TRUSTEESHIP

The Importance of Choosing the Right Trustee

Many wealthy families accept the need to spend time and effort in building the right structure to hold, grow and transfer their assets. Once a structure is in place, though, they tend to neglect it for years at a time. Not enough attention is given to ensure that it continues to fit the purpose for which it was first set up. Changed family circumstances, developing expectations of the wealth inheritors and new tax and residency laws, all can seriously impact the original vision of the wealth founder. Indeed, if a wealth planning structure is not reviewed regularly and updated to reflect these changes, more harm may be done than having no plan at all. Often, the weaknesses of an outdated plan become clear when the time comes to put it into action – and it’s too late to change.

Just as vital as the right succession plan and its regular maintenance is the choice of trustees. From this choice comes the plan’s ultimate success – or its failure. After all, it is the trustees who will ensure that the family’s plan is carried out and their expectations met. But how to select a trustee? When it’s up to the family’s lawyers to recommend, they tend to pick trustees by price or by prestige alone, without due consideration of the client ‘fit’. Choosing on price or prestige is not necessarily a sound basis for success. If price is the key issue, the chances are that the trustee may not have the resources, or inclination, to offer a truly personal service. If, instead, the choice is driven by the prestige of the trustee institution, a family may find that it is either paying too much for the service or that its particular needs are not fully understood by the organisation. Expecting the family to choose a trustee is not always ideal, either. The settlor and his family may not have the knowledge or experience to choose the trustee that’s appropriate for them.

Griffon Solutions Limited

Our professionals have many years’ experience working with families and our proud of the fact that existing family business refer new trustee business to us because of the history we share with them. We do not actively market as we believe that the best endorsement of our approach is by existing trustee clients as they already know how to choose the right trustee and monitor its performance over time. In a market of increasingly standardised products and services, more and more families seek help from those who can offer a personal, tailor-made service.

Our clients expect the jurisdictions they choose to be efficient and beyond reproach. We meet these high standards in Mauritius a country that is not on any “black list” for its failure to comply with the global regulatory environment; with a sophisticated legal and regulatory system and a large, skilled workforce. Mauritius meets the most rigorous ‘acceptability’ tests as its is not a traditional tax haven, yet is an effective tax haven “proxy” with a zero tax environment and legally enforced confidentiality if utilised effectively.

The Services We Offer

Most trustees focus on the administration aspects of the trusts they handle. They verify, for example, that any actions conform to the terms of the particular trust deed and that all formalities relating to a trust and its underlying assets and investments are followed, including preparation of accounts and minutes of trust meetings. Importantly, of course, trustees make sure that their activities comply with the laws in the jurisdiction of the trust and any investment companies it holds.

Our in house service allows us to go beyond this approach. We offer not only the highest quality trusteeship services but also a broad fiduciary oversight capability for those families who want an integrated solution. Specifically and amongst others:

• Anticipating threats to trust structures from changes in law and regulations. We can adjust planning structures accordingly and, if the threats we identify are sufficiently serious, we may even recommend a change in trustee.

• Regular reviews of the wealth distribution aspects of trusts. If there are changes in family circumstances or in the economic, political and investment climate, we propose appropriate changes to the succession plan.

• Informing trust beneficiaries, and their successors, of the terms of their inheritance – if we are guided by the wealth founder to do so. The aim is to avoid challenges to the inheritance plan or, with the family’s consensus, to adapt it, if necessary, so that its benefits are maximised for all.

Our clients can choose our integrated trusteeship and oversight approach or opt to use just one of the services. Our fees reflect the work we do to meet the specific needs of our clients and the complexity of their trust arrangements.

Our Credentials

Griffon has the flexibility, independence and responsiveness of a “boutique”, trustee company with experienced administrators. Our management is commercially experienced and takes a practical approach to client and business challenges. Talk to any of our professionals to discuss the challenges faced by your business or your family and we will draw on our experience to work with you to provide effective solutions.

GRIFFON SOLUTIONS IN AFRICA

South Africa, the most developed economy on the African continent, offers investors and corporations alike a wealth of opportunity in all areas of business. Whether your company is restructuring its business interest, strengthening its balance sheet or entering South Africa for the first time, this opportunity is best realized through the careful management of sovereign and currency risk.

South Africa is indeed at a watershed in its extraordinary development. In order to achieve success in this market of opportunity, businesses will need a financial partner with specialist market knowledge.

Griffon can profitably help clients by the sharing of expertise and experience and therefore helping clients achieve their objectives.

Griffon Solutions identifies specific growth markets in:

• Structured finance in Southern Africa
• Corporate Finance advisory work to governments or parastatal institutions, project finance
• Corporate Finance and M & A advice for offshore companies with current or future business ties in sub-Saharan Africa
• Structuring of commodity-based transactions between parties based in these areas.

SECURITISATION

The word ‘securitisation’ literally means, “to turn into securities”. In a securitisation programme, the owner or originator of assets that produce a cash flow stream transfers those assets to a special purpose vehicle (SPV). Relying on the cash flow from those assets and certain other structural and enhancement features, the SPV issues securities.

The securities are usually liquid, negotiable and often highly rated and include floating rate notes and commercial paper. The securities are designated ‘asset-backed securities’ as each security is backed by a specific pool of assets rather than being a general corporate obligation of an issuer. Funds raised by the issue of securities are used to fund purchases by the SPV from the originator.

The term “securitisation” has been extended to cover transactions in which a bank term or warehouse facility is used to provide funds to the SPV on a non-recourse basis, rather than securities being issued.

Company advantages from securitisation

There are many advantages to securitisation, some or all of which may be applicable to your particular company. Some of the advantages are:

Release of capital Securitisation converts illiquid, low or negative yielding assets into cash that you can use:

• To purchase high yielding assets
• To repay high cost debt or equity
• To finance business growth including by acquisition or
• For any other purpose.

Off-balance-sheet treatment The transfer of assets from you, as seller, to the special purpose vehicle can be structured as a sale of assets, removing the assets from your balance sheet. This increases the return on assets and return on equity measures and decreases gearing and the weighted average cost of capital (WACC).

Reduce cost of funds By using structural and credit enhancement, securitisation enhances the credit of the transferred assets to a level that enables funding to be obtained from the capital markets at a lower spread.

Funds are potentially unlimited In a revolving securitisation, subject to a programme limit, the amount of funds grows proportionally to the size of the asset portfolio.

Diversify funding to reduce liquidity risk Diversifying funding sources reduces liquidity risk if one or more sources of funding increase in cost or become unavailable.

Market risk transfer Securitisation can minimise or eliminate interest rate risk through interest rate swaps and other hedging mechanisms. Some organisations are restricted in their use of derivative products such as interest rate swaps.

Securitisation allows the use of swaps and hedges to minimise certain risks (e.g. currency and interest rate risk). For example, fixed rate mortgages can be finance by floating rate notes. Interest rate swaps remove the risk of the floating rate increasing and thus reducing the profit margin.

Limited covenants Many other forms of funding incorporate restrictive covenants on operations. Securitisation covenants generally focus on the asset portfolio being securitised with only limited covenants over other operations.

Limited disclosure Compared with other sources of funding, securitisation usually requires little public disclosure. The focus is normally on the issuing SPV rather than the transaction sponsor.

Improve asset management Securitisation focuses attention on the asset portfolio being securitised, often improving the performance of those assets and the systems supporting those assets. This increases cash flow and reduced the cost of funds