What is the function of an Asset Protection Trust (APT) in Gibraltar?
Short answer
A Gibraltar asset protection trust is a trust whose transfer of assets has been entered on the official Register of Dispositions, so that the settlor's creditors cannot apply to have that transfer set aside, provided the settlor was solvent when making it. The rules are in section 419A of the Insolvency Act 2011 and the Bankruptcy (Register of Dispositions) Regulations 1990.
Detailed answer
Gibraltar's asset protection trust regime is a registration system for transfers of property into trust. It is now in section 419A of the Insolvency Act 2011, which took effect on Saturday 1 November 2014. The detailed rules are in the Bankruptcy (Register of Dispositions) Regulations 1990, which were originally made under the Bankruptcy Act. That Act has since been repealed, and the regulations remain in force. Section 419A applies to a transfer of property into trust where the settlor is an individual, the settlor is not insolvent on the date of the transfer and does not become insolvent because of it, and the transfer is registered under the regulations. A settlor is insolvent if his or her liabilities exceed his or her assets. A claim counts as a liability for this test if the settlor had actual notice of it, or of the facts that could give rise to it, when the transfer was made. Where the section applies, the transfer cannot be set aside at the instance of, or on an application by, any creditor of the settlor. The Fraudulent Conveyances Act 1571, an English statute that would otherwise allow some transfers made to defeat creditors to be challenged, does not apply to it. Only the trustee can apply to register. The trustee must be the sole corporate trustee, a company with a permanent place of business in Gibraltar that is authorised to act as a trustee, with adequate financial and administrative resources and professional indemnity insurance of at least £1,000,000. Before applying, the trustee must take the settlor through approved forms of enquiry, check the settlor's information against public records and obtain the settlor's affidavit that he or she is not insolvent. The application fee is £785.50 and the annual notification fee is £160. Information on the register is confidential. Registration ends if the trustee stops meeting the requirements, withdraws its undertakings, misses an annual notification without being reinstated, or the trust ends. The statutory protection deals with creditors' applications to set aside the transfer. The legislation does not say that a registered trust defeats every kind of claim, such as claims in divorce proceedings or the enforcement of a foreign judgment, and the outcome of those claims depends on the facts and on other law. Anyone considering this structure should take independent legal advice.