ASSUME NOTHING!
Ownership structure
The ownership structures briefly examined below, combined with the buyer vetting process explained above, also satisfies the Isle of Man Governments desire to protect its reputation as a 1st class offshore financial centre and as one of the most strict, technically and operationally, ship registry’s in the world. It similarly protects the Government of Bermuda interests in the event that the optional trust structure is established.
It is in three parts, the first and second parts covering the construction period and the basic IoM owning company operation with the third part only relevant related to the optional Bermuda Trust Structure at the end of this section.
Part 1: during Raffles construction
- Raffles Limited (Ltd.) is initially established with a paid up capital of about €17,000 when it is 100% owned by FVH. At its formation it is not considered as a shipowning company as it does not own a ship and has not contracted for one.
- Raffles Limited (Ltd.) is an Isle of Man private limited liability company whose sole business or activity is to contract for, purchase, own and then “operate” one (1) vessel built for it (MV Raffles), that does not ply for hire (trade commercially) so is privately owned and does not generate any profits intended for distribution to its shareholders. As the company does not pay any dividends as well as it being a shipowing company it is not liable for any Isle of Man taxation except VAT on any services in IoM it uses to support its operation.
- Raffles Ltd. as provided for in the construction contract during construction of Raffles (the ship), is from the time of the first payments receipt the part owner of the vessel while it is under construction jointly with its builders FVH / AMS. Upon legal delivery happening the sole owners of the company's shares (and ship) are then the about 122 community of owner - occupants of its similar number of apartments.
- Before Raffles Ltd signs the shipbuilding contract FVH in cooperation with The Bank will select and appoint to be the Chairman of the IoM company a person who is independent of the business, legal advisors, accountants and the bank. The Chairman will be an individual with international business experience in shipping, finance, trading or manufacturing whose expertise and experience will be utilised to protect the interests of the 122 owners during Raffles about 2 years of construction and the minimum one year guarantee period after delivery.
- During the about 2 years construction period Ernst & Young will audit the company and Raffles construction accounts at least twice for the IoM financial authority.
- During the 2 years construction period the company documentation will be simplified as the company is not active in a legal / operational sense.
- In the final year of construction the Chairman, Alexanders, Ernst & Young and any advisors / consultants considered as needed will draw up the full company documents required for Raffles / the company after delivery and when put into operation. This will include but not be limited to:
- Memorandum and Articles
- Company charter / shareholder agreement
- By-laws
+ Constitution
- During the about 2 years construction period all of the shares in Raffles Limited, both those owned by FVH and those owned by the 122 owners, will be lodged in the special single purpose escrow / trust account established only for this and limited in duration to the construction period. The escrow account in Bermuda will be operated by The Bank and its managers will be responsible as owners stage payments are made to Raffles Limited for automatic transfer from FVH to the owners of a like amount of shares. The shares transfer will be in 5 stages and involve shares to the amount of:
1st transfer |
51% |
2nd transfer |
25% |
3rd transfer |
10% |
4th transfer |
10% |
5th transfer |
4% |
On completion and delivery of Raffles, owners / occupants will then own 100% of the shares in Raffles Limited and the special purpose escrow / trust account will be closed.
Note: The Chairman and any bank fees are included in the builders construction costs but only during Raffles construction.
- Apartment owners' right to use their apartment is linked directly and pro-rata to ownership of shares in Raffles Ltd. with the number of shares owned (but held in escrow during construction) equivalent at about 17,000 in total to the m2 of the apartment space allocated to, and then occupied by them. (Final m2 measurement is by Lloyd’s Register).
- Raffles Ltd. is established and operated under standard Isle of Man company documentation as above proposed by Alexanders, approved if necessary by Ernst & Young as company accountants and the Chairman. The wording of these will however be finally decided upon by the majority of owners. This includes in particular the Isle of Man company shareholders agreement and by-laws which also dictate the legal method of operation and management of Raffles the ship, the company’s sole asset as well as the allowed conditions for individual owners selling or transferring ownership rights.
Note: A more detailed explanatory document of all financial – legal structure – arrangements – commitments and ownership rights can be provided to successful applicants (for their legal / financial advisors use) at the time the 10 or 20% deposit is lodged in escrow with The Bank.
Part 2: Applicable to both Part 1 and Part 3 after Raffles delivery
By whichever method of ownership is selected, either limited to only the IoM company and / or optionally an additional Bermuda Trust Structure, the operation of Raffles after legal / technical delivery will be identical, generally as follows.
- The day to day routine business / operation of Raffles, the ship itself, is managed by the Captain and his staff, which includes a qualified accountant, supervised by an on-board (elected) owners committee (or supervisory board).
Note: Election to the owners committee and its establishment is initially supervised and held by Ernst & Young or Alexanders and the Chairman. Thereafter it is regulated by the by-laws and / or a written ships constitution which will also regulate future composition of the committee.
- In addition to the by-laws Raffles will be provided with a written “constitution” (similar to a set of condominium or club rules) that will define the daily operation of Raffles to the benefit of the owners and for their safety, comfort and convenience. The constitution will be drafted by the former general manager (for 3 years) of a similar residential vessel, “The World” assisted by the Chairman and ships Captain.
- Sale or transfer of share ownership as allowed for in the Raffles Limited shareholder agreement and / or by-laws will be handled by Alexanders and / or the bank and subject to the owners own provisions that they have authorised in the by-laws is as simple as selling any shares, with important tax neutral benefits applying in Isle of Man and / or Bermuda to non US / Australian citizens.
Note: Any legal fees and charges for such share transfer is to the individuals sellers’ or buyers account and not for Raffles Limited.
- As required by the