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.
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.
- 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.
- 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.
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