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Cook Islands

ASIACITI TRUST IN THE COOK ISLANDS

In the Cook Islands we operate through Asiaciti Trust Pacific Limited which was formed and licensed as a trustee company in 1986. The Asiaciti Trust group Director, Trust Services is based in this office. The Cook Islands is our principal offshore trust centre specializing in asset protection trusts, purpose trusts, life assurance trusts, other offshore trust structures and pre-migration planning for immigrants to Canada, New Zealand and the United States. Company formation and corporate secretarial services are also provided for Cook Islands international companies.

THE COOK ISLANDS - THE OFFSHORE TRUST JURISDICTION

The Cook Islands was the first offshore jurisdiction to enact legislation to specifically facilitate asset protection trusts through amendments to the International Trusts Act in 1989. Further amendments were enacted in 1991, 1994, 1996 and 1999. As a result the Cook Islands currently has the most modern international trust legislation for the protection of assets. The Cook Islands international trust law is derived from English common law and equity but the International Trusts Act 1984 (as amended) ("the Act" ) has removed some of the problem areas of common law pertaining to trusts. For example, the modern rule against perpetuities has been abolished although a specific perpetuity period can be adopted if required.

To view a consolidation of the International Trusts Act click here. (Please note that this document requires Adobe Acrobat Reader.)

The trustee(s), beneficiaries and settlor of an international trust are exempt from any form of taxation and duty in the Cook Islands.

Asset Protection Trusts

The Cook Islands is the pre-eminent offshore jurisdiction for asset protection trusts. The Act incorporates innovative statutory provisions for the protection of assets, the protection of beneficiaries, and protection of the interests of the settlor. Features of that legislation include :

• Abolition of the statute of Elizabeth.
• Foreign judgements cannot be enforced against a Cook Islands international trust.
• An international trust is not invalidated as a consequence of the subsequent bankruptcy of the settlor.
• A clear definition of what constitutes a fraudulent disposition for the purposes of Cook Islands trust law.
• The existence of a fraudulent disposition does not invalidate the trust(the creditor's claim is to be satisfied from the property transferred under the fraudulent disposition).
• A creditor faces two time limitation periods in seeking to bring an action against a Cook Islands International Trust.  Firstly, the creditor must begin proceedings against the settlor in the settlor's home jurisdiction alleging some sort of debt or damages owed to the creditor by the settlor within 12 months of the transfer of the assets to the Cook Islands International Trust.  Secondly, the creditor must also commence proceedings against the Cook Islands International Trust within the Cook Islands within 2 years of the transfer of assets to the trust.  If a creditor does not comply with either of these time limitation periods any fraudulent transfer action the creditor may allege against a Cook Islands International Trust is statute barred.
• The settlor may retain certain powers and benefits without invalidating the the trust.
• A creditor cannot alienate the interest of a "spendthrift" beneficiary in an international trust.
• Retroactive protection may be possible for trusts that migrate from other jurisdictions.
• The avoidance of forced heirship rights does not render an international trust invalid.

The strength of the Cook Islands asset protection legislation is highlighted in our Comparison of Offshore Trust Jurisdictions which compares the features of the major offshore trust jurisdictions offering asset protection trusts.

Other Offshore Trust structures

The Cook Islands international trust legislation also facilitates the formation and administration of charitable trusts, non-charitable purpose trusts, life assurance trusts and pre-migration tax planning trusts. Other features of the legislation include :

• A clear definition of a Protector of an international trust and specific provisions pertaining to the role of the Protector.
• Specific provisions for the appointment and role of custodian trustees.
• Clear definition of charitable objects or purposes for a charitable trust.
• Statutory recognition of trusts established for non-charitable purposes.

Overall the Act creates a flexible tax effective environment in which the familiar English trust concept can be used for both tax planning and asset protection purposes.

INTERNATIONAL COMPANIES

A company can be incorporated under the International Companies Act 1981-82 ("the Companies Act") as an international company if its shareholders are non-resident of the Cook Islands. A trustee company registered under the Trustee Companies Act 1981-82 may hold shares in an international company.

International companies:

• Have no minimum capital requirements and shares may be of no par value.
• May designate shares in most major currencies.
• Need appoint only one director but there is no obligation to appoint a resident director.
• Must appoint a resident secretary who must be an officer of a registered trustee company. Additional non-resident secretaries may be appointed.
• Must lodge an Annual Return but are not required to file annual financial statements nor appoint an auditor nor hold an Annual General Meeting.
• Are not be subject to any form of taxation including stamp duty.
• May be incorporated under foreign language names, e.g. Chinese, French, Japanese, German.
• Shall not carry on the business of banking or insurance, unless licensed under the relevant Act.
• Are subject to the secrecy provisions of the offshore legislation.

Special Features

The Companies Act incorporates a number of special provisions which provide considerable flexibility and unique benefits for offshore corporate structures. These include:

Stock Exchange Listing

International companies may be listed on a number of major Stock Exchanges.

Transfer of Corporate Domicile

The transfer of domicile provisions of the Companies Act allow companies incorporated in other jurisdictions to transfer their registration to the Cook Islands to become international companies; and conversely for international companies to transfer their registration to other jurisdictions.

Companies Limited by Guarantee, etc

Companies limited by guarantee may be incorporated as well as no liability companies, unlimited companies, and mutual companies.

Share Capital Maintenance

The Companies Act provides considerable flexibility in regard to reduction of share capital. Specifically, the Companies Act allows:

• A company to purchase and cancel its own shares.
• Redemption of shares without maintenance of capital and without the need for a Court order.
• A company to finance the purchase of its own shares.

Debentures

Various forms of debentures may be issued including registered debentures, secured debentures and perpetual debentures.

PARTNERSHIPS

The International Partnerships Act 1984 provides for the registration of partnerships in the Cook Islands and exempts the partnership and the partners thereof from all taxation and duties in the Cook Islands. An international partnership must have one partner who is a trustee company or an international company registered in the Cook Islands ( in the case of limited partnerships one of the general partners must be similarly qualified). All other partners must be non-residents. Registration procedures are simple and the partnership agreement does not need to be filed.

INSURANCE COMPANIES

The Cook Islands insurance legislation readily facilitates the formation and operation of captive insurance and reinsurance companies. The Off-shore Insurance Act controls the licensing of offshore insurance companies. Offshore insurance business is defined as any insurance business where each of the insured, the policy beneficiary and the owner of the policy are not domiciled nor ordinarily resident in the Cook Islands. Only an international company or a foreign company registered under the International Companies Act 1981-82 may be authorised to carry on offshore insurance business. A licensee is not permitted to transact any insurance business other than offshore insurance business and must use the services of a registered trustee company to conduct such business. An offshore insurance company is required to maintain a surplus of tangible assets over liabilities of US$100,000. A licensed insurer is exempt from any form of taxation and duty in the Cook Islands but must file annual audited accounts with the Cook Islands Financial Supervisory Commission.

BANKS

The Banking Act 2003 governs the operation of banks in the Cook Islands. A licence holder must maintain a physical presence in the Cook Islands and have a resident individual director. All bank records must physically kept in the Cook Islands. The minimum capital requirement for a bank in the Cook Islands is US$2,000,000. A licensed bank is exempt from any form of taxation or duty in the Cook Islands where the licensee is incorporated or registered under the Cook Islands International Companies Act. Interest paid to non-resident depositors is similarly exempt. All banks must file audited accounts annually with the Financial Supervisory Commission.

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