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Open for Business: The Gibraltar family office

Wealthy families are increasingly resorting to “family offices” to manage their activities. Isaac Levy and Stephen Noguera comment on the phenomenon.

Recent years have seen the world of private client legal work become more complex due to the ever increasing need for transparency and accountability, coupled with having to operate within, and comply with, stricter regulatory and taxation frameworks. Likewise, the management of trust and corporate structures is becoming increasingly onerous and demanding. Investments in general are also becoming more sophisticated, and individuals are consequently faced with having to place greater reliance on the expertise of specialists to manage their wealth.

It is against this background that family offices – private operations routinely dedicated to the strategic management of financial investments, trusts, legal affairs and philanthropic enterprises for wealthy families – have proliferated. Gibraltar has been no exception to these developments, and the jurisdiction offers a number of important advantages which make it an attractive location in which to base a family office.

The generational difficulties that wealth can present is just one of the more ephemeral and long-standing challenges to be tackled. Social awareness, the hunger to develop, innovate and persevere, are all traits which the older generation want to instil in the next. The effects of wealth on a younger generation that have been born into it can run counter to these values, resulting in a reluctance on the part of certain families, celebrities included, to have their accumulated wealth automatically included in the family inheritance pool. Intergenerational dynamics are thus key, and the family office is often used to ensure a smooth transfer of wealth and values across generations.

Although there is no one-size-fits-all family office structure that can be implemented across the board, the core features which are prevalent across many setups will often include enterprise/investment, governance and compliance, risk and security management, and philanthropy.

 

  1. Enterprise/investment

This represents the crux of the family office’s day-to-day activities. Office managers will in effect provide a range of investment management services: making decisions in respect of asset allocation (bonds, equities, private equity etc.); identify sectors and industries to invest in; provide feedback to the managing board in respect of the financial performance of the company; and very frequently, back the family members in other enterprises that are not necessarily within the remit of the family office.

Gibraltar is a thriving, modern and efficient European financial centre, compliant with all the latest international fiscal and administrative standards and with almost full employment. Gibraltar is part of the European Union, and any family office situated in the jurisdiction can accordingly benefit from the associated advantages. Significantly, however, Gibraltar is exempt from VAT, which has an important bearing on service provision costs, both locally and from within the EU, which is generally a significant expense incurred by family offices.

The jurisdiction also offers additional advantages. Gibraltar company law largely follows that of England and Wales, and the recently enacted Companies Act and Insolvency Act have done much to provide a consolidated and modern statutory regime. In addition, Gibraltar’s financial services regulator has developed a reputation for robust regulation, together with an efficient regulatory process.

 

  1. Governance and compliance

 

The family office is manned by a host of suitably qualified and experienced professionals, who are each allocated specific titles, roles and responsibilities. Lawyers are also regularly engaged, be it as private third party consultants or as in-house counsel. In the context of the family office, the lawyer’s role is thus not only to advise on the technical side of the law, but also to advise on a suitable organisational structure that assists and promotes the objectives of the family company.

Family members are not precluded from staffing the family office, although in many instances, family input comes at the board level of the family office, or at the family council level.

Monitoring how the family office runs has become fundamentally important in recent years. The corporate structure employed is thus paramount, with suitable management and control as well as a sufficiently substantive physical presence in the chosen jurisdiction. The existing fiscal and administrative infrastructure in Gibraltar both on the corporate and personal side is such that it allows for the Gibraltar-based family office to properly discharge its numerous functions without any detrimental effect on the structure.

 

  1. Risk and security management

Ultra-wealthy families ordinarily tend to shy away from publicity and the limelight. There are also additional physical security and confidentiality considerations to be weighed up. By its very nature, the Rock’s physical geographical situation, its stable socio-political and economic climate, and its friendly, family-oriented atmosphere are conducive to allowing families the privacy and safety to run their respective offices without undue concern for their wellbeing.

