Sunday, December 01, 2013
Wednesday, August 07, 2013
Trastelonogía o Patrasología realidad o mito de los programas de relaciones y redes sociales
QUIEN CONTROLA AL CONTROL?
Generalmente las operaciones comerciales realizadas por compañías o individuos se someten en todos los países a un grupo de reglas para su formación y operación.
Existe sin embargo un tipo de asociación no corporativa que desarrolla negocios como un colectivo sometido a diversas regulaciones en la mayoría de los países industrializados. Se conoce con el nombre de mercadeo de redes o relaciones personales, o mercadeo de múltiples niveles.
En los próximos días estaremos publicando algunas ideas sobre este tipo de actividad que debe considerarse comercial en su esencia pero que no ser tomada tan en serio por algunos miembros del colectivo social.
Lo más importante de nuestro análisis sería determinar quien controla a quienes están a cargo de las organizaciones internacionales que promueven sus productos a través de este tipo de sistemas de mercadeo independiente. Forman esquemas ilegales, son controlados o regulados, o bien son corporaciones que proyectan imágenes de éxito para generar o desarrollar percepciones incorrectas en las personas interesadas en desarrollar un negocio propio con poco capital inicial?
Esperen nuestras próximas entregas sobre el tema.
Generalmente las operaciones comerciales realizadas por compañías o individuos se someten en todos los países a un grupo de reglas para su formación y operación.
Existe sin embargo un tipo de asociación no corporativa que desarrolla negocios como un colectivo sometido a diversas regulaciones en la mayoría de los países industrializados. Se conoce con el nombre de mercadeo de redes o relaciones personales, o mercadeo de múltiples niveles.
En los próximos días estaremos publicando algunas ideas sobre este tipo de actividad que debe considerarse comercial en su esencia pero que no ser tomada tan en serio por algunos miembros del colectivo social.
Lo más importante de nuestro análisis sería determinar quien controla a quienes están a cargo de las organizaciones internacionales que promueven sus productos a través de este tipo de sistemas de mercadeo independiente. Forman esquemas ilegales, son controlados o regulados, o bien son corporaciones que proyectan imágenes de éxito para generar o desarrollar percepciones incorrectas en las personas interesadas en desarrollar un negocio propio con poco capital inicial?
Esperen nuestras próximas entregas sobre el tema.
Tuesday, November 13, 2012
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Thursday, July 05, 2007
LA NORMA GENERAL NUMERO 07-2007 SOBRE LA EXENCION PARA LAS EMPRESAS DE CONSTRUCCION DE PROYECTOS.
En fecha 26 de Junio del año dos mil siete (2007) la Dirección General de Impuestos Internos dictó la norma 07-2007 conocida como NORMA PARA ESTABLECER LA FORMA DE APLICACIÓN DE LA EXENCION A LOS ACTIVOS DEL ISR Y EL ITBIS PARA EL SECTOR CONSTRUCCION Y DEL USO DE COMPROBANTES FISCALES QEU DEBEN SUSTENTAR SUS OPERACIONES.
En su artículo primero esta norma establece que para ser beneficiarias de la exención fiscal establecida en el Código Tributario sobre el impuesto a los activos las sociedades DEDICADAS a la construcción de obras importantes deberán someter a la Dirección General de impuestos Internos el estimado de los costos del proyecto y el plazo para la ejecución.
En otras palabras para que la empresa pueda calificar como exenta del impuesto de los activos tienen que estar registradas como tal en la DGII. De conformidad con dicha norma las empresas constructoras de obras estatales tales como carreteras, puentes, presas, caminos vecinales o edificaciones o similares, tienen derecho a la exención siempre y cuando la registren como avance al final del ejercicio. No obstante para recibir este beneficio se hace necesario el registro en la DGII del contrato con el Estado Dominicano.
El plazo para calificar una obra como exenta de impuesto sobre los activos es de 120 días. Estos comenzarán a correr para los nuevos proyectos al momento de inicio de las obras y para los que ya están en ejecución en el mismo plazo. Cuándo es el momento de inicio de la obra? Para la DGII el inicio de la obra (parrafo III) es el momento de la primera erogación de fondos. Es decir desde que el proyecto tenga los fondos para trabajar la obra.
Si los constructores decidiesen prorrogar el plazo del inicio de obra deberán informarlo a la DGII oportunamente. No se define en la norma cuál es el plazo de oportunidad pero se entiende que lo que busca la administración de impuestos es que las obras no se paralicen con la finalidad de acogerse a la exención. Es por este motivo que el párrafo V de dicha norma establece que de todas formas es necesario que las empresas se inscriban en la DGII para calificar como constructoras exentas del impuesto sobre los activos cumpliendo con las disposiciones del Título V del Código Tributario.
Cuando una empresa de venta de inmuebles o dedicada a la construcción tenga varios proyectos en ejecución cada proyecto debe de mantener sus registros individualizados, aunque para fines del Impuesto sobre la renta estos proyectos se presenten como obras consolidadas con el formulario IR-2.
Loa pagos que hagan dichas empresas a los subcontratistas estarán sujetos a una retención de un 2%. Los arquitectos, ingenieros, agrimensores y otros de profesiones similares "facturen consignando únicamente el valor del servicio profesional prestado, la retención del ISR será del 10% del valor facturado. En adición las empresas estarán obligadas a retener a su vez un 2% con carácter de retención a los trabajadores bajo la dependencia de los subcontratistas es decir de los trabajadores que documentados o indocumentados estén bajo la dependencia de dichos subcontratistas. Esta retención del 2% bruto se considerará pago definitivo.
Estos pagos no requerirán de comprobante fiscal. En consecuencia podrían beneficiar a las empresas constructoras por la facilidad de reportar dichos pagos al final del ejercicio fiscal, sólamente consignando los datos de los beneficiarios tales como nombres cédulas, fecha, etc.
Como indicamos anteriormente estos pagos no requerirán de comprobante fiscal, pero para la DGII existe una obligación general de prudencia que tienen las empresas constructoras en el sentido de que estos pagos tendrán que ser razonables y guardar relación con los parámetros aceptados para este tipo de gastos.
Los maestros constructores, ajusteros, y obreros no estarán sujetos a la retención del Impuesto a la Transferencia de Bienes y Servicios (ITBIS); sin embargo el ITBIS será retenido por las empresas constructoras de la siguiente forma: a) persona jurídica ITBIS más retención del 2% de impuesto sobre la renta como pago definitivo; y b) si se trata de persona física 30%, repetimos que esta retención la efectua en la fuenta la empresa que realiza el pago.
El artículo 4 de la norma establece que "Cuando un contratista o subcontratista, sean estas personas físicas o jurídicas, realicen trabajos de construcción y dichos trabajos inlcluyan materiales, equipos o piezas de la construcción, la facturación del 16% del ITBIS se aplicará sobre el 10% del monto de los trabajos facturados. El ITBIS facturado de esta manera, estará sujeto a la retención del 100% si quien factura es una persona física y de 30% si quien factura es una persona jurídica.
Las obras contratadas como CONTRATO DE ADMINISTRACIÓN se calcularán sobre el porcentaje a percibir por el subcontratista como pago de su obra.
El promotor o dueño de la obra podría para documentar el costo de la obra aportar como evidencia de dicho costo los comprobantes fiscales que sirvan de sustento a la compra de materiales de construcción por parte de las personas físicas o jurídicas que trabajen bajo la modalidad de contrato de administración.
En el párrafo III de la norma en lo relacionado con el ITBIS se expresa que: " Las disposiciones de la presente norma sobre el ITBIS, no incluye los demás pagos que los constructores hagan a favor de técnicos, profesionales liberales y otras personas físicas cuya labor haya sido prestada sin estar bajo relación de dependencia de la empresa constructora que realiza el pago, los cuales estarán sujetos a las disposiciones establecidas en el Código Tributario y sus reglamentos. En el caso de que estos profesionales no estén registrados como contribuyentes, la emprsa constructora podrá hacer uso del comprobante fiscal proveedor informal para sustentar estos pagos.
Los pagos que se realicen fuera del contenido de la norma y que las empresas contratistas deseen deducir como gastos tendrán que ser avalados por comprobantes fiscales válidos.
Las empresas dedicadas a la venta de inmuebles tendrán que registrar sus ventas como ingreso cuando las transferencias sean efectivamente realizadas o cuando el bien se entregue al propietario. Los recibos emitidos o el contrato tendrán que tener el número de comprobante fiscal para que sea considerado por la DGII.
La norma deroga expresamente la norma 04-07 del 30de marzo del 2007 y la norma general del 11-01 del 26 de diciembre del 2001.
Freddy Miranda Severino, Esq.
Real estate lawyer. http://freddymiranda.com
En fecha 26 de Junio del año dos mil siete (2007) la Dirección General de Impuestos Internos dictó la norma 07-2007 conocida como NORMA PARA ESTABLECER LA FORMA DE APLICACIÓN DE LA EXENCION A LOS ACTIVOS DEL ISR Y EL ITBIS PARA EL SECTOR CONSTRUCCION Y DEL USO DE COMPROBANTES FISCALES QEU DEBEN SUSTENTAR SUS OPERACIONES.
En su artículo primero esta norma establece que para ser beneficiarias de la exención fiscal establecida en el Código Tributario sobre el impuesto a los activos las sociedades DEDICADAS a la construcción de obras importantes deberán someter a la Dirección General de impuestos Internos el estimado de los costos del proyecto y el plazo para la ejecución.
En otras palabras para que la empresa pueda calificar como exenta del impuesto de los activos tienen que estar registradas como tal en la DGII. De conformidad con dicha norma las empresas constructoras de obras estatales tales como carreteras, puentes, presas, caminos vecinales o edificaciones o similares, tienen derecho a la exención siempre y cuando la registren como avance al final del ejercicio. No obstante para recibir este beneficio se hace necesario el registro en la DGII del contrato con el Estado Dominicano.
El plazo para calificar una obra como exenta de impuesto sobre los activos es de 120 días. Estos comenzarán a correr para los nuevos proyectos al momento de inicio de las obras y para los que ya están en ejecución en el mismo plazo. Cuándo es el momento de inicio de la obra? Para la DGII el inicio de la obra (parrafo III) es el momento de la primera erogación de fondos. Es decir desde que el proyecto tenga los fondos para trabajar la obra.
Si los constructores decidiesen prorrogar el plazo del inicio de obra deberán informarlo a la DGII oportunamente. No se define en la norma cuál es el plazo de oportunidad pero se entiende que lo que busca la administración de impuestos es que las obras no se paralicen con la finalidad de acogerse a la exención. Es por este motivo que el párrafo V de dicha norma establece que de todas formas es necesario que las empresas se inscriban en la DGII para calificar como constructoras exentas del impuesto sobre los activos cumpliendo con las disposiciones del Título V del Código Tributario.
Cuando una empresa de venta de inmuebles o dedicada a la construcción tenga varios proyectos en ejecución cada proyecto debe de mantener sus registros individualizados, aunque para fines del Impuesto sobre la renta estos proyectos se presenten como obras consolidadas con el formulario IR-2.
Loa pagos que hagan dichas empresas a los subcontratistas estarán sujetos a una retención de un 2%. Los arquitectos, ingenieros, agrimensores y otros de profesiones similares "facturen consignando únicamente el valor del servicio profesional prestado, la retención del ISR será del 10% del valor facturado. En adición las empresas estarán obligadas a retener a su vez un 2% con carácter de retención a los trabajadores bajo la dependencia de los subcontratistas es decir de los trabajadores que documentados o indocumentados estén bajo la dependencia de dichos subcontratistas. Esta retención del 2% bruto se considerará pago definitivo.
Estos pagos no requerirán de comprobante fiscal. En consecuencia podrían beneficiar a las empresas constructoras por la facilidad de reportar dichos pagos al final del ejercicio fiscal, sólamente consignando los datos de los beneficiarios tales como nombres cédulas, fecha, etc.
