The Private Foundation in the Netherlands Antilles (PF or SPF)

Definition

In 1998, the Netherlands Antilles introduced a new, separate legal entity under private law called the Private Foundation (Stichting Particulier Fonds or SPF in Dutch). The Private Foundation is a more flexible and specific form of the common, legal entity foundation used for charitable purposes. The PF is actually a civil law equivalent to the Anglo-American trust and can act as a holding or investment company. The PF is the best alternative for private individuals wishing to protect their assets and estates from future creditors, bankruptcies and excessive taxes, as well as to make provisions for their families. Contrary to the common foundation, the PF is allowed to make distributions to its beneficiaries or to third persons designated by the founder, for instance, incorporators or children. These distributions having to be of a charitable nature. The PF has no shareholders, share capital or members. The founder is the one controlling and overseeing the activities of the board of directors, which manages the daily affairs. The assets and liabilities of the PF are kept in its own name. The beneficiary, the founder, or the members of the board have no personal liability for debts or liabilities of the PF.

Advantages of the Private Foundation

Family Provisions and Asset Protection

First and foremost, the PF is the ideal vehicle to make family provisions assuring a lifetime control over your assets. By protecting your assets against economic risks you can assure the future of your children and other family members. The beneficiary can make provisions for the case of death, and the PF will distribute the assets or postpone distribution – for instance if the heir is too young - in accordance with the wishes of the deceased. Such provisions guarantee that your assets or estates will not be the subject of long and complicated inheritance procedures, which could actually endanger your assets and lead to unwanted property splitting. The PF can regulate income, decide about education funds and generally, prevent excessive spending by some heirs. You can at any moment, change the beneficiaries after death, but your decision cannot be subject to appeal. The PF allows a transition without problems .Such provisions for succession being made possible by the PF differ from what a company can do.

Asset Management and Investment Activities

A Private Foundation is not allowed to run a business or enterprise in order to make profits and the articles charter of the foundation should not mention any intention of doing so. It is not allowed to engage in business transactions. Nevertheless, asset management – except for third parties – or acting as a holding, or investment company, is not considered as a business. In fact, asset management includes a wide range of perfectly legal activities. The PF can invest its assets following the wish of the beneficiary, without any restrictions to the type of investment. Such assets could be:

Shares, bonds, mutual funds, bank deposits;
Real estate;
Copy rights, licensing rights or powers to third parties;
Art collections.

Tax Advantages

A Private Foundation is exempted from any type of taxes in the Netherlands Antilles, providing the articles of incorporation clearly mention its legal status as a Private Foundation. In general, a PF does not have to file a tax return, but if it does, it should explicitly be done in the name of a Private Foundation;
Non-residents can transfer their assets or make gifts – distributions - to the private foundation without having to pay NA gift taxes. Nevertheless, the donor may have to pay gift taxes in his country of residence;
PF does not pay any profit tax, as long as its activities cannot be qualified as a business and it does not run an enterprise for profit;
In many cases, the founder and beneficiary can reduce his/her income and estate tax burden in his/her country of residence;
There are no succession duties on the assets of the PF.

Further Advantages

A PF can qualify as a passive holding company and under certain circumstances, can conduct passive management and financing activities, like granting loans or borrow funds. It can hold insurance policies, annuity policies and pensions;
There is no minimum capital requirement and the amount of capital does not have to be mentioned in the Articles of the Foundation;
The name of the beneficiary is not mentioned in the Articles of the Foundation;
There are no nationality requirements in the NA law regarding the founder and beneficiary, investment managers, registrars, transfer and paying agents;
There is no obligation to publish the results and the financial status of the PF;
Strict confidentiality protects the beneficiary;
A PF can exist for an indefinite period of time and can be dissolved at any moment;
Assets do not have to be transferred immediately to the PF;
Assets can be transferred to natural persons, legal entities or corporations to be held in trust for the benefit of the Foundation.

Basic idea of a PF in the Netherlands Antilles

In a private foundation, the ownership of assets is separated from control. A private person transfers his/her assets to the foundation and is no longer their owner but becomes the beneficiary of the foundation’s assets.

This is done by means of a trust management agreement established between the PF and the founder - now the beneficiary - or between the PF and a fiduciary appointed as a member of the Private Foundation’s board of directors. The founder can be a trust company established in the Netherlands Antilles.

Incorporation

The first step is a deed, executed by the Founder in the presence of a civil-law notary resident in the Netherlands Antilles and registered in the Register of Foundations at the Chamber of Commerce. This deed fixes the rights which the Founder wants to retain over the PF concerning the enjoyment of the foundation’s assets and the appointment and removal of the board of directors or individual directors. The articles of the foundation must include its name and clearly mention it being a Private Foundation. They must further include the island in which the PF has its seat, the purposes of it and the destination of its assets in case of dissolution. Furthermore, the Founder will, through a letter to the board of directors or by nominating a supervisory board member, appoint the beneficiaries and give advices concerning the management of the PF. The Founder’s rights are transferable to any person or group of persons of his choice. The board of directors is responsible for the daily management of the PF and for the distribution of gifts following the wishes of the Founder as stated in the articles. It is recommended to appoint trusted persons as supervising directors.

The PF must have at least one resident director, which can be the sole board member which has to be in possession of a valid director’s license by the Netherlands Antillean Supervisory Board of Fiduciary Business. A NA-trust Company can act as founder and resident director. He also provides a local registered address and an office. He is personally liable to the Founder/Beneficiary, which instructions he has to follow.

The founder, having become the beneficiary, keeps total control over the assets of the PF. Potential fears by the founder of giving up ownership of his/her assets are, therefore, not at all justified.

Conclusion - Why a PF in the NA?

Because it is absolutely legal and supervised by the Supreme Court in the Netherlands
Because it is absolutely safe. The founder always keeps control over the foundation’s assets
Because a PF is tax-free
Because the incorporation only takes a few days and all formalities can be done in English


	Saturday September 04 2010
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