 

  1. Philanthropy

The family office is also very well placed to manage the family’s philanthropic efforts, not only in terms of evaluating philanthropic proposals the office may receive from third parties, but also administering their own charitable foundations or trusts. In the Gibraltar context, there is a local Charity Commissioner at the Supreme Court with whom Gibraltar charities are registered. The roles, functions and responsibilities of the local Charity Commissioner are similar to those of the Charity Commission for England and Wales.

Gibraltar’s unique geo-political status and fiscal and administrative infrastructure has to date, allowed the jurisdiction to flourish and to be at the forefront of trends in wealth management, preservation and succession planning. For reasons discussed in this piece, Gibraltar is well placed to accommodate the family office, and to this extent, the Gibraltar family office is open for business.

Isaac Levy and Stephen Noguera are lawyers at Hassans International Law Firm


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Gibraltar and Europe: caught in the slipstream?

The British papers are full of who has the lead in the European in or out campaigns – Guy Clapperton considers the fallout for the smaller territories

Let’s start by acknowledging that there is no clear pattern emerging in the Europe debate, as long as we understand “Europe debate” to mean whether the UK should stay in or leave the European Union. This week alone we’ve seen Boris Johnson “warning Obama off” (as the BBC put it) getting involved in the debated, the same London Mayor and MP having a radio spat with Chuka Umunna involving telling each other to man up and various insults traded as either side accuses the other of scaremongering or making it up as they go along.

Divining who’s going to win is more difficult. The Daily Telegraph reports that “out” has it by a tiny margin but, crucially, the anti-Europe vote is likely to be more motivated so will actually show up on the day, expanding the margin by which it will win. Meanwhile the Times’ daily Red Box email points to Elections Etc. whose research suggests a 58% “remain” vote but with a plus or minus 14% error margin; so somewhere between 44% and 72% will go for staying in the EU. This, readers will note, tells us precisely nothing.

So the outcome, even if there weren’t 100 days in which Presidents and world leaders will offer counsel, claims and counterclaims will be made and the “leave” campaign will eventually decide who the official “leave” group actually is (there are two factions at the moment, doing the best impression of the Monty Python Judean People’s Front and the People’s Front of Judea that they can manage), we wouldn’t want to call a snap referendum even if it were to be called this afternoon.

What’s clear is that the outcome will ripple beyond the British mainland’s shores, and the ramifications of an “out” vote are already being felt on Gibraltar. Anyone doubting this should check today’s Times (subscription required), in which the Gibraltarian Chief Minister Fabian Picardo highlights recent Spanish statements about what would happen in the event of a Brexit.

Spain actually caused a few eyebrows to raise and some other people to panic just a little with its recent statements. Essentially the country’s foreign minister, José Manuel García-Margallo, suggested that there would be conversations on the sovereignty of Gibraltar the “day after” an announcement of a British exit, according to the Daily Mail and other reports. He also said (much, much further down the report) that he didn’t want Britain to leave: “God forbid” is the phrase he uses.

He raised the idea of joint sovereignty once again more recently, reports the Gibraltar Chronicle, this time suggesting that if Britain leaves Europe then Gib could do what it nearly did (he says) in 2002 and start transitioning towards Spain. This is an interesting definition of “nearly” when 98.48% of the electorate actually voted not to do so, but remaining British when this might exclude the Rock from Europe would inevitably raise different issues if not a different final outcome.

Outside Gibraltarian interests the effect could be more severe than that. SNP leader and Scottish First Minister Nicola Sturgeon has made no secret of her wish to make a fresh case for Scottish independence. The once-in-a-generation referendum on this was lost in 2014 but should Britain exit Europe with a majority of Scots clearly demonstrating that they want to stay in, the case becomes stronger (although the collapse of the oil price would blow the original blueprint out of the water).

So we could end up with Scotland as well as Gibraltar wanting to remain in Europe while Britain made its exit. Whether this would be legally possible if both stayed tied to Britain is untested as yet – and with Spain eager to enter talks the day after an exit is agreed but the Gibraltarians implacably opposed to becoming Spanish, the way forward would not be clear.

Guy Clapperton is the freelance journalist who edits the New Statesman’s Gibraltar hub. You can also find him in the Guardian, Computer Business Review and Professional Outsourcing which he edits.