Como indicamos anteriormente estos pagos no requerirán de comprobante fiscal, pero para la DGII existe una obligación general de prudencia que tienen las empresas constructoras en el sentido de que estos pagos tendrán que ser razonables y guardar relación con los parámetros aceptados para este tipo de gastos.
Los maestros constructores, ajusteros, y obreros no estarán sujetos a la retención del Impuesto a la Transferencia de Bienes y Servicios (ITBIS); sin embargo el ITBIS será retenido por las empresas constructoras de la siguiente forma: a) persona jurídica ITBIS más retención del 2% de impuesto sobre la renta como pago definitivo; y b) si se trata de persona física 30%, repetimos que esta retención la efectua en la fuenta la empresa que realiza el pago.
El artículo 4 de la norma establece que "Cuando un contratista o subcontratista, sean estas personas físicas o jurídicas, realicen trabajos de construcción y dichos trabajos inlcluyan materiales, equipos o piezas de la construcción, la facturación del 16% del ITBIS se aplicará sobre el 10% del monto de los trabajos facturados. El ITBIS facturado de esta manera, estará sujeto a la retención del 100% si quien factura es una persona física y de 30% si quien factura es una persona jurídica.
Las obras contratadas como CONTRATO DE ADMINISTRACIÓN se calcularán sobre el porcentaje a percibir por el subcontratista como pago de su obra.
El promotor o dueño de la obra podría para documentar el costo de la obra aportar como evidencia de dicho costo los comprobantes fiscales que sirvan de sustento a la compra de materiales de construcción por parte de las personas físicas o jurídicas que trabajen bajo la modalidad de contrato de administración.
En el párrafo III de la norma en lo relacionado con el ITBIS se expresa que: " Las disposiciones de la presente norma sobre el ITBIS, no incluye los demás pagos que los constructores hagan a favor de técnicos, profesionales liberales y otras personas físicas cuya labor haya sido prestada sin estar bajo relación de dependencia de la empresa constructora que realiza el pago, los cuales estarán sujetos a las disposiciones establecidas en el Código Tributario y sus reglamentos. En el caso de que estos profesionales no estén registrados como contribuyentes, la emprsa constructora podrá hacer uso del comprobante fiscal proveedor informal para sustentar estos pagos.
Los pagos que se realicen fuera del contenido de la norma y que las empresas contratistas deseen deducir como gastos tendrán que ser avalados por comprobantes fiscales válidos.
Las empresas dedicadas a la venta de inmuebles tendrán que registrar sus ventas como ingreso cuando las transferencias sean efectivamente realizadas o cuando el bien se entregue al propietario. Los recibos emitidos o el contrato tendrán que tener el número de comprobante fiscal para que sea considerado por la DGII.
La norma deroga expresamente la norma 04-07 del 30de marzo del 2007 y la norma general del 11-01 del 26 de diciembre del 2001.
Freddy Miranda Severino, Esq.
Real estate lawyer. http://freddymiranda.com
Tuesday, June 19, 2007
TITULO V
EL REGISTRO EN LA JURISDICCIÓN INMOBILIARIA
CAPITULO I
EL REGISTRO
En lo concerniente al registro se destaca en primer término el tipo de documentos que esta nueva ley considera registrables.
Los dos primeros párrafos del artículo 89 parecen hechos en consonancia con la teoría clásica de los derechos inmobiliarios.
En los párrafos primero y segundo encontramos las formas llamadas derivativas de adquisición de derechos inmobiliarios y además las que involucran los derechos accesorios. El párrafo primero ratifica el principio de que los derechos registrales son constitutivos, es decir que la condición de propietario se asume y surte efectos jurídicos a partir del registro. Este principio aparece confirmado en el artículo 90.
El párrafo III es muy especial y está dedicado a las restricciones a la libertad de adquirir, haciendo mención de las servidumbres y a las declaraciones de patrimonio cultural. Este mismo párrafo, sin embargo establece que puede haber otras inscripciones que limiten la libertad del adquiriente. Esto es inusual en la teoría y en la práctica toda vez que en materia de actos jurídicos se entiende que los particulares no pueden establecer por convención limitaciones a la libertad de adquirir que pudiesen redundar en perjuicio de terceros. En la esfera publica si porque se admiten las leyes que alteran o limitan la libertad de acción sobre el derecho de propiedad como inembargabilidad o servidumbres.
De todos modos debe interpretarse este articulo de forma enunciativa y no limitativa y admitirse que los particulares puedan establecer limitaciones “particulares sobre los inmuebles”.
En el artículo 90 encontramos consagrado el principio de que el derecho de registro se genera con la inscripción y es convalidante de este derecho. No existen en este régimen hipotecas ocultas.
El peligro de este artículo es que establece una presunción absoluta contra la inscripción. Esto es no admite prueba en contrario. Lo que el registro consigna se presume exacto. Una disposición arbitraria que limita la corrección de simples errores materiales por vía administrativa como en principio era admitido por la vieja ley. En el presente caso se admite la prueba en contrario pero por la vía de recurso por causa de error o por fraude.
En el artículo 92 se consigna la nueva forma del duplicado del certificado de titulo. Una copia fiel dice este artículo, no una constancia anotada un verdadero duplicado.
¿Y que decir de los copropietarios, aparecen todos en un mismo certificado? El párrafo I de este artículo establece que cada copropietario tendrá derecho a un extracto del certificado original. En otras palabras ellos aparecen en el título original, pero en vez de una copia individual tienen derecho a un extracto, que no parece otra cosa que una constancia del derecho del copropietario.
Esta ley ha simplificado un poco la obtención de un nuevo certificado cuando el anterior se ha perdido o destruido. En la actualidad basta con una declaración jurada una publicación y una solicitud al mismo Registro de Títulos quien deberá expedir la copia del duplicado.
La constancia de la inscripción de derechos reales accesorios como hipotecas y medidas provisionales se hará mediante una copia del documento y una certificación de que ese derecho está inscrito, artículo 93.
Las disposiciones del artículo 94 parte infine que establece la posibilidad de prueba en contrario de las certificaciones sobre las inscripciones de gravamen, parecen contradictorias con lo establecido por el artículo 90 sobre los efectos del registro. Parecería que el artìculo 90 se consagra para el certificado de tìtulo, sin embargo el mismo establece que el registro de cargas o gravámenes no sòlo del certificado de tìtulo.
No obstante el mismo artìculo 94 parece hacer la diferencia entre ambas nociones de registros. El artìculo 94 se refiere a las certificaciones de registros. Estas admiten la prueba en contratio, pero las anotaciones que las atestan no. Asì una certificación es vàlida en un tribunal como medio de prueba hasta prueba en contrario, mientras que la anotación de esta certificación se presume exacta. ¿Qué debemos entender? Que lo que puede hacerse es mostrar que el registro y la certificación difieren y con esto se hace prueba contra la certificación, ya que el artìculo dice “excepto cuando se demuestre que son contrarias a la realidad del Registro.” O sea que difieren. No obstante el registro parece tener la misma fuerza probante, tendría que ser desonocido por un tribunal, aunque el artìculo 90 parece admitirlo sòlo por causa de fraude o por error material.
Cuando el derecho de propiedad ha sido objeto de registro, los nuevos actos a inscribir quedan en lo que respecta especialmente a sus formas a juicio y calificación del Registrador de Títulos. Esta facultad no es privativa del Registrador sino que la ley señala que deberà estar establecida por la vìa reglamentaria.
Cuando el acto a registrar provenga de una decisión de la Jurisdicción Inmobiliaria el Registrador sòlo puede calificar la forma de la inscripción, artìculo 96 de la ley.
Todas las anotaciones deben de ser promovidas por las partes interesadas salvo las que sean autorizadas por los òrganos de la Jurisdicción Inmobiliarias. Las anotaciones que sean resultado de modificaciones a los derechos registrados o fruto del saneamiento deberán estar acompañadas de un plano aprobado por la Dirección de Mensuras y Catastro.
Esto està regulado por el artìculo 97 de la ley la cual en su párrafo II establece la posibilidad de que luego de realizado un diagnòstico los propietarios pueden ser objetos de una actualizaciòn de sus planos.
Esta disposición es confusa porque la ley no puede tener efectos retroactivos. Puede alegarse que lo que ese busca es la exactitud de los derechos registrados, pero que decir de un propietario con derechos reconocidos por màs de 20 años? El derecho de propiedad es reconocido como perpetuo. Un propietario que no ha actualizado para usar el tèrmino de la ley su plano, puede por eso ser objeto de una actualizaciòn de su plano? Esta es una solución dudosa.
En ese mismo artìculo se regula el registro de derechos en caso de expropiación por el Estado Dominicano. No hay necesidad de oponerse a la expropiación en apariencia, porque los registradores no inscribirán la misma hasta tanto no se les de constancia de que los derechos de la parte expropiada han sido satisfechos.
Esta ley contempla un bloqueo registral. Mediante el sistema de venta condicional de inmuebles. En el registro complementario al certificado se inscribe esta venta y desde ese momento no se puede ya registrar ningún acto de disposición sobre el inmueble a ser afectado. En ese mismo registro se inscriben otras limitaciones a la transferencia como son las declaraciones de bien de familia.
En el artìculo 99 nos encontramos con una disposición aunque no colide con el artìculo 90 respecto de la exactitud de los registros inmobiliarios al menos darà muchos problemas prácticos. Se establece que los errores puramente materiales puedan ser corregidos por los Registradores. Esto existìa en el antiguo sistema y por los fraudes y distorsiones los propietarios terminaron requiriendo por resolución hasta modificaciones a las cèdulas y errores de nombres. Suponemos que todo esto tendrà que ser ampliado por vìa reglamentaria.
CAPITULO II
CONDOMINIOS
El artículo 100 está consagrado a la definición de lo que es un condominio. Dentro de los elementos de la definición encontramos el de independencia funcional y salida directa o indirecta a la vìa pública de las unidades.
El terreno se mantiene como comùn y proindiviso entre los condomines. Los sectores o àreas comunes son insperables y no estàn sujetas a venta o disposición.
Para fines de financiamiento està permitido a las entidades financieras inscribir la intención del propietario de convertir en régimen comùn el inmueble.
Està prohibido constituir condominios sobre inmuebles o unidades ya incorporadas al régimen de condominios ni sobre los que pudiesen estar amparados en cartas constancias.
La propiedad de diferentes unidades construidas en terrenos registrados tendrán que ser constituidas en condominio si estàn divididas por pisos de lo contrario pertenecerán a un solo propietario.
El consorcio de propietarios tendrà derecho a un Certificado de Titulo y a un bloqueo registral para que no puedan ser inscritos nuevos gravámenes sobre la parte comùn.
Las cuotas vencidas y no pagadas de los gastos comunes gozan de un privilegio y una vez liquidadas gozan de toda la fuerza de un titulo ejecutorio.
La competencia para todos los conflictos que surjan en esta materia será competencia del tribunal de Jurisdicción Original relacionadas con: a) derechos; b) cargas y gravámenes registrados.
CAPITULO II
PUBLICIDAD REGISTRAL
Nos encontramos que aunque las informaciones de los registros son públicas la obtención de certificaciones es privativa de los propietarios.
Los propietarios pueden sin embargo provocar un bloqueo para realizar transacciones inmobiliarias mediante la obtención de una certificación con reserva de prioridad. Un sistema novedoso sobre todo para ciertas promesas de venta. Decimos que sólo algunas porque el bloqueo sólo puede ser hecho por 15 días aunque no parece que el artículo restringa la renovación de la misma.
Aunque la certificación con reserva produce un bloqueo para fines de traspaso de la propiedad, la ley permite la inscripción de cargas y gravámenes provisionales, que se convierten en definitivas al final del plazo.
Entiendo que el sistema aunque novedoso parece admitir que se burle la protección de los acreedores, toda vez que si la operación cuyo objeto es el bloqueo se materializa las inscripciones provisionales son objeto de una especie de purga.
CAPITULO IV
INMUEBLES DEL DOMINIO PUBLICO
Los artículos 106 y 107 están consagrados a los bienes del dominio público, una noción que no nos merece mayores comentarios, tal vez que la desafectaciòn o la colocación de estos bienes en el comercio debe ser hecha por ley.
TITULO V
MODIFICACIONES PARCELARIAS
CAPITULO I
OPERACIONES DE MENSURAS CATASTRALES
Las modificaciones parcelarias parecen estar sometidas a un régimen simplicado. Se obliga a someter a mensura todas las propiedades que se vayan a ser objeto de registro de acuerdo a la presente ley.
El procedimiento de conformidad con el artìculo 111 es bastante sencillo, una vez hecho el contrato de mensura con el agrimensor la Dirección Regional de Mensura inviste o autoriza al agrimensor y ya està.
En la pràctica parece estar comenzando a funcionar el sistema de satélite que permitirà agilizar los procedimientos. Lo que antes tomaba seis o siete meses se podrà hacer en uno o dos.
Si el contrato de mensura genera algún tipo de controversias, el asunto se dirime por la jurisdicción inmobiliaria. Si por el contrario el acto de mensura es impugnado se procede por la vìa administrativa que vamos a explicar:
Los recursos estàn abiertos contra las decisiones administrativas y de los òrganos técnicos y contra las decisiones administrativas de la Jurisdicción Inmobiliaria.
El recurso de acuerdo con el artículo 75 está abierto a todo el mundo, todo el que sienta afectado.
La primera fase para impugnar un acto administrativo es la reconsideración, que se interpone en un plazo de 15 dìas contados a partir la fecha de publicidad.
El fallo debe producirse tambièn en un plazo de 15 dìas después de interpuesto el recurso. Denegada la reconsideración se abre el recurso jerárquico.
El plazo para interponer el recurso jerárquico es el mismo, o sea de 15 dìas. Tambièn el plazo para fallarlo es el mismo.
Rechazado el recurso jerárquico se abre el recurso jurisdiccional. El tribunal competente es el Superior de Tierras territorialmente competente.
El plazo para interponer el recurso y para fallarlo es de 30 dìas.
Haremos otro paréntesis para discutir acerca de los recursos contra las decisiones jurisdiccionales. Estos recursos son Apelación, Casación Revisión por error material y revisión por fraude.
La apelación es el recurso abierto contra las decisiones de los tribunales de jurisdicción original. Como sabemos de conformidad con el artìculo 6 de la ley habrà no menos de cinco (59 tribunales Superiores de Tierras, los cuales como todo lo relacionado con esta nueva ley estarà controlado por la Suprema Corte de Justicia la cual los pondrà en funcionamiento de acuerdo CON LAS NECESIDADES DEL SISTEMA.
Volviendo al articulo 80 de la ley el Tribunal Superior de Tierras es el del territorio del tribunal de jurisdicción original que dicto la sentencia.
En el aspecto formal el recurso de interpone en la Secretarìa del Tribunal que dictò la sentencia, mediante escrito motivado. Este recurso debe de ser notificado a la contraparte en un plazo de 10 dìas.
El recurso està abierto contra las partes y los intervinientes, pero si se trata de apelaciòn relacionada con el saneamiento cualquier intersado lo puede interponer.
El plazo del recurso es de 30 dìas, contados a partir de la notificación de la sentencia.
La Casación està abierta contra las decisiones de los Tribunales Superiores de Tierra, y se rige por la ley de Casación, y por los reglamentos que se dicten para complementar la ley.
LA REVISIÓN.
Este recurso està abierto para corregir errores puramente materiales. Como dijimos la ley no define cuales son esos errores y este artìculo podría colidir con los artículos 90 y 99. El primero que determina la exactitud del registro y que sòlo puede ser impugnada por el recurso de revisión. El 99 permite a los Registradores corregir los errores puramente materiales. Entendemos que la vìa reglamentaria tendrà que determinar la aplicación de ambos artículos, aunque el artìculo 83 se refiere a decisiones de la jurisdicción inmobiliria, pero al dejar abierto el 90 este tipo de recursos contra el registro inmobiliario que afecta a los registradores podría suceder como señalaramos anteriormente con la vieja ley que hasta para los números de cèdula los registradores decidìan no enmendarlos y someterlos al Tribunal Superior.
De todas formas entendemos que debe prevalecer el principio de que el registrador de títulos puede evaluar y decidir lo que es un error puramente material y enmendarlo de forma que la revisión estè abierta contra las decisiones jurisdiccionales y las del registro por supuesta inexactitud del mismo de conformidad con el artìculo 90.
El plazo para este recurso es breve de quince (15) y es competente el órgano que generò la decisión. Hay que fijarse bien que la ley habla como dijimos, de forma indistinta de organo y tribunales. Algo que tambièn tendrà que ser ampliado por los reglamentos.
REVISIÓN POR FRAUDE
Abierto contra fraudes en el saneamiento este proceso està abierto para todo aquel que haya sido privado de su derecho, y se interpone por ante el Tribunal Superior de Tierras competente en un plazo no mayor de un año (1) después de expedido el certificado de tìtulo correspondiente.
No obstante el recurso està abierto desde la publicación de la sentencia pero se extiende hasta un año después de la emisión del PRIMER CERTIFICADO DE TITULO.
El principio de tercero adquiriente de buena sufre una derogación mientras estè abierto el plazo para la revisión por causa de fraude.
Como forma de determinar el inicio del plazo del recurso el párrafo IV de la ley determina que el registrador harà una anotación en el primer tìtulo el plazo de la prescripción. No sabemos cual es la sanción por la omisión. Ahora bien como toda prescripción se presume que comienza en caso de omisión cuando el interesado conoce del certiticado. Esta serìa la mejor solución pero en este artìculo se habla de emisión asì que la parte interesada en caso de que no estè anotado del plazo de prescripción tendría que partir de la fecha de emisión del certificado.
EL REGISTRO EN LA JURISDICCIÓN INMOBILIARIA
CAPITULO I
EL REGISTRO
En lo concerniente al registro se destaca en primer término el tipo de documentos que esta nueva ley considera registrables.
Los dos primeros párrafos del artículo 89 parecen hechos en consonancia con la teoría clásica de los derechos inmobiliarios.
En los párrafos primero y segundo encontramos las formas llamadas derivativas de adquisición de derechos inmobiliarios y además las que involucran los derechos accesorios. El párrafo primero ratifica el principio de que los derechos registrales son constitutivos, es decir que la condición de propietario se asume y surte efectos jurídicos a partir del registro. Este principio aparece confirmado en el artículo 90.
El párrafo III es muy especial y está dedicado a las restricciones a la libertad de adquirir, haciendo mención de las servidumbres y a las declaraciones de patrimonio cultural. Este mismo párrafo, sin embargo establece que puede haber otras inscripciones que limiten la libertad del adquiriente. Esto es inusual en la teoría y en la práctica toda vez que en materia de actos jurídicos se entiende que los particulares no pueden establecer por convención limitaciones a la libertad de adquirir que pudiesen redundar en perjuicio de terceros. En la esfera publica si porque se admiten las leyes que alteran o limitan la libertad de acción sobre el derecho de propiedad como inembargabilidad o servidumbres.
De todos modos debe interpretarse este articulo de forma enunciativa y no limitativa y admitirse que los particulares puedan establecer limitaciones “particulares sobre los inmuebles”.
En el artículo 90 encontramos consagrado el principio de que el derecho de registro se genera con la inscripción y es convalidante de este derecho. No existen en este régimen hipotecas ocultas.
El peligro de este artículo es que establece una presunción absoluta contra la inscripción. Esto es no admite prueba en contrario. Lo que el registro consigna se presume exacto. Una disposición arbitraria que limita la corrección de simples errores materiales por vía administrativa como en principio era admitido por la vieja ley. En el presente caso se admite la prueba en contrario pero por la vía de recurso por causa de error o por fraude.
En el artículo 92 se consigna la nueva forma del duplicado del certificado de titulo. Una copia fiel dice este artículo, no una constancia anotada un verdadero duplicado.
¿Y que decir de los copropietarios, aparecen todos en un mismo certificado? El párrafo I de este artículo establece que cada copropietario tendrá derecho a un extracto del certificado original. En otras palabras ellos aparecen en el título original, pero en vez de una copia individual tienen derecho a un extracto, que no parece otra cosa que una constancia del derecho del copropietario.
Esta ley ha simplificado un poco la obtención de un nuevo certificado cuando el anterior se ha perdido o destruido. En la actualidad basta con una declaración jurada una publicación y una solicitud al mismo Registro de Títulos quien deberá expedir la copia del duplicado.
La constancia de la inscripción de derechos reales accesorios como hipotecas y medidas provisionales se hará mediante una copia del documento y una certificación de que ese derecho está inscrito, artículo 93.
Las disposiciones del artículo 94 parte infine que establece la posibilidad de prueba en contrario de las certificaciones sobre las inscripciones de gravamen, parecen contradictorias con lo establecido por el artículo 90 sobre los efectos del registro. Parecería que el artìculo 90 se consagra para el certificado de tìtulo, sin embargo el mismo establece que el registro de cargas o gravámenes no sòlo del certificado de tìtulo.
No obstante el mismo artìculo 94 parece hacer la diferencia entre ambas nociones de registros. El artìculo 94 se refiere a las certificaciones de registros. Estas admiten la prueba en contratio, pero las anotaciones que las atestan no. Asì una certificación es vàlida en un tribunal como medio de prueba hasta prueba en contrario, mientras que la anotación de esta certificación se presume exacta. ¿Qué debemos entender? Que lo que puede hacerse es mostrar que el registro y la certificación difieren y con esto se hace prueba contra la certificación, ya que el artìculo dice “excepto cuando se demuestre que son contrarias a la realidad del Registro.” O sea que difieren. No obstante el registro parece tener la misma fuerza probante, tendría que ser desonocido por un tribunal, aunque el artìculo 90 parece admitirlo sòlo por causa de fraude o por error material.
Cuando el derecho de propiedad ha sido objeto de registro, los nuevos actos a inscribir quedan en lo que respecta especialmente a sus formas a juicio y calificación del Registrador de Títulos. Esta facultad no es privativa del Registrador sino que la ley señala que deberà estar establecida por la vìa reglamentaria.
Cuando el acto a registrar provenga de una decisión de la Jurisdicción Inmobiliaria el Registrador sòlo puede calificar la forma de la inscripción, artìculo 96 de la ley.
Todas las anotaciones deben de ser promovidas por las partes interesadas salvo las que sean autorizadas por los òrganos de la Jurisdicción Inmobiliarias. Las anotaciones que sean resultado de modificaciones a los derechos registrados o fruto del saneamiento deberán estar acompañadas de un plano aprobado por la Dirección de Mensuras y Catastro.
Esto està regulado por el artìculo 97 de la ley la cual en su párrafo II establece la posibilidad de que luego de realizado un diagnòstico los propietarios pueden ser objetos de una actualizaciòn de sus planos.
Esta disposición es confusa porque la ley no puede tener efectos retroactivos. Puede alegarse que lo que ese busca es la exactitud de los derechos registrados, pero que decir de un propietario con derechos reconocidos por màs de 20 años? El derecho de propiedad es reconocido como perpetuo. Un propietario que no ha actualizado para usar el tèrmino de la ley su plano, puede por eso ser objeto de una actualizaciòn de su plano? Esta es una solución dudosa.
En ese mismo artìculo se regula el registro de derechos en caso de expropiación por el Estado Dominicano. No hay necesidad de oponerse a la expropiación en apariencia, porque los registradores no inscribirán la misma hasta tanto no se les de constancia de que los derechos de la parte expropiada han sido satisfechos.
