Skip to main content

While the appeal of protecting assets from creditors through the use of an offshore trust in the Cook Islands or Nevis has attracted clients to Southpac for decades, the foundation has been largely overlooked as an asset protection device. This is perhaps out of a lack of familiarity for clients and attorneys from the US and other jurisdictions who are more familiar with the trust concept, after all, people tend to stick to what they know.

However, the foundation is definitely worth a closer look and with its hallmarks of flexibility, certainty and ease of control, but without what could be viewed as the encumbrances that centuries of case law have placed on the operation of trusts, it provides a valuable alternative option within the asset protection product suite.


Foundations have existed in some form in a number of European civil law jurisdictions for hundreds of years. Originally set up for religious, philanthropic or charitable purposes, the use of private foundations for commercial purposes broadened throughout the twentieth century, particularly in Liechtenstein, where foundation legislation was enacted in 1926 which exists to this day and which provided the template for foundation legislation in many other jurisdictions.

Foundation legislation has been enacted in Nevis in by the Multiform Foundations Ordinance 2004 and in the Cook Islands by the Foundations Act 2012. While there are differences in terminology between the two jurisdictions (and terms used in this article follow the Cook Islands legislation) the overall concept is the same. The Nevis legislation is of particular interest as it allows a flexibility not seen in other foundation jurisdictions, and allows foundations to take on the form and share characteristics of other types of entities including trusts, LLCs and partnerships.

For those more familiar with trusts and companies, the foundation is best seen as a hybrid of the two. Foundations share certain characteristics with companies (for example, they come into existence upon registration and have their own legal and economic personality) and some with trusts (they are established in order to hold assets for the benefit of beneficiaries and/or to further one or more purposes selected by the founder). However, they have some characteristics which are unique to foundations: in particular, foundations are self-owning and self-governing. They do not have members or shareholders, and cannot be owned by other entities. While they are established and funded by a founder, who holds a position analogous to that of a trust settlor, the founder is not in law regarded as the owner of the foundation or the assets they have endowed upon the foundation – after endowment, those assets belong to the foundation.


All powers vested in a foundation are exercised by its foundation council. This is a body consisting of one or more persons which manages the business and assets of the foundation for the benefit of the foundation in accordance with foundation rules. These rules are the foundation equivalent of the operating agreement or trust deed and set parameters around what the foundation council may or may not do. The foundation council has a fiduciary duty towards the foundation, as directors do towards a company, but not to its beneficiaries, as trustees do. The beneficiaries of a foundation do not have enforceable rights against the foundation or the foundation council. This is very different to a trust, where everything the trustee does must be in the best interests of the beneficiaries, where the beneficiaries are the equitable owners of the trust fund and where they have rights which can be enforced by a court against the trustee. This may be viewed as easing the fiduciary burden on foundation council members. A client looking to act as a foundation council member of their own foundation will most likely find that it is easier to comply with their fiduciary duties than if they were acting as a trustee and is less likely to run into difficulties as a result.

As many trusts have a protector, many foundations have an enforcer, who exercises a supervisory role over the foundation council and ensures that the council acts at all times in the best interests of the foundation.

Perhaps of most appeal is the level of control which the founder of a foundation is able to maintain. Whereas a trust may be declared a sham, and therefore void, in circumstances where a trust settlor retains too much control over the trust assets, this is not true of foundations. A founder may be both a member of the foundation council and a beneficiary of the foundation without any fear of the arrangement being declared void in almost all circumstances.


So how does this work in practice? For example, a founder could establish a foundation whose purpose is to make financial provision for the founder, their spouse and their descendants. The founder can appoint one or more trusted associates to act as the foundation council (and can also be a member of the council) and could act as the foundation enforcer if desired. The founder and their spouse and descendants would be the beneficiaries of the foundation. As a council member, the founder can be closely involved in the decision-making process so long as all decisions taken are with the intention of furthering the purpose of the foundation: to benefit the founder and the founder’s family. However, individual family members who may benefit under the foundation do not have any rights against the founder or the foundation council that they can seek to enforce if they are unhappy with how the foundation is being managed, although as they do not have a right to foundation information in any event, they are unlikely to be aware of decisions taken by the foundation council.

It is important to note, from an asset protection perspective, that Cook Islands and Nevis foundation laws contain the same protective provisions in relation to fraudulent dispositions as do the trust statutes in those jurisdictions. In other words, the court will not find that property endowed by a founder to a foundation is available to satisfy a creditor claim unless the property was endowed after (but not more than two years after) the creditor’s cause of action accrued and, after the creditor brings court proceedings in Nevis or the Cook Islands, as the case may be, the court is satisfied beyond reasonable doubt that the principal purpose of the endowment was to defraud the creditor and that the making of the endowment to the foundation rendered the founder insolvent.


Southpac offers foundation registration services in both Nevis and the Cook Islands, and can also provide corporate foundation council member or corporate foundation enforcer services. For more information, please contact your Southpac representative or contact us here.


Disclaimer: The above material has been prepared for information purposes. It is not intended to provide and should not be relied on for tax, legal or accounting advice.  Seek a duly licensed professional for these services.


Close Menu


Level 1/399
Cameron Road,
Tauranga 3110
New Zealand