provides private client and corporate services to international families. To speak to Daniel to find out more please contact daniel@whitmill.com