Esta ley contempla un bloqueo registral. Mediante el sistema de venta condicional de inmuebles. En el registro complementario al certificado se inscribe esta venta y desde ese momento no se puede ya registrar ningún acto de disposición sobre el inmueble a ser afectado. En ese mismo registro se inscriben otras limitaciones a la transferencia como son las declaraciones de bien de familia.
En el artìculo 99 nos encontramos con una disposición aunque no colide con el artìculo 90 respecto de la exactitud de los registros inmobiliarios al menos darà muchos problemas prácticos. Se establece que los errores puramente materiales puedan ser corregidos por los Registradores. Esto existìa en el antiguo sistema y por los fraudes y distorsiones los propietarios terminaron requiriendo por resolución hasta modificaciones a las cèdulas y errores de nombres. Suponemos que todo esto tendrà que ser ampliado por vìa reglamentaria.
CAPITULO II
CONDOMINIOS
El artículo 100 está consagrado a la definición de lo que es un condominio. Dentro de los elementos de la definición encontramos el de independencia funcional y salida directa o indirecta a la vìa pública de las unidades.
El terreno se mantiene como comùn y proindiviso entre los condomines. Los sectores o àreas comunes son insperables y no estàn sujetas a venta o disposición.
Para fines de financiamiento està permitido a las entidades financieras inscribir la intención del propietario de convertir en régimen comùn el inmueble.
Està prohibido constituir condominios sobre inmuebles o unidades ya incorporadas al régimen de condominios ni sobre los que pudiesen estar amparados en cartas constancias.
La propiedad de diferentes unidades construidas en terrenos registrados tendrán que ser constituidas en condominio si estàn divididas por pisos de lo contrario pertenecerán a un solo propietario.
El consorcio de propietarios tendrà derecho a un Certificado de Titulo y a un bloqueo registral para que no puedan ser inscritos nuevos gravámenes sobre la parte comùn.
Las cuotas vencidas y no pagadas de los gastos comunes gozan de un privilegio y una vez liquidadas gozan de toda la fuerza de un titulo ejecutorio.
La competencia para todos los conflictos que surjan en esta materia será competencia del tribunal de Jurisdicción Original relacionadas con: a) derechos; b) cargas y gravámenes registrados.
CAPITULO II
PUBLICIDAD REGISTRAL
Nos encontramos que aunque las informaciones de los registros son públicas la obtención de certificaciones es privativa de los propietarios.
Los propietarios pueden sin embargo provocar un bloqueo para realizar transacciones inmobiliarias mediante la obtención de una certificación con reserva de prioridad. Un sistema novedoso sobre todo para ciertas promesas de venta. Decimos que sólo algunas porque el bloqueo sólo puede ser hecho por 15 días aunque no parece que el artículo restringa la renovación de la misma.
Aunque la certificación con reserva produce un bloqueo para fines de traspaso de la propiedad, la ley permite la inscripción de cargas y gravámenes provisionales, que se convierten en definitivas al final del plazo.
Entiendo que el sistema aunque novedoso parece admitir que se burle la protección de los acreedores, toda vez que si la operación cuyo objeto es el bloqueo se materializa las inscripciones provisionales son objeto de una especie de purga.
CAPITULO IV
INMUEBLES DEL DOMINIO PUBLICO
Los artículos 106 y 107 están consagrados a los bienes del dominio público, una noción que no nos merece mayores comentarios, tal vez que la desafectaciòn o la colocación de estos bienes en el comercio debe ser hecha por ley.
TITULO V
MODIFICACIONES PARCELARIAS
CAPITULO I
OPERACIONES DE MENSURAS CATASTRALES
Las modificaciones parcelarias parecen estar sometidas a un régimen simplicado. Se obliga a someter a mensura todas las propiedades que se vayan a ser objeto de registro de acuerdo a la presente ley.
El procedimiento de conformidad con el artìculo 111 es bastante sencillo, una vez hecho el contrato de mensura con el agrimensor la Dirección Regional de Mensura inviste o autoriza al agrimensor y ya està.
En la pràctica parece estar comenzando a funcionar el sistema de satélite que permitirà agilizar los procedimientos. Lo que antes tomaba seis o siete meses se podrà hacer en uno o dos.
Si el contrato de mensura genera algún tipo de controversias, el asunto se dirime por la jurisdicción inmobiliaria. Si por el contrario el acto de mensura es impugnado se procede por la vìa administrativa que vamos a explicar:
Los recursos estàn abiertos contra las decisiones administrativas y de los òrganos técnicos y contra las decisiones administrativas de la Jurisdicción Inmobiliaria.
El recurso de acuerdo con el artículo 75 está abierto a todo el mundo, todo el que sienta afectado.
La primera fase para impugnar un acto administrativo es la reconsideración, que se interpone en un plazo de 15 dìas contados a partir la fecha de publicidad.
El fallo debe producirse tambièn en un plazo de 15 dìas después de interpuesto el recurso. Denegada la reconsideración se abre el recurso jerárquico.
El plazo para interponer el recurso jerárquico es el mismo, o sea de 15 dìas. Tambièn el plazo para fallarlo es el mismo.
Rechazado el recurso jerárquico se abre el recurso jurisdiccional. El tribunal competente es el Superior de Tierras territorialmente competente.
El plazo para interponer el recurso y para fallarlo es de 30 dìas.
Haremos otro paréntesis para discutir acerca de los recursos contra las decisiones jurisdiccionales. Estos recursos son Apelación, Casación Revisión por error material y revisión por fraude.
La apelación es el recurso abierto contra las decisiones de los tribunales de jurisdicción original. Como sabemos de conformidad con el artìculo 6 de la ley habrà no menos de cinco (59 tribunales Superiores de Tierras, los cuales como todo lo relacionado con esta nueva ley estarà controlado por la Suprema Corte de Justicia la cual los pondrà en funcionamiento de acuerdo CON LAS NECESIDADES DEL SISTEMA.
Volviendo al articulo 80 de la ley el Tribunal Superior de Tierras es el del territorio del tribunal de jurisdicción original que dicto la sentencia.
En el aspecto formal el recurso de interpone en la Secretarìa del Tribunal que dictò la sentencia, mediante escrito motivado. Este recurso debe de ser notificado a la contraparte en un plazo de 10 dìas.
El recurso està abierto contra las partes y los intervinientes, pero si se trata de apelaciòn relacionada con el saneamiento cualquier intersado lo puede interponer.
El plazo del recurso es de 30 dìas, contados a partir de la notificación de la sentencia.
La Casación està abierta contra las decisiones de los Tribunales Superiores de Tierra, y se rige por la ley de Casación, y por los reglamentos que se dicten para complementar la ley.
LA REVISIÓN.
Este recurso està abierto para corregir errores puramente materiales. Como dijimos la ley no define cuales son esos errores y este artìculo podría colidir con los artículos 90 y 99. El primero que determina la exactitud del registro y que sòlo puede ser impugnada por el recurso de revisión. El 99 permite a los Registradores corregir los errores puramente materiales. Entendemos que la vìa reglamentaria tendrà que determinar la aplicación de ambos artículos, aunque el artìculo 83 se refiere a decisiones de la jurisdicción inmobiliria, pero al dejar abierto el 90 este tipo de recursos contra el registro inmobiliario que afecta a los registradores podría suceder como señalaramos anteriormente con la vieja ley que hasta para los números de cèdula los registradores decidìan no enmendarlos y someterlos al Tribunal Superior.
De todas formas entendemos que debe prevalecer el principio de que el registrador de títulos puede evaluar y decidir lo que es un error puramente material y enmendarlo de forma que la revisión estè abierta contra las decisiones jurisdiccionales y las del registro por supuesta inexactitud del mismo de conformidad con el artìculo 90.
El plazo para este recurso es breve de quince (15) y es competente el órgano que generò la decisión. Hay que fijarse bien que la ley habla como dijimos, de forma indistinta de organo y tribunales. Algo que tambièn tendrà que ser ampliado por los reglamentos.
REVISIÓN POR FRAUDE
Abierto contra fraudes en el saneamiento este proceso està abierto para todo aquel que haya sido privado de su derecho, y se interpone por ante el Tribunal Superior de Tierras competente en un plazo no mayor de un año (1) después de expedido el certificado de tìtulo correspondiente.
No obstante el recurso està abierto desde la publicación de la sentencia pero se extiende hasta un año después de la emisión del PRIMER CERTIFICADO DE TITULO.
El principio de tercero adquiriente de buena sufre una derogación mientras estè abierto el plazo para la revisión por causa de fraude.
Como forma de determinar el inicio del plazo del recurso el párrafo IV de la ley determina que el registrador harà una anotación en el primer tìtulo el plazo de la prescripción. No sabemos cual es la sanción por la omisión. Ahora bien como toda prescripción se presume que comienza en caso de omisión cuando el interesado conoce del certiticado. Esta serìa la mejor solución pero en este artìculo se habla de emisión asì que la parte interesada en caso de que no estè anotado del plazo de prescripción tendría que partir de la fecha de emisión del certificado.
Wednesday, May 19, 2004
Offshore Asset Protection
A fresh look at offshore techniques in conjunction with recent developments in law relating to fraudulent transfer in the Isle of Man
by Charles A. Cain
For some years, the favoured mechanism of Asset Protection vehicles, that is to say, vehicles for the protection of the assets of US persons from litigious creditors, has been the offshore trust. Indeed, it had almost reached the point where nothing else was ever mentioned, in spite of the fact that there always have been a variety of mechanisms available.
The original reason for this was a tax reason. At that time, and indeed, still today, the objective was to establish a vehicle into which assets could be placed which
· protected the assets from attack through the US judicial system
· would be able to make the assets available, if necessary, to the client and/or his family
· would at worst be entirely tax neutral and at best enable routine Estate Tax planning to be done.
To achieve the first objective was comparatively simple - just get the assets out of the USA into a jurisdiction which had no Reciprocal Enforcement of Judgements Agreement1.
The actual holding mechanisms available then had to be selected.
At that time, the Limited Liability Company (LLC) was not available. In addition, the older classification rules of the IRS were still in force, and had not been replaced by the Check-the-Box Regulations, which were introduced in 19972.
All offshore Corporate forms were, as a consequence, ruled out because an overseas holding corporation would have been a Controlled Foreign Corporation3. Quite apart from the enhanced reporting requirements implicit in a Controlled Foreign Corporation (CFC) with Sub-Part F income, a Foreign Personal Holding Company (FPHC)4, a Passive Foreign Investment Company (PFIC)5 and the other implications of being caught up in Prof. Harvey Dale’s renowned five armed Pentapuss (now six-armed with the addition of the PFIC), there is a distinct penalty provision in relation to Basis step-up for Capital Gains Tax, derived from the rules in IRC s.1246(e) and 1291(e). The tax consequences of using a CFC for asset protection were therefore prohibitive.
The Limited Partnership was another vehicle which was used extensively inside the USA, but in those days, few offshore jurisdictions had them, although they have been in the statute book in the Isle of Man since 1909 (Partnership Act, 1909).
Many US Practitioners then looked at Trusts for Asset Protection. They found that there was a rich tradition of Trusts being used for ‘Asset Protection’ in a more general sense - indeed, there is scarcely any other purpose for a Trust.
For tax purposes, they were brilliant, since a trust established by a US person which he was also capable of benefiting from was a Grantor Trust6, and therefore entirely transparent for income and capital gains tax purposes. Thus the offshore trust was tax neutral, but was still capable of being structured for basic estate tax planning.
There were, of course, some drawbacks. Firstly, the establishment of a foreign trust, even though a Grantor Trust, led to enhanced reporting. This could, in theory be cured, by making the trust a domestic trust. This could be done by providing as a joint trustee, a US trustee, and by ensuring that the provisions of IRC s. 7701(a)(30) were met. The trustee would resign the moment the heat was turned up, but until that time it could be argued that the trust to argue was a US domestic trust for tax purposes, notwithstanding that the proper law was overseas, as were the assets, and the actual management of those assets.
