Legal forms

In the English legal tradition, two legal forms have always been traditionally used;-

1. The Trust. This name does not describe an actual legal ‘entity’, but a relationship, whereby a person, the ‘Trustee’, holds and manages assets in accordance with the provisions and objects, usually set out in a Trust Deed, for other persons, the ‘Beneficiaries’, or for a Purpose. Trusts are notoriously complex for laymen to understand, and the potential exposure to litigation for a trustee is significant, especially in the current litigious climate of business.
   
2. The Company Limited by Guarantee and the Company Limited by Guarantee and Having Shares). These corporate forms were first introduced in the Isle of Man in the Companies Act, 1865. Notwithstanding this, the trust has always been the overwhelmingly preferred fiduciary mechanism because of its ability to handle abstract concepts, such as unborn (and unconceived) children. It is only in very recent years that changes in both trust and tax law have caused these corporate forms to be explored and their full potential to become recognised.
   

Although the trust concept was widely used in continental Europe in the Middle Ages, it was swept away by the Napoleonic reforms at the end of the eighteenth century. In recent years, however, the trust concept has seen something of a revival in Roman law countries, particularly in those providing ‘offshore’ financial services such as Liechtenstein, and Panama.

In place of the trust, there evolved in some Civil law countries the use of the civil law Establishment or Foundation, or, as it is known in Liechtenstein, the Stiftung. Originally intended to be for public not-for-profit structures, the Foundation has been adapted for private purposes, and as such is now to be found in a number of jurisdictions.

There are two primary differences between the Foundation as found in Liechtenstein and elsewhere and the Company Limited by Guarantee, its nearest equivalent in the world of English type companies: