Private Trust Company "PTC"

A PTC is a Company authorized to act as trustee of one or more family trusts but not to offer trusteeship services to the general public. Although the PTC would be owned and possibly managed by an individual or family, it is still common for a professional trustee to be engaged as administrator of the underlying trust(s).

The main advantage of a PTC lies in the opportunity to be much more closely involved in the operation of the trust (either directly or by appointing trusted advisors or family members to the board of the PTC).

Key Issues

A PTC is a trust company formed for the purpose of acting as Trustee of one or several trusts, which are created for the benefit of the same family.

Contrary to professional Trustee Companies PTCs are generally exempt from reporting licensing and supervisory obligations in many jurisdictions. The representation of family members, protectors and others involved in the administration of the family’s affairs on the board of directors of the PTC:

Provides families with a greater level of control over the administration of the trusts and adds an extra layer of confidentiality regarding their financial affairs.

The hand-picked selection of the Directors of a PTC ensures that their trustee is genuinely knowledgeable of and sensitive to the family’s history, background and dynamics and that the trust(s) is/are administered in an individual manner sympathetic to those issues and concerns. Provided the PTC is properly run, it should be possible to retain control within the family without prejudicing the validity of the underlying trust. If need be the client can change the administrator of the PTC without changing the actual trustee itself and while leaving the client’s chosen advisors on the board of the PTC.

Characteristics

High net-worth families seek flexible and creative solutions regarding their estate planning and asset management. The use of a PTC is the most common means of striking a more correct balance between the needs of a family to control trust assets yet ensure that those assets remain in trust. It enables the family to own operating businesses in a trust while having an ongoing involvement in the management of such family business. On the assumption that the PTC is properly managed, it should be possible to retain control within the family without jeopardising the validity and integrity of the underlying trusts.

The usual arrangement involves a thinly capitalized company incorporated to act as trustee of one or more trusts for a single family. Such trust company in turn holds the private company shares. The shares of the PTC can be held by a purpose trust or a charitable trust, i.e. a trust with no beneficiaries and the objective (“purpose”) to hold the shares in the PTC. The purpose of this exercise is to make ownership disappear and to add an additional guarantee that the initial intention of the Settlor is maintained. These trusts may again have protectors who would if necessary remove the trustee of the purpose or charitable trust.   Within a PTC, the powers and operations are defined to meet the needs and wishes of the family and can be drafted to closely interact with the family office. Sometimes both can be effectively combined with the establishment of the PTC. Typically, the board of directors of the PTC delegate all administrative and corporate secretarial matters to an institutional trustee. Such delegation provides an additional level of comfort to family members and ensures an extra element of control over non-family members of the board of directors of the PTC.