The second drawback was the desirability of having a holding company below the trust. Such a company immediately plunged the structure back into the CFC problem. There were three solutions to these CFC problems. Either the assets were transferred direct into a bank ‘street’ name or nominee company. Or, they were held in a US corporation, which because of the tax attribution back to the Grantor, could be a transparent S-corporation7, or, thirdly, the assets were held in a foreign corporation which, although owned by the Trustee, was arguably a nominee company, relying on the decision in Commissioner v Bollinger 108 S.Ct 1173(1988).
None of these was very satisfactory. Not all assets can be held in a “street name”. The use of a US S-corporation immediately brought the ownership of the assets back into the USA, where they could be frozen and/or sequestrated. But the use of a nominee company correctly made it impossible to use the company as a mechanism for the day-to day management of the assets by the client.
The problem remained until the advent of the offshore LLC, which, by being classified as a partnership8 instead of a corporation enabled the Tax Transparent trust to have a Tax Transparent LLC beneath it, with the client as Manager of the LLC.
There were also other problems derived from the fundamental character of trust law itself, and from the so-called ‘Statute of Elizabeth’9. The most serious problem of all was perceived to be the issue of fraudulent transfer, and this still remains the biggest problem for a foreign trustee.
Under normal English Common Law principles, the principles set out in the so-called Statute of Elizabeth (Fraudulent Conveyances Act 1571 (13 Eliz I Cap 5) are now contained in the UK’s Insolvency Act 1986) have been adopted in one way or another by every country which looks to England for the source of its law (in the USA, the Uniform Fraudulent Transfer Act 1984). This is not, technically, a matter of trust law, but is a matter of bankruptcy law. Where a person effects a transfer to a trust with the intent to defeat any future creditor, the transfer can be set aside and the trust declared void.
Virtually every jurisdiction which had adequate equity-based trust law (anything else was and is far too risky in terms of dealing with the unknown) had also absorbed the principles of the Fraudulent Conveyances Act 1571 (13 Eliz I Cap 5).
There is one jurisdiction, however, which while being an absolutely traditional Common Law jurisdiction, has never been afflicted by the problems thrown up by the Statute of Elizabeth.
In the Isle of Man there was considerable uncertainty concerning fraudulent transfer, and, in consequence, after a promising start in the Asset Protection business, the Isle of Man fell by the wayside. But, in 1999 came the case of Re Heginbotham’s Petition 199910. In that case, it was determined that the Statute of Elizabeth had never been accepted into Manx law. Different Manx legislation applied, and in consequence Asset Protection Trusts or other structures established in the Isle of Man are now safe, provided that, at the time of establishment, the Settlor was solvent, was able to meet all his known and ascertainable creditors, and had no intent to defraud creditors. We shall examine this case in a little more depth later on.
Elsewhere, the Asset Protection Trust has been running into problems, largely derived from the equitable character of trust law, and the extreme reluctance of the courts to allow an equitable remedy to be used to deny equity to another party. Notwithstanding aggressive legislation in certain jurisdictions (which has caused some commentators to wonder whether trust law now actually exists in such jurisdictions, have been replaced entirely by bailments14, the courts have shown a determination to uphold basic rules of equity.
In consequence, we have the excitements of the Orange Grove11 case in the Cook Islands, the Lawrence case12 and the more recent Anderson case13, where the settlor went to prison for contempt for failing to return the funds to the USA. Effectively, the trusts were treated as bailments.
As all this was happening, there were changes to the law too. In August 1996, the USA enacted the Small Business Jobs Protection Act 1996, which, under the wing of a fairly innocuous piece of social security legislation, fundamentally altered the tax rules relating to foreign Grantor Trusts. As far as Asset Protection Trusts are concerned, it abolished the charade of the foreign trust being a ‘US Trust’ for tax purposes, and thereby forced the reporting regime for foreign trusts on all offshore Asset Protection Trusts. It also greatly enhanced that reporting regime, including a requirement on the offshore trustee to provide information, and appoint an agent in the USA for that purpose. This latter has caused real difficulties in situations where there are beneficiaries resident outside, as well as inside the US tax net.
Finally, the Check-the-Box Regulations2 that came into force on 1st January 1997, changed the whole classification mechanism for entities, and thus the arguments that had been stitched together in favour of the use of the offshore Asset Protection Trust all came apart.
Let us go back to first principles. We need to park assets offshore into an entity which is both transparent for tax purposes, and which provides substantial asset protection capability. We now know that the trust is subject to many difficulties, but these do not afflict the LLC. A properly designed LLC can provide tax transparency, as well as powerful Asset Protection features, which are not vulnerable to shifting sands of trust law.
The offshore LLC, though, has its limitations. It cannot be used to do Estate Tax planning in the USA. It cannot cope with complex family inheritance issues. For such matters, a trust is needed. Such a trust, however, does not need to be offshore – it can easily be established in the USA itself, in a suitable state, as a domestic trust. Since the Asset Protection planning is being done in the offshore LLC, the domestic trust need not concern itself with asset protection. Thus, the preferred solution now is a domestic trust in which all the estate tax planning is effected, and, below it, an appropriately designed LLC, in which all the asset protection planning is done.
In the Isle of Man, the LLC is a legal entity created under the Limited Liability Companies Act 1996. It is not a Trust. No US court will have jurisdiction. Only the Isle of Man Courts have jurisdiction. An order made by a US court requiring the US Client to instruct the overseas Trustee to instruct the LLC to distribute the assets will not be enforced in the Isle of Man15.
There are three members of such an LLC. The US person will have a 99.9% interest, and two offshore members will have (genuinely and beneficially) an 0.01% interest between them (there are no de minimis rules.) All decisions have to be made unanimously.
The parties attacking the US Client will first have to demolish the US domestic trust. After that, they will have to take the action to the Isle of Man courts15, and endeavour to obtain a charging order over the US Client’s beneficial Interest. But that will achieve nothing, since they cannot obtain any access to funds in the LLC, while now having a tax liability commensurate with their 99.9% interest16. This means that no transferee can force a distribution. He can only wait until the members unanimously decide to make a distribution. This could be never.
Furthermore, in consequence of the decision in Re the Petition of Christopher Jollian Heginbotham 199910, the transfer to the LLC cannot be attacked, even though the trust may have been set aside in the USA. Asset Protection LLCs established in the Isle of Man are now safe in Manx law, provided that, at the time of establishment, the Settlor was solvent, was able to meet all his known and ascertainable creditors, and had no intent to defraud creditors.
For many years, there has been considerable uncertainty in the Isle of Man relating to the law of fraudulent transfer. This arose because the Isle of Man, as a jurisdiction is, and always has been separate and distinct from that of England, and thus English law was never ‘received’ in the same way as, for example, it was received into former English colonies, including the USA. The infamous ‘Statute of Elizabeth’, or more properly, the English Fraudulent Conveyances Act 1571 (13 Eliz I Cap 5) was never adopted in the Isle of Man. The earliest legislation on the subject in the Isle of Man is the Fraudulent Assignments Act 1736 of which, today, just one section remains in force. This reads as follows:
“(4) And that all fraudulent Assignments or Transffers [sic] of the Debtor’s Goods of Effects shall be void and of no effect against his just Creditors, any Custome or Practice to the contrary notwithstanding.”
The only other reference in Manx legislation is to found in the The Bankruptcy Code 1892.
Section 30 of that Act reads:
“Avoidance of voluntary Settlements
(1) Any Settlement of property, not being a settlement made before and in consideration of marriage, or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration, or a settlement made on or for the wife and children of the settlor of property which has accrued to the settlor after marriage in right of his wife, shall, if the settlor becomes bankrupt within two years after the date of settlement, be void against the trustee1, and shall if the settlor becomes bankrupt at any subsequent time within ten years after the date of the settlement, be void against the trustee 17 unless the parties claiming under the settlement can prove that the settlor was at the time of making the settlement able to pay all his debts without the aid of the property comprised in the settlement, and that the interest of the settlor had passed to the trustee of such settlement on the execution thereof.
(2) .........
(3) ‘Settlement’ shall for the purposes of this section, include any conveyance or transfer of property.”
Thus the whole situation relating to future creditors, (i.e. creditors not existing or being ascertainable at the time of the settlement is effected and arising subsequent to such a settlement having been made) was unknown.
This is of great significance because the Isle of Man was one of the pioneer jurisdictions for asset protection trusts, but fell by the wayside because of uncertainty on this point. In addition, the Isle of Man turned its face against the type of ‘debtor’ protection legislation as was adopted in many other jurisdictions, to the extent that the Isle of Man does not even feature on a list of jurisdictions favored for asset protection work.
However, as a result of the judgement in Re the Petition of Christopher Jollian Heginbotham 199910, the uncertaint has been resolved. The note of the Editor of the International Trust and Estate Law Reports 18 (Philip Baker) states:-
“The issue decided by this case had not previously been settled in Isle of Man jurisprudence. The issue is of relevance because the Isle of Man has eschewed specific asset protection legislation. This case now establishes (subject to any contrary decision of a higher court) that a transfer of asset to a trust, for example, cannot be set aside at the instance of creditors whose debts were not known and ascertained at the time of the transfer. Thus so long as the transferor is not in a ‘state of insolvency’ at the time of the transfer - that is, he can pay all his known and ascertained debts, including those falling due on a future date - the transfer cannot be set aside.
This case also confirms the general principle that a trust, bona fide established by a person who is not insolvent, is a perfectly good asset protection arrangement. In some instances, the use of a trust in a territory with strong asset protection legislation - such as in the Cook islands - is an indication that the transferor was not bona fide or knew of future debts he wished to avoid. On the outcome of creating an asset protection trust under such a regime, see FTC v Affordable Media 2ITELR 73.”
The case was a petition under the Fraudulent Transfers Act 1736 for an order that the petitioner could enforce a judgement against two Isle of Man companies. The Petitioner, a local Estate Agent (Realtor), Mr A, had sold out to a Purchaser, Mr W. The deal was structured so that the business was transferred to a new company, A Ltd, which was owned by Mr W. Because of local legislation, an Estate Agency business must have a qualified person in management. Mr A was so qualified. Mr W was not. Therefore, the services of Mr A were retained as a director of A Ltd.
There was a disagreement between Mr A and Mr W, and the terms of the agreement were not carried out. Mr W, needing a qualified person, did a deal with Mr M, who was so qualified. Part of the business was transferred into one of the companies; the other part, which required a qualified person to be involved, was transferred to the second company with which Mr M was associated.
Mr A obtained a judgement for specific performance of the agreement, but was unable to enforce it against A Ltd, since the asset had been transferred out of A Ltd to the two new companies. Mr A petitioned under the Fraudulent Assignments Act 1736 to have the transfers set aside as fraudulent transfers.
The Deemster (as a High Court Judge is called in the Isle of Man) rejected the Petition.
HELD
(1) For the 1736 Act to apply, there must be an intent to defraud creditors. This intent applies only to present debts, not contingent or future debts which may never materialise. Present debts include known and ascertained debts which are to fall due on a date in the future.
(2) At the time of the transfers to the two companies, the petitioner had not yet served his defence and counterclaim to the action. The judgement debt was not therefore a present debt. The transfers were bona fide and not contrived to defraud creditors.
The Deemster considered the implications of the ‘Statute of Elizabeth’ and the Fraudulent Assignments Act 1736 at great length. This included a judgement of the Judicial Committee of the Privy Council of 1859. He also considered the ‘obiter dicta’ of Deemster Kneen in the unreported case of Re Corrin’s bankruptcy (1908)19, which those who have followed the Isle of Man’s law in this area will be aware of.
What does all this mean in practice. It means that Asset Protection Trusts or LLCs established in the Isle of Man are now safe in Manx law, provided that, at the time of establishment, the Settlor was solvent, was able to meet all his known and ascertainable creditors, and had no intent to defraud creditors.
