Cook Islands Foundation An Excellent Vehicle for
Wealth Management
Inheritance and Estate planning
Protection from Creditors
Cook Islands Foundations Laws
Grant strict privacy against disclosure
Of Foundation affairs

Cook Islands Foundations

The Cook Islands Foundations Act 2012 was enacted in June 2012. It is a modern and innovative piece of legislation drawing from the experiences and features of foundation law in other financial centres, and adding Cook Islands specialist asset protection provisions.

A foundation is formed by a person known as the founder (who may be either an individual or corporate body) who provides (through an “endowment”) the assets to be administered by the foundation. The foundation’s assets are to be administered through contractual, rather than proprietary, principles.

Unlike a trust, a foundation is a separate legal entity. It is managed by a council of members. A foundation can hold assets, enter into agreements with third parties and can sue or be sued in its own name. On the face of it a foundation is similar to a corporation. However, unlike a corporation, a foundation does not have any shareholders. A foundation can have beneficiaries, similar to a trust, or it can have purely charitable purposes. Contrary to trust beneficiaries, who have equitable rights, the beneficiaries of a foundation have contractual rights in relation to the assets of the foundation.

A founder may retain some control over the foundation’s assets through reserving certain powers under its rules. Powers that are commonly reserved include powers relating to the investment strategy of the foundation and the appointment or removal of beneficiaries. The founder may also be given the power to revoke the foundation.

Cook Islands Foundation Registration and Rules

The Act provides a registration regime for foundations in the Cook Islands. Each foundation shall have a foundation instrument which contains its basic details including name, objects, and the registered agent in the Cook Islands. The foundation instrument is filed with the Registrar.

A foundation must also have rules that comply with the Act. Under the Cook Islands Act, while there are certain matters that must be addressed in the rules, there is significant flexibility in how the rules in general are drafted. This allows client founders and their advisors to set out clearly how they want the foundation to operate, and how they want it to benefit the beneficiaries. The rules of the foundation are not required to be filed with the Registrar, but only held by the registered agent in the Cook Islands.

The rules of the foundation provide the substantive details of how the foundation will operate. The rules will include procedures as to the establishment of the council, the appointment of registered agent, the functions of any enforcer, and the rules as to endowment of further assets. The rules may also deal with how powers can be exercised by the council, and the distribution of assets of the foundation should it be wound up and dissolved.

Cook Islands Foundations
Advantages and Uses

The Cook Islands Foundations Act 2012 was enacted in June 2012. It is a modern and innovative piece of legislation drawing from the experiences and features of foundation law in other financial centres, and adding Cook Islands specialist asset protection provisions.

Validity of a Foundation in Cook Islands

Foundation is a separate legal entity from its founder.
Foundation is valid even if the law in the founder’s jurisdiction does not recognise or prohibits foundations.

Multipurpose Use of Cook Islands Foundations

Foundation can be used for charitable or non-charitable purposes, inheritance and estate planning, wealth management.
Protection from Creditors
2 year statute of limitations on claims to set aside the foundation or attack the transfer of an asset to the foundation.
Courts cannot recognise or enforce a foreign judgment against the foundation.
Stringent fraudulent transfer rules that make it difficult for creditors to bring a claim for fraudulent transfer.
Foundation stands independent from the founder’s personal circumstances. The foundation cannot be void or voidable in the event of the founder’s bankruptcy, insolvency, or liquidation.

Cook Islands Foundation Management

Founder establishes rules that govern the operation of the foundation.
Foundation is managed by a board, allowing for input from a number of relevant persons.

Foundation Supervisor or Enforcer

Law recognises someone to oversee the board’s management of the foundation, an ‘enforcer’ or ‘supervisor’.

Privacy

Strict privacy laws against disclosure of the affairs of the foundation.

Cook Islands Foundations Investment Opportunities

Foundation can derive earning from investments/broad investment powers may be authorised in the foundation rules.
Foundation cannot be used for regular trade or commercial activity.

Tax Exemption

Foundation and its beneficiaries are exempt from paying tax in the foundation’s jurisdiction.

Application of Foreign Law to a Cook Islands Foundation

The Foundations Act 2012 specifically provides that foreign laws (i.e. laws other than those of the Cook Islands) shall not apply to invalidate the establishment of the CIF or any dedication of assets to the CIF. In addition:
Forced Heirship laws of another jurisdiction cannot be enforced.
Foreign law will not apply notwithstanding that a dedication of assets to a CIF has the effect of avoiding, defeating (or potentially avoiding or defeating) a right, claim interest, obligation or liability conferred by that foreign law.

Cook Islands Foundation
Wealth Preservation Advantages

Certainty as to the time limitation periods in which creditors must commence actions in relation to “fraudulent transfers” against Founders of CIFs. In summary, a creditor must commence an action against a Founder within 12 months of the date of transfer of assets to the CIF and against the CIF itself within 24 months of the date of transfer of assets to the CIF, in order to have legal standing to argue a fraudulent transfer by the Founder.

The creditor bears the onus of proof to show that a transfer by a Founder was done with intent to defraud that creditor. The creditor must satisfy this onus of proof to a standard of “beyond reasonable doubt”

A CIF will continue to exist notwithstanding that the Founder of the trust may be declared bankrupt.

In the event that a creditor is successful in arguing that a transfer to a CIF was done with intent to defraud creditors, the only remedy available to the creditor is an award of damages from the assets of the CIF.

Punitive damages cannot be recovered from a CIF.

The avoidance of forced heirship rights in the home jurisdiction of the Founder will not render a CIF void or voidable.

Special purpose domestic or offshore entities can be placed underneath the CIF and take advantage of the wealth preservation features offered by Foundations Act 2012.

Conclusion

As clients and planners look to flexibility in wealth planning vehicles, the foundation provides an alternative to the more traditional trust. In developing its foundations legislation the Cook Islands has taken the opportunity to learn from other jurisdictions to bring in the most advantageous provisions combined with its existing expertise in the area of asset protection.

Why not contact Atrium company formation specialists today to speak to one of our advisors on private foundation start-up in Nevis? These experts will guide you towards the correct package for you and your foundation’s needs. We are a highly reputable, reliable company incorporation service provider. Atrium are specialists in guiding clients through the process, from documentation required to submit an application, to post formation considerations.

Why Atrium

What separates us from our competitors is that our services don’t end with the registration of your entity. We offer a wide range of additional services others can’t or just won’t offer, such as lifetime free support.

Whilst most providers either specialise on personalized consultation at relatively high rates or run bulk registration factories without any support, we want to offer the positive aspects of both types. Therefore Atrium combines professional advice, worldwide registration services, reasonable fees, customized order processing, lifetime support and fast processing. Where others see company formation services as a bulk registration with no support and no individual assistance, we do care about your business needs.

Cook Islands Foundation

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