In Re (#11 November 2012)

Private Assistant

Lana A. Golian

Issues of confidentiality of beneficiaries in deals relating to both structuring and protection of business assets or tax planning transactions are becoming more and more topical today. Investigations by inquisitive journalists, a heightened interest from fiscal authorities and invalidation of transactions show that all beaten paths and hackneyed offshore schemes are closed now. To avoid such negative effects as additional accrued taxes, the owner shall consider not only recommendations of offshore advisers, but also specialists in tax planning and contract law. And their recommendations appear quite frequently to be the opposite. Simple schemes and mass variations are valid only for single operations. Talking about establishing long-term contractual relationships, assets structuring for future attraction of investors and inheritance planning, it is necessary to involve different specialists and build a scheme with interchangeable parts.

To meet the needs of the owner in structuring and scheme building it is advisable to involve also independent specialists it can be your personal assistant in worldwide incorporation. When you entrust a staff lawyer to get details of international laws, your business may get less attention and support from this employee for some period of time. An offshore adviser is only aware in facts and details of incorporation process, but usually dont understand all the issues of implementation of tax rules. Almost all experts in tax law, as though as auditors, are usually highly competent in local Ukrainian legislation and they usually involve offshore advisers or affiliate audit companies for international structures considering. The concept of personal assistant applies first of all to the person collecting and combining all the advantages mentioned above:

it should be lawyer and accountant and offshore adviser at once. Furthermore, a personal assistant provides services with a high degree of confidentiality and privacy, and it is considered to be a highly moral and responsible personality.

The concept of personal assistance in the world practice is reflected by the creation of so-called Family offices. It is believed that the modern concept of the family office was born in the USA. Later, this concept is considered to be widespread in the Europe, and the most popular places for organizing family offices are Switzerland, London and Monaco. Today, the creation of a family office is becoming more and more popular among wealthy people from Asian countries and the CIS countries, particularly Russia and Ukraine. In fact, the family office is a special management company, which is created for managing assets and personal affairs of wealthy people.

The maintenance of such company costs an average of 1% of the value of a familys assets. For the reason of reducing high maintain expenses many people began to use multi-family offices (MFO) companies serving not one but several wealthy families. European wealthy families successfully use the services of such multi-family offices structures that fully or partially control the pool of assets of several well-off families. Control of the assets means, above all, protection and preservation of the assets and also high confidentiality of ownership, and protect and planning inheritance procedures in accordance with the wishes of the beneficial owner. Wealth management as a service is a secondary goal of the family office, as such services are in most cases associated with a high risk and are usually provided by narrow specialists in the banking, investing and real estate fields. Multi-family office services are usually carried out by highly qualified specialists in law, finance, investment, and in other fields. It usually includes development and implementation of investment plans, management of family property, support in family business, consulting and assistance in planning of the family budget, childrens education, property acquisition, inheritance, family assets, including the organization of family events, etc.

The concept of personal assistance is based on the concept of Multi-family office, with the only difference being that the set of services is limited by business, commercial purposes structuring and assets planning, registration and maintains of international companies, advising and support. At the same time, the personal assistant provides high-level services as family office services, ensuring confidential ownership and management of assets (not acquiring the rights to assets at the same time), and can also oversee the process of inheritance and distribution of assets to the beneficiaries.

An advantage of personal assistant is independence and objectivity. The main source of income of the personal assistant is the professional fee from clients. A personal assistant is not an agent of any particular bank, such as Private Banking. At the same time, he or she is not an agent of an offshore provider company such as an offshore adviser that represents interests and acts on behalf of the offshore provider and gets a commission fee from them. He is an interested prima facie in high-level quality services and this becomes the basis of his choice of bank and offshore provider company for the client.

A personal assistant per se acts as a protector or trustee in relations of inheritance and assets protection by implementing the fiduciary management function. A personal assistant might be authorized to carry out different actions on behalf of the client, such as signing documents, keeping bank accounts, etc., even disposal of assets in the clients interests for certain purposes.

Compared to family office staff, who can be entrusted almost everything starting from private assets management solutions right up to day-to-day operations such as yacht maintains and friends parties organizing, a personal assistant complies only with responsibility related to business purposes, tax planning, assets protection and inheritance.

Such issues as assets protection and inheritance are becoming the most relevant in the business community in recent years. It is explicable first of all because of the unstable political situation in Ukraine and the world economic situation in general. Schemes of assets protection by offshore companies do not always solve problems of inheritance, and often are non-realizable in protecting confidentiality of the beneficial owners. Now they should be substituted by such structures as Trusts and Private Family Foundations. Confidentiality is the key to successful business. Increased privacy requirements make it necessary to divide the powers between the owners, managers and administrators by way of creation and operation of offshore companies. Divide et impera! Alexander the Great words are more than acceptable in business, and in particular relating to offshore companies. Personal assistance services in such cases offer maximum client confidentiality relating to communication (telephone, Internet, e-mail) regarding the storage of documents.

World practice shows that the nominee directors institute becomes out-of-use: nominee directors are becoming not purely nominal, but non-executive. To carry out the operational functions the Board of Directors includes, among others, entrusted persons. And it is advisable they should be not affiliated to the main structure of the beneficial owner and business income, for the reason of avoiding recognizing the structure as being created for tax evasion.

A personal assistant may become such an entrusted person that is not directly involved in the core business of the owner but acts as its attorney.

For the prevention of offshore raiding, nominee shareholders should be professional trustees, acting as a fiduciary and having the proper certification and accreditation with the relevant local authorities. Control over the trustees activity could be implemented directly by the beneficiary, but this would increase the risk of recognition of the entire structure as a sham. This high risk can be declined by appointing personal assistant as a protector of Trust structure or Foundation.

There is no doubt that despite the great advantages of using the personal assistant concept there are also some imperfections, with the main ones being faith and loyalty. Just like offshore and trust services, personal assistance services are based mostly on good faith relationships between the beneficial owner and the personal assistant. While there is no valid legislation on fiduciary and trust services in Ukraine, most wealthy people are used to being served by British, Swiss, Panamanians and other residents, whose legislation has direct regulations on such professional activity. Nevertheless, in recent years there is a strong trend towards getting ones own family doctor in offshore tax planning and assets protection area, who will act as a personal assistant, be responsible to support non-resident structures and be controlled by the beneficial owner much more easily than his European colleagues. And confidentiality requirements and an individual approach in a task solution will meet the most specific needs of the beneficial owners and result in enjoying a personal assistance service.

a
Subscribe
The Ukrainian Journal of Business Law

Subscribe to The Ukrainian Journal of Business Law right now and enjoy the most relevant issues on doing business in Ukraine on your device or in print.

All this for just USD 9.99 a month.

 

Subscribe now