The conclusion of this is that the options for asset protection planning have substantially changed in the last year or two. There is now more choice, not less. For would be fraudsters, the options have diminished, For everyone else, the options have expanded.
1 Very few jurisdictions doing substantial offshore business have such agreements with the USA. Very few are subject to the Brussels and Lugano Conventions on the Reciprocal Enforcement of Judgements nor the Rome Convention on applicable contract law. See also note 15, infra.
2 Treas.Reg 301.770 as amended and in force January 1, 1997
3 Internal Rev Code, s.957
4 Internal Rev Code, s.552
5 Internal Rev Code, s.1296
6 Internal Rev Code, s.671 through 679
7 Internal Rev Code, s.1361. The prohibition of a Non Resident Alien from being a shareholder in an S-Corporation was ended in 1982, P.L. 97-354 §2.
8 Under the previous classification regulations, an LLC failed, by design, to meet the definitions of a corporation set out in the former Treas. Reg 301.7701 – 1(a)(i) but this was changed by the new Regs adopted on January 1 1997 (the Check-the-box Regulations). An LLC is now be a default corporation, because all its members have limited liability, (Treas.Reg 301.7701-3(b)(2)(B)) but it can make a one-off election by filing Form 8832 to be treated as a Partnership, and thus obtain transparency (Treas. Reg 301-7701-3(c)(1)).
9. Fraudulent Conveyances Act 1571 (13 Eliz I Cap 5)
10. Re the Petition of Christopher Jollian Heginbotham 1999 2ITELR 95
11. 515 South Orange Grove Owners Association and Others v. Orange Grove Partners and others (No.1) (1995) CA 1/95 and CA 1./96, Cook Islands, and 515 South Orange Grove Owners Association and Others v. Orange Grove Partners and others (No.2) (1997/98) 1 OFLR3)
12 Re Stephan Jay Lawrence, Debtor, Case no 97-14687, BKC-AJC-Chapter 7, 2ITELR283
13 Federal Trade Commission v Affordable Media LLC, Denyse Anderson and Michael Anderson, Case no 98-16378, US Ct of Appeals 9th Circuit, 2 ITELR 73
14 A bailment is a relationship created when there is no intention on the part of the baillor (equivalent to the settlor) to lose control. (cf. handing a coat into a hotel cloakroom for safe keeping.) See Clough Mill Ltd v. Martin - Court of Appeal [1948] 3 All E.R. 982
15 There is no Reciprocal Enforcement of Judgement Agreement between the Isle of Man and the USA. In the Isle of Man, the Judgements (Reciprocal Enforcement) (Isle of Man) Act 1968 provides for reciprocal agreements, but there has never been such an agreement with the USA.
16 The LLC has filed Form 8832 and elected to be taxed as a partnership. As a consequence, the income and gains of the LLC is attributed directly to the Members. If a Members’ interest is taken over by a successor, so also is the tax liability, irrespective of whether actual distributions are being made by the LLC.
17 Trustee in bankruptcy.
18 Published by Butterworths, London UK. In the USA available from Lexis Law Publishing, Charlottesville, Virginia ISSN 1464-7125.
19 Re Corin Bankruptcy, Kermode Trustee of Corin’s bankruptcy v Craig (1908), see Asset Protection Trusts – Grundy, Briggs & Field, 3rd Edition, at p.12 (ISBN 1 870070 80 1)
A fresh look at offshore techniques in conjunction with recent developments in law relating to fraudulent transfer in the Isle of Man
by Charles A. Cain
For some years, the favoured mechanism of Asset Protection vehicles, that is to say, vehicles for the protection of the assets of US persons from litigious creditors, has been the offshore trust. Indeed, it had almost reached the point where nothing else was ever mentioned, in spite of the fact that there always have been a variety of mechanisms available.
The original reason for this was a tax reason. At that time, and indeed, still today, the objective was to establish a vehicle into which assets could be placed which
· protected the assets from attack through the US judicial system
· would be able to make the assets available, if necessary, to the client and/or his family
· would at worst be entirely tax neutral and at best enable routine Estate Tax planning to be done.
To achieve the first objective was comparatively simple - just get the assets out of the USA into a jurisdiction which had no Reciprocal Enforcement of Judgements Agreement1.
The actual holding mechanisms available then had to be selected.
At that time, the Limited Liability Company (LLC) was not available. In addition, the older classification rules of the IRS were still in force, and had not been replaced by the Check-the-Box Regulations, which were introduced in 19972.
All offshore Corporate forms were, as a consequence, ruled out because an overseas holding corporation would have been a Controlled Foreign Corporation3. Quite apart from the enhanced reporting requirements implicit in a Controlled Foreign Corporation (CFC) with Sub-Part F income, a Foreign Personal Holding Company (FPHC)4, a Passive Foreign Investment Company (PFIC)5 and the other implications of being caught up in Prof. Harvey Dale’s renowned five armed Pentapuss (now six-armed with the addition of the PFIC), there is a distinct penalty provision in relation to Basis step-up for Capital Gains Tax, derived from the rules in IRC s.1246(e) and 1291(e). The tax consequences of using a CFC for asset protection were therefore prohibitive.
The Limited Partnership was another vehicle which was used extensively inside the USA, but in those days, few offshore jurisdictions had them, although they have been in the statute book in the Isle of Man since 1909 (Partnership Act, 1909).
Many US Practitioners then looked at Trusts for Asset Protection. They found that there was a rich tradition of Trusts being used for ‘Asset Protection’ in a more general sense - indeed, there is scarcely any other purpose for a Trust.
For tax purposes, they were brilliant, since a trust established by a US person which he was also capable of benefiting from was a Grantor Trust6, and therefore entirely transparent for income and capital gains tax purposes. Thus the offshore trust was tax neutral, but was still capable of being structured for basic estate tax planning.
There were, of course, some drawbacks. Firstly, the establishment of a foreign trust, even though a Grantor Trust, led to enhanced reporting. This could, in theory be cured, by making the trust a domestic trust. This could be done by providing as a joint trustee, a US trustee, and by ensuring that the provisions of IRC s. 7701(a)(30) were met. The trustee would resign the moment the heat was turned up, but until that time it could be argued that the trust to argue was a US domestic trust for tax purposes, notwithstanding that the proper law was overseas, as were the assets, and the actual management of those assets.
The second drawback was the desirability of having a holding company below the trust. Such a company immediately plunged the structure back into the CFC problem. There were three solutions to these CFC problems. Either the assets were transferred direct into a bank ‘street’ name or nominee company. Or, they were held in a US corporation, which because of the tax attribution back to the Grantor, could be a transparent S-corporation7, or, thirdly, the assets were held in a foreign corporation which, although owned by the Trustee, was arguably a nominee company, relying on the decision in Commissioner v Bollinger 108 S.Ct 1173(1988).
None of these was very satisfactory. Not all assets can be held in a “street name”. The use of a US S-corporation immediately brought the ownership of the assets back into the USA, where they could be frozen and/or sequestrated. But the use of a nominee company correctly made it impossible to use the company as a mechanism for the day-to day management of the assets by the client.
The problem remained until the advent of the offshore LLC, which, by being classified as a partnership8 instead of a corporation enabled the Tax Transparent trust to have a Tax Transparent LLC beneath it, with the client as Manager of the LLC.
There were also other problems derived from the fundamental character of trust law itself, and from the so-called ‘Statute of Elizabeth’9. The most serious problem of all was perceived to be the issue of fraudulent transfer, and this still remains the biggest problem for a foreign trustee.
Under normal English Common Law principles, the principles set out in the so-called Statute of Elizabeth (Fraudulent Conveyances Act 1571 (13 Eliz I Cap 5) are now contained in the UK’s Insolvency Act 1986) have been adopted in one way or another by every country which looks to England for the source of its law (in the USA, the Uniform Fraudulent Transfer Act 1984). This is not, technically, a matter of trust law, but is a matter of bankruptcy law. Where a person effects a transfer to a trust with the intent to defeat any future creditor, the transfer can be set aside and the trust declared void.
Virtually every jurisdiction which had adequate equity-based trust law (anything else was and is far too risky in terms of dealing with the unknown) had also absorbed the principles of the Fraudulent Conveyances Act 1571 (13 Eliz I Cap 5).
There is one jurisdiction, however, which while being an absolutely traditional Common Law jurisdiction, has never been afflicted by the problems thrown up by the Statute of Elizabeth.
In the Isle of Man there was considerable uncertainty concerning fraudulent transfer, and, in consequence, after a promising start in the Asset Protection business, the Isle of Man fell by the wayside. But, in 1999 came the case of Re Heginbotham’s Petition 199910. In that case, it was determined that the Statute of Elizabeth had never been accepted into Manx law. Different Manx legislation applied, and in consequence Asset Protection Trusts or other structures established in the Isle of Man are now safe, provided that, at the time of establishment, the Settlor was solvent, was able to meet all his known and ascertainable creditors, and had no intent to defraud creditors. We shall examine this case in a little more depth later on.
Elsewhere, the Asset Protection Trust has been running into problems, largely derived from the equitable character of trust law, and the extreme reluctance of the courts to allow an equitable remedy to be used to deny equity to another party. Notwithstanding aggressive legislation in certain jurisdictions (which has caused some commentators to wonder whether trust law now actually exists in such jurisdictions, have been replaced entirely by bailments14, the courts have shown a determination to uphold basic rules of equity.
In consequence, we have the excitements of the Orange Grove11 case in the Cook Islands, the Lawrence case12 and the more recent Anderson case13, where the settlor went to prison for contempt for failing to return the funds to the USA. Effectively, the trusts were treated as bailments.
As all this was happening, there were changes to the law too. In August 1996, the USA enacted the Small Business Jobs Protection Act 1996, which, under the wing of a fairly innocuous piece of social security legislation, fundamentally altered the tax rules relating to foreign Grantor Trusts. As far as Asset Protection Trusts are concerned, it abolished the charade of the foreign trust being a ‘US Trust’ for tax purposes, and thereby forced the reporting regime for foreign trusts on all offshore Asset Protection Trusts. It also greatly enhanced that reporting regime, including a requirement on the offshore trustee to provide information, and appoint an agent in the USA for that purpose. This latter has caused real difficulties in situations where there are beneficiaries resident outside, as well as inside the US tax net.
Finally, the Check-the-Box Regulations2 that came into force on 1st January 1997, changed the whole classification mechanism for entities, and thus the arguments that had been stitched together in favour of the use of the offshore Asset Protection Trust all came apart.
Let us go back to first principles. We need to park assets offshore into an entity which is both transparent for tax purposes, and which provides substantial asset protection capability. We now know that the trust is subject to many difficulties, but these do not afflict the LLC. A properly designed LLC can provide tax transparency, as well as powerful Asset Protection features, which are not vulnerable to shifting sands of trust law.
The offshore LLC, though, has its limitations. It cannot be used to do Estate Tax planning in the USA. It cannot cope with complex family inheritance issues. For such matters, a trust is needed. Such a trust, however, does not need to be offshore – it can easily be established in the USA itself, in a suitable state, as a domestic trust. Since the Asset Protection planning is being done in the offshore LLC, the domestic trust need not concern itself with asset protection. Thus, the preferred solution now is a domestic trust in which all the estate tax planning is effected, and, below it, an appropriately designed LLC, in which all the asset protection planning is done.
In the Isle of Man, the LLC is a legal entity created under the Limited Liability Companies Act 1996. It is not a Trust. No US court will have jurisdiction. Only the Isle of Man Courts have jurisdiction. An order made by a US court requiring the US Client to instruct the overseas Trustee to instruct the LLC to distribute the assets will not be enforced in the Isle of Man15.
There are three members of such an LLC. The US person will have a 99.9% interest, and two offshore members will have (genuinely and beneficially) an 0.01% interest between them (there are no de minimis rules.) All decisions have to be made unanimously.
The parties attacking the US Client will first have to demolish the US domestic trust. After that, they will have to take the action to the Isle of Man courts15, and endeavour to obtain a charging order over the US Client’s beneficial Interest. But that will achieve nothing, since they cannot obtain any access to funds in the LLC, while now having a tax liability commensurate with their 99.9% interest16. This means that no transferee can force a distribution. He can only wait until the members unanimously decide to make a distribution. This could be never.
Furthermore, in consequence of the decision in Re the Petition of Christopher Jollian Heginbotham 199910, the transfer to the LLC cannot be attacked, even though the trust may have been set aside in the USA. Asset Protection LLCs established in the Isle of Man are now safe in Manx law, provided that, at the time of establishment, the Settlor was solvent, was able to meet all his known and ascertainable creditors, and had no intent to defraud creditors.
For many years, there has been considerable uncertainty in the Isle of Man relating to the law of fraudulent transfer. This arose because the Isle of Man, as a jurisdiction is, and always has been separate and distinct from that of England, and thus English law was never ‘received’ in the same way as, for example, it was received into former English colonies, including the USA. The infamous ‘Statute of Elizabeth’, or more properly, the English Fraudulent Conveyances Act 1571 (13 Eliz I Cap 5) was never adopted in the Isle of Man. The earliest legislation on the subject in the Isle of Man is the Fraudulent Assignments Act 1736 of which, today, just one section remains in force. This reads as follows:
“(4) And that all fraudulent Assignments or Transffers [sic] of the Debtor’s Goods of Effects shall be void and of no effect against his just Creditors, any Custome or Practice to the contrary notwithstanding.”
The only other reference in Manx legislation is to found in the The Bankruptcy Code 1892.
Section 30 of that Act reads:
“Avoidance of voluntary Settlements
(1) Any Settlement of property, not being a settlement made before and in consideration of marriage, or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration, or a settlement made on or for the wife and children of the settlor of property which has accrued to the settlor after marriage in right of his wife, shall, if the settlor becomes bankrupt within two years after the date of settlement, be void against the trustee1, and shall if the settlor becomes bankrupt at any subsequent time within ten years after the date of the settlement, be void against the trustee 17 unless the parties claiming under the settlement can prove that the settlor was at the time of making the settlement able to pay all his debts without the aid of the property comprised in the settlement, and that the interest of the settlor had passed to the trustee of such settlement on the execution thereof.
(2) .........
(3) ‘Settlement’ shall for the purposes of this section, include any conveyance or transfer of property.”
Thus the whole situation relating to future creditors, (i.e. creditors not existing or being ascertainable at the time of the settlement is effected and arising subsequent to such a settlement having been made) was unknown.
This is of great significance because the Isle of Man was one of the pioneer jurisdictions for asset protection trusts, but fell by the wayside because of uncertainty on this point. In addition, the Isle of Man turned its face against the type of ‘debtor’ protection legislation as was adopted in many other jurisdictions, to the extent that the Isle of Man does not even feature on a list of jurisdictions favored for asset protection work.
However, as a result of the judgement in Re the Petition of Christopher Jollian Heginbotham 199910, the uncertaint has been resolved. The note of the Editor of the International Trust and Estate Law Reports 18 (Philip Baker) states:-
“The issue decided by this case had not previously been settled in Isle of Man jurisprudence. The issue is of relevance because the Isle of Man has eschewed specific asset protection legislation. This case now establishes (subject to any contrary decision of a higher court) that a transfer of asset to a trust, for example, cannot be set aside at the instance of creditors whose debts were not known and ascertained at the time of the transfer. Thus so long as the transferor is not in a ‘state of insolvency’ at the time of the transfer - that is, he can pay all his known and ascertained debts, including those falling due on a future date - the transfer cannot be set aside.
This case also confirms the general principle that a trust, bona fide established by a person who is not insolvent, is a perfectly good asset protection arrangement. In some instances, the use of a trust in a territory with strong asset protection legislation - such as in the Cook islands - is an indication that the transferor was not bona fide or knew of future debts he wished to avoid. On the outcome of creating an asset protection trust under such a regime, see FTC v Affordable Media 2ITELR 73.”
The case was a petition under the Fraudulent Transfers Act 1736 for an order that the petitioner could enforce a judgement against two Isle of Man companies. The Petitioner, a local Estate Agent (Realtor), Mr A, had sold out to a Purchaser, Mr W. The deal was structured so that the business was transferred to a new company, A Ltd, which was owned by Mr W. Because of local legislation, an Estate Agency business must have a qualified person in management. Mr A was so qualified. Mr W was not. Therefore, the services of Mr A were retained as a director of A Ltd.
There was a disagreement between Mr A and Mr W, and the terms of the agreement were not carried out. Mr W, needing a qualified person, did a deal with Mr M, who was so qualified. Part of the business was transferred into one of the companies; the other part, which required a qualified person to be involved, was transferred to the second company with which Mr M was associated.
Mr A obtained a judgement for specific performance of the agreement, but was unable to enforce it against A Ltd, since the asset had been transferred out of A Ltd to the two new companies. Mr A petitioned under the Fraudulent Assignments Act 1736 to have the transfers set aside as fraudulent transfers.
The Deemster (as a High Court Judge is called in the Isle of Man) rejected the Petition.
HELD
(1) For the 1736 Act to apply, there must be an intent to defraud creditors. This intent applies only to present debts, not contingent or future debts which may never materialise. Present debts include known and ascertained debts which are to fall due on a date in the future.
(2) At the time of the transfers to the two companies, the petitioner had not yet served his defence and counterclaim to the action. The judgement debt was not therefore a present debt. The transfers were bona fide and not contrived to defraud creditors.
The Deemster considered the implications of the ‘Statute of Elizabeth’ and the Fraudulent Assignments Act 1736 at great length. This included a judgement of the Judicial Committee of the Privy Council of 1859. He also considered the ‘obiter dicta’ of Deemster Kneen in the unreported case of Re Corrin’s bankruptcy (1908)19, which those who have followed the Isle of Man’s law in this area will be aware of.
What does all this mean in practice. It means that Asset Protection Trusts or LLCs established in the Isle of Man are now safe in Manx law, provided that, at the time of establishment, the Settlor was solvent, was able to meet all his known and ascertainable creditors, and had no intent to defraud creditors.
The conclusion of this is that the options for asset protection planning have substantially changed in the last year or two. There is now more choice, not less. For would be fraudsters, the options have diminished, For everyone else, the options have expanded.
1 Very few jurisdictions doing substantial offshore business have such agreements with the USA. Very few are subject to the Brussels and Lugano Conventions on the Reciprocal Enforcement of Judgements nor the Rome Convention on applicable contract law. See also note 15, infra.
2 Treas.Reg 301.770 as amended and in force January 1, 1997
3 Internal Rev Code, s.957
4 Internal Rev Code, s.552
5 Internal Rev Code, s.1296
6 Internal Rev Code, s.671 through 679
7 Internal Rev Code, s.1361. The prohibition of a Non Resident Alien from being a shareholder in an S-Corporation was ended in 1982, P.L. 97-354 §2.
8 Under the previous classification regulations, an LLC failed, by design, to meet the definitions of a corporation set out in the former Treas. Reg 301.7701 – 1(a)(i) but this was changed by the new Regs adopted on January 1 1997 (the Check-the-box Regulations). An LLC is now be a default corporation, because all its members have limited liability, (Treas.Reg 301.7701-3(b)(2)(B)) but it can make a one-off election by filing Form 8832 to be treated as a Partnership, and thus obtain transparency (Treas. Reg 301-7701-3(c)(1)).
9. Fraudulent Conveyances Act 1571 (13 Eliz I Cap 5)
10. Re the Petition of Christopher Jollian Heginbotham 1999 2ITELR 95
11. 515 South Orange Grove Owners Association and Others v. Orange Grove Partners and others (No.1) (1995) CA 1/95 and CA 1./96, Cook Islands, and 515 South Orange Grove Owners Association and Others v. Orange Grove Partners and others (No.2) (1997/98) 1 OFLR3)
12 Re Stephan Jay Lawrence, Debtor, Case no 97-14687, BKC-AJC-Chapter 7, 2ITELR283
13 Federal Trade Commission v Affordable Media LLC, Denyse Anderson and Michael Anderson, Case no 98-16378, US Ct of Appeals 9th Circuit, 2 ITELR 73
14 A bailment is a relationship created when there is no intention on the part of the baillor (equivalent to the settlor) to lose control. (cf. handing a coat into a hotel cloakroom for safe keeping.) See Clough Mill Ltd v. Martin - Court of Appeal [1948] 3 All E.R. 982
15 There is no Reciprocal Enforcement of Judgement Agreement between the Isle of Man and the USA. In the Isle of Man, the Judgements (Reciprocal Enforcement) (Isle of Man) Act 1968 provides for reciprocal agreements, but there has never been such an agreement with the USA.
16 The LLC has filed Form 8832 and elected to be taxed as a partnership. As a consequence, the income and gains of the LLC is attributed directly to the Members. If a Members’ interest is taken over by a successor, so also is the tax liability, irrespective of whether actual distributions are being made by the LLC.
17 Trustee in bankruptcy.
18 Published by Butterworths, London UK. In the USA available from Lexis Law Publishing, Charlottesville, Virginia ISSN 1464-7125.
19 Re Corin Bankruptcy, Kermode Trustee of Corin’s bankruptcy v Craig (1908), see Asset Protection Trusts – Grundy, Briggs & Field, 3rd Edition, at p.12 (ISBN 1 870070 80 1)
Finally, the BVI legislature has approved and released the much awaited provisions dealing with the immobilization of Bearer Shares and the definition of a Custodian that is incidental to the restrictive use of bearer shares. As expected, the Bearer Shares changes came as an amendment to the BVI International Business Company Law. The Custodian legislation came as a modification to the Financial Services Commission Act.
Although some of these provisions are yet to formally be made public in the BVI Gazette, such publication is expected in the coming weeks. Below is a summary of the most relevant aspects, for your reference:
1. INTERNATIONAL BUSINESS COMPANIES (AMENDMENT) ACT, 2004.
Amendments to the International Business Companies (IBCs) will ultimately require that all bearer shares in BVI IBCs be held by a custodian and thus immobilized. Companies formed after 1 January 2005 must comply with these requirements from their date of formation. Alternatively, BVI IBCs may be issued with registered shares.
However, Section 2 of the International Business Companies Act is amended to move back the deadline for the immobilization of bearer shares that are in existence prior to 1 January 2005, from the initially proposed date of 31 December 2004, to 31 December 2010. Thus, you will not need to be concerned about the restrictions on bearer shares for those companies formed previously, and up to 31 December 2004, at least until the year 2010.
2. FINANCIAL SECOMMISSIONMMISSON (AMENDMENT) ACT, 2004:
a. Authorized Custodian of Bearer Shares
This amendment act introduces a new section 50A to the BVI Financial Services Act that provides for the approval of authorized custodians by the BVI Financial Services Commission (FSC).
An Authorized custodian will be either (i) the holder of a license under any financial services legislation; or (ii) a body corporate formed outside the BVI that is not resident in, and does not have a place of business in the BVI. In both cases, an applicant for approval must satisfy the FSC that it is a fit and proper person to act as an authorized custodian, and that it has the necessary security and compliance systems and procedures in place.
In determining whether a body corporate incorporated and operating outside the BVI is fit and proper to act as an authorized custodian, the FSC will also consider the prudential regulation exercised over, and anti-money laundering obligations imposed on such corporate body outside the BVI.
The amendment act provides in its new section 50C that the FSC may establish conditions for the approval of an authorized custodian and to vary or revoke said conditions. Also, under section 50D, the FSC is enabled to issue Guidance Notes specifying the practices and procedures it expects authorized custodians to follow.
