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Western International Trust Company Outlines the Advantages of Foundation Companies and Digital Assets

Thursday, 29 June 2023 08:00 AM

WEST BAY, GRAND CAYMAN, CAYMAN ISLANDS / ACCESSWIRE / June 29, 2023 / Lawrence J. Chastang, Jr., Managing Director, along with B.P. Dan Martiuk, Director of Western International Trust Company Limited, and Star Insurance Company (Cayman) Limited, examine the key features of Cayman Foundation companies and why they are considered ideal structures for digital assets; especially decentralized finance (DEFI), non-fungible tokens (NFTs) and play-to-earn gaming (P2E). Decentralized autonomous organizations (DAOs), which are blockchain based and governed by smart contracts have emerged as the preferred model within the digital assets or "Crypto" space.

Lawrence J. Chastang, Jr. notes, "The Cayman Foundation has become the popular choice for digital asset structuring due to its unique benefits and characteristics - these are hybrid corporate vehicles with limited liability and a separate legal personality." Foundations are similar to trusts, in that they may designate beneficiaries and allocate powers to entities other than the directors. Foundations may also become ownerless vehicles, which aligns well with their decentralized philosophy.

BP Dan Martiuk lists the following features of Foundations which make them ideal digital asset holding structures:

  • Corporation Status: Foundation is a separate legal persona and may execute token agreements, contracts and open bank and/or brokerage accounts.
  • Ownerless: Foundations may cease to have shareholders or members which aligns with the decentralized philosophy of digital assets.
  • Flexible Control: Control provisions may be built into Foundation structures to allow founders or members to influence corporate direction.
  • Quick Turnaround: Foundations are established quickly after the completion of all onboarding and KYC.
  • Familiar Structure: Cayman foundations are familiar to industry participants.
  • Regulatory Clarity: Cayman offers a favorable regulatory regime making the jurisdiction attractive for digital asset related vehicles.
  • Competent Service Providers: Cayman has numerous local service providers familiar with digital assets and the provision of registered office services.
  • Privacy of Bylaws: Foundations may have separate bylaws that are not filed with the constitutional documents thus ensuring privacy.
  • Fiscal Advantages: Cayman offers fiscal efficiencies - absence of income, corporate and capital gains levies.

Foundations serve numerous roles in the digital asset space due to their flexibility. A Foundation may provide a corporate wrapper for projects, act as a service provider, serve as a fundraising entity, hold liquidity, facilitate decentralization, provide project support, offer marketing and development services or function as a parent or holding structure.

Lawrence J. Chastang Jr. however cautions, "Setting up a Cayman Foundation company requires very careful consideration of numerous factors. Three important considerations we are mindful of at Western International Trust Company are the VASP Act, the SIB Act and the Private Funds Act."

The VASP Act (Virtual Assets Service Providers Act), is a major consideration as it regulates various digital asset related activities. Other Cayman laws and regulations, such as the SIB (Securities Investments Business Act) as well as the Private Funds Act, play an important role, along with Economic Substance (ES) and Anti-Money Laundering (AML) and Know Your Customer (KYC).

Lawrence J Chastang Jr. also notes, "It is critical to seek legal, regulatory and tax advice from experienced advisors in the various jurisdictions associated with the founders and project management team. This ensures that all legal and regulatory obligations are satisfied avoiding unexpected surprises and consequences."

Cayman Foundations must have a registered office and secretary and hold the required licenses. It will also be necessary to engage a local service provider as a supervisor or independent director, which incurs an annual cost depending upon the project and the type of engagement.

BP Dan Martiuk concludes, "At Western International Trust Company Limited, we believe that the Cayman Islands Foundation company offers numerous advantages for digital assets." He advises that establishing and managing the entities requires professional experience for a full understanding of the structures.

This article provides guidance and information for consideration and is not intended to provide specific tax and/or legal advice.

Contact Information:

Andrew Mitchell
Email: [email protected]
Phone: 404-955-7133

SOURCE: Cambridge Global

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