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posted 2 weeks ago
The Cook Islands is recognised internationally as a leader in the protection of wealth. Over the past 40 years the Cook Islands has enacted a suite of legislation focussed on enhancing the protection available to asset owners when structuring and managing their wealth.
Regardless of whether the protection is from those seeking to access that wealth by force, litigation or legislation, whether through illegal, unethical or immoral means, the Cook Islands asset protection framework is designed to provide security and peace of mind.
In 1989 the Cook Islands amended its International Trusts Act 1984 (“ITA”) to include provisions designed to provide certainty to the process for claiming against assets when held in trust by providing reference to specific dates and events. These provisions gave rise to what is now commonly called the Cook Islands Asset Protection Trust (“CIAPT”). The CIAPT is well known in international wealth structuring circles as providing the gold standard in asset protection.
What is maybe not so well known is the other legislation enacted by the Cook Islands providing structures for holding, investing and protecting assets that may be integrated with a CIAPT, or stand alone, to produce or form part of an international wealth management plan.
Those structures include:
These statutes each contain specific provisions designed to protect assets. The following highlights the most significant of those provisions:
International Companies
Section 228B of the ICA provides that upon the happening of a specified event a share held by any person affected by that event or any interest a person has in a share of the company, or any other interest that arises due to the fact the person is a member of the international company, shall automatically pass to a specified person. Such events and persons must be specified in the company’s articles of association. This provision has obvious benefits for those whose assets may come under threat from unstable governments and other political regimes. For example, where a foreign government expropriates the membership interest of a member of the international company, the ownership of that share will automatically vest in the specified person.
Foundations
The Cook Islands has combined some of the technical and practical features of both its international trusts and international companies giving rise to the Cook Islands Foundation (“CIF”), a wealth planning vehicle that is recognised internationally, in both civil and common law jurisdictions, for its flexibility and ease of administration.
The Foundations Act provides very similar asset protection features as the ITA, including:
The flexibility offered by a CIF through carefully drafted Foundation Rules and the active involvement available to the founder and his/her family and associates in the operation of the CIF, makes it an attractive option when implementing a wealth management plan to hold, invest and transfer assets to the next generation. A CIF is functional, practical and easy to administer whether used as an alternative to or in conjunction with a trust, for succession, philanthropic or business objectives.
Limited Liability Companies
The Cook Islands Limited Liability Company (“CILLC”) is an important component in the suite of wealth planning tools the Cook Islands offers to professional service providers and their clients. Whilst addressing concerns US attorneys face when using domestic US LLCs, the CILLC appeals to an international client base due to the flexibility, certainty and enhanced protection it provides when structuring and managing wealth. It gives its members the opportunity to implement a management and ownership structure best suited to hold and invest both their liquid and illiquid assets.
The LLCA has incorporated several asset protection features consistent with the Cook Islands asset protection framework. The most notable of these being the provision of a charging order as the “sole and exclusive remedy available to a creditor in respect of a member’s Membership rights.” The Cook Islands has made it clear that such charging orders will not operate as a lien over the member’s interest in the CILLC and the creditor will not become an assignee of any of the membership interests. Any rights and obligations existing in relation to a membership interest, which is the subject of a charging order, shall apply to the member as if the charging order had not been issued.
Other asset protection features of the LLCA include:
Conclusion
For centuries people have been seeking and finding ways, both legal and otherwise, to protect and preserve their wealth. The Cook Islands courts and legislature have assisted those looking for legal means by developing and codifying the laws pertaining to trusts, companies and foundations. The Cook Islands structures created provide an ideal platform from which wealth can be held, managed, invested, distributed and, most importantly, protected and preserved to ensure succession to the next generations.
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