To assist potential applicants for custodian status, the FSC has issued a new Aide Memoire, entitled Criteria for Approval of Authorized Custodians of Bearer Shares of BVI Incorporated Companies. In addition to providing an outline of the criteria that will be used by the FSC when approving custodians, the Aide Memoire addresses, inter alia, the duty of custodians and the grounds on which the FSC may revoke approvals. Based on the stringent requirements and compliance obligations, it is unlikely that many non-BVI companies, offices, trusts or firms, will be willing to apply for a custodian license.
Further, section 50E of the amendment act allows for the automatic revocation of an authorized custodianÂ’s license by the FSC if such person is no longer fit and proper to act as an authorized custodian, breaches any conditions to which its approval is subject, breaches any Guidance Notes issued by the FSC, or being a non-resident corporate body operating outside the BVI a person becomes resident or establishes a place of business in the BVI.
b. Recognized Custodian of Bearer Shares
Under a new section 50B, the FSC is also empowered to acknowledge as a recognized custodian of bearer shares, an investment exchange or a clearing organization operating securities clearance or settlement systems in a jurisdiction that is a member of the Financial Action Task Force (FATF).
c. Other Provisions
The principal Financial Services Act is amended such as to clarify that only courts of competent jurisdiction in the BVI are empowered to make an order for the disclosure of privileged information held by the FSC.
Additionally, the amendment extends immunity from being sued to persons who disclose information pursuant to a request from the FSC under the Financial Services Act.
Although some of these provisions are yet to formally be made public in the BVI Gazette, such publication is expected in the coming weeks. Below is a summary of the most relevant aspects, for your reference:
1. INTERNATIONAL BUSINESS COMPANIES (AMENDMENT) ACT, 2004.
Amendments to the International Business Companies (IBCs) will ultimately require that all bearer shares in BVI IBCs be held by a custodian and thus immobilized. Companies formed after 1 January 2005 must comply with these requirements from their date of formation. Alternatively, BVI IBCs may be issued with registered shares.
However, Section 2 of the International Business Companies Act is amended to move back the deadline for the immobilization of bearer shares that are in existence prior to 1 January 2005, from the initially proposed date of 31 December 2004, to 31 December 2010. Thus, you will not need to be concerned about the restrictions on bearer shares for those companies formed previously, and up to 31 December 2004, at least until the year 2010.
2. FINANCIAL SECOMMISSIONMMISSON (AMENDMENT) ACT, 2004:
a. Authorized Custodian of Bearer Shares
This amendment act introduces a new section 50A to the BVI Financial Services Act that provides for the approval of authorized custodians by the BVI Financial Services Commission (FSC).
An Authorized custodian will be either (i) the holder of a license under any financial services legislation; or (ii) a body corporate formed outside the BVI that is not resident in, and does not have a place of business in the BVI. In both cases, an applicant for approval must satisfy the FSC that it is a fit and proper person to act as an authorized custodian, and that it has the necessary security and compliance systems and procedures in place.
In determining whether a body corporate incorporated and operating outside the BVI is fit and proper to act as an authorized custodian, the FSC will also consider the prudential regulation exercised over, and anti-money laundering obligations imposed on such corporate body outside the BVI.
The amendment act provides in its new section 50C that the FSC may establish conditions for the approval of an authorized custodian and to vary or revoke said conditions. Also, under section 50D, the FSC is enabled to issue Guidance Notes specifying the practices and procedures it expects authorized custodians to follow.
To assist potential applicants for custodian status, the FSC has issued a new Aide Memoire, entitled Criteria for Approval of Authorized Custodians of Bearer Shares of BVI Incorporated Companies. In addition to providing an outline of the criteria that will be used by the FSC when approving custodians, the Aide Memoire addresses, inter alia, the duty of custodians and the grounds on which the FSC may revoke approvals. Based on the stringent requirements and compliance obligations, it is unlikely that many non-BVI companies, offices, trusts or firms, will be willing to apply for a custodian license.
Further, section 50E of the amendment act allows for the automatic revocation of an authorized custodianÂ’s license by the FSC if such person is no longer fit and proper to act as an authorized custodian, breaches any conditions to which its approval is subject, breaches any Guidance Notes issued by the FSC, or being a non-resident corporate body operating outside the BVI a person becomes resident or establishes a place of business in the BVI.
b. Recognized Custodian of Bearer Shares
Under a new section 50B, the FSC is also empowered to acknowledge as a recognized custodian of bearer shares, an investment exchange or a clearing organization operating securities clearance or settlement systems in a jurisdiction that is a member of the Financial Action Task Force (FATF).
c. Other Provisions
The principal Financial Services Act is amended such as to clarify that only courts of competent jurisdiction in the BVI are empowered to make an order for the disclosure of privileged information held by the FSC.
Additionally, the amendment extends immunity from being sued to persons who disclose information pursuant to a request from the FSC under the Financial Services Act.
Finally, the BVI legislature has approved and released the much awaited provisions dealing with the immobilization of Bearer Shares and the definition of “Custodian” that is incidental to the restrictive use of bearer shares. As expected, the Bearer Shares changes came as an amendment to the BVI International Business Company Law. The “Custodian” legislation came as a modification to the Financial Services Commission Act.
Although some of these provisions are yet to formally be made public in the BVI Gazette, such publication is expected in the coming weeks. Below is a summary of the most relevant aspects, for your reference:
1. INTERNATIONAL BUSINESS COMPANIES (AMENDMENT) ACT, 2004.
Amendments to the International Business Companies (IBC’s) will ultimately require that all bearer shares in BVI IBC’s be held by a custodian and thus immobilized. Companies formed after 1 January 2005 must comply with these requirements from their date of formation. Alternatively, BVI IBC’s may be issued with registered shares.
However, Section 2 of the International Business Companies Act is amended to move back the deadline for the immobilization of bearer shares that are in existence prior to 1 January 2005, from the initially proposed date of 31 December 2004, to 31 December 2010. Thus, you will not need to be concerned about the restrictions on bearer shares for those companies formed previously, and up to 31 December 2004, at least until the year 2010.
2. FINANCIAL SERVICES COMMISSON (AMENDMENT) ACT, 2004:
a. Authorized Custodian of Bearer Shares
This amendment act introduces a new section 50A to the BVI Financial Services Act that provides for the approval of authorized custodians by the BVI Financial Services Commission (“FSC”).
An Authorized custodian will be either (i) the holder of a license under any financial services legislation; or (ii) a body corporate formed outside the BVI that is not resident in, and does not have a place of business in the BVI. In both cases, an applicant for approval must satisfy the FSC that it is a fit and proper person to act as an authorized custodian, and that it has the necessary security and compliance systems and procedures in place.
In determining whether a body corporate incorporated and operating outside the BVI is fit and proper to act as an authorized custodian, the FSC will also consider the prudential regulation exercised over, and anti-money laundering obligations imposed on such corporate body outside the BVI.
The amendment act provides in its new section 50C that the FSC may establish conditions for the approval of an authorized custodian and to vary or revoke said conditions. Also, under section 50D, the FSC is enabled to issue Guidance Notes specifying the practices and procedures it expects authorized custodians to follow.
To assist potential applicants for custodian status, the FSC has issued a new Aide Memoire, entitled Criteria for Approval of Authorized Custodians of Bearer Shares of BVI Incorporated Companies. In addition to providing an outline of the criteria that will be used by the FSC when approving custodians, the Aide Memoire addresses, inter alia, the duty of custodians and the grounds on which the FSC may revoke approvals. Based on the stringent requirements and compliance obligations, it is unlikely that many non-BVI companies, offices, trusts or firms, will be willing to apply for a custodian license.
Further, section 50E of the amendment act allows for the automatic revocation of an authorized custodian’s license by the FSC if such person is no longer fit and proper to act as an authorized custodian, breaches any conditions to which its approval is subject, breaches any Guidance Notes issued by the FSC, or being a non-resident corporate body operating outside the BVI a person becomes resident or establishes a place of business in the BVI.
b. Recognized Custodian of Bearer Shares
Under a new section 50B, the FSC is also empowered to acknowledge as a recognized custodian of bearer shares, an investment exchange or a clearing organization operating securities clearance or settlement systems in a jurisdiction that is a member of the Financial Action Task Force (“FATF”).
c. Other Provisions
The principal Financial Services Act is amended such as to clarify that only courts of competent jurisdiction in the BVI are empowered to make an order for the disclosure of privileged information held by the FSC.
Additionally, the amendment extends immunity from being sued to persons who disclose information pursuant to a request from the FSC under the Financial Services Act.
Although some of these provisions are yet to formally be made public in the BVI Gazette, such publication is expected in the coming weeks. Below is a summary of the most relevant aspects, for your reference:
1. INTERNATIONAL BUSINESS COMPANIES (AMENDMENT) ACT, 2004.
Amendments to the International Business Companies (IBC’s) will ultimately require that all bearer shares in BVI IBC’s be held by a custodian and thus immobilized. Companies formed after 1 January 2005 must comply with these requirements from their date of formation. Alternatively, BVI IBC’s may be issued with registered shares.
However, Section 2 of the International Business Companies Act is amended to move back the deadline for the immobilization of bearer shares that are in existence prior to 1 January 2005, from the initially proposed date of 31 December 2004, to 31 December 2010. Thus, you will not need to be concerned about the restrictions on bearer shares for those companies formed previously, and up to 31 December 2004, at least until the year 2010.
2. FINANCIAL SERVICES COMMISSON (AMENDMENT) ACT, 2004:
a. Authorized Custodian of Bearer Shares
This amendment act introduces a new section 50A to the BVI Financial Services Act that provides for the approval of authorized custodians by the BVI Financial Services Commission (“FSC”).
An Authorized custodian will be either (i) the holder of a license under any financial services legislation; or (ii) a body corporate formed outside the BVI that is not resident in, and does not have a place of business in the BVI. In both cases, an applicant for approval must satisfy the FSC that it is a fit and proper person to act as an authorized custodian, and that it has the necessary security and compliance systems and procedures in place.
In determining whether a body corporate incorporated and operating outside the BVI is fit and proper to act as an authorized custodian, the FSC will also consider the prudential regulation exercised over, and anti-money laundering obligations imposed on such corporate body outside the BVI.
The amendment act provides in its new section 50C that the FSC may establish conditions for the approval of an authorized custodian and to vary or revoke said conditions. Also, under section 50D, the FSC is enabled to issue Guidance Notes specifying the practices and procedures it expects authorized custodians to follow.
To assist potential applicants for custodian status, the FSC has issued a new Aide Memoire, entitled Criteria for Approval of Authorized Custodians of Bearer Shares of BVI Incorporated Companies. In addition to providing an outline of the criteria that will be used by the FSC when approving custodians, the Aide Memoire addresses, inter alia, the duty of custodians and the grounds on which the FSC may revoke approvals. Based on the stringent requirements and compliance obligations, it is unlikely that many non-BVI companies, offices, trusts or firms, will be willing to apply for a custodian license.
Further, section 50E of the amendment act allows for the automatic revocation of an authorized custodian’s license by the FSC if such person is no longer fit and proper to act as an authorized custodian, breaches any conditions to which its approval is subject, breaches any Guidance Notes issued by the FSC, or being a non-resident corporate body operating outside the BVI a person becomes resident or establishes a place of business in the BVI.
b. Recognized Custodian of Bearer Shares
Under a new section 50B, the FSC is also empowered to acknowledge as a recognized custodian of bearer shares, an investment exchange or a clearing organization operating securities clearance or settlement systems in a jurisdiction that is a member of the Financial Action Task Force (“FATF”).
c. Other Provisions
The principal Financial Services Act is amended such as to clarify that only courts of competent jurisdiction in the BVI are empowered to make an order for the disclosure of privileged information held by the FSC.
Additionally, the amendment extends immunity from being sued to persons who disclose information pursuant to a request from the FSC under the Financial Services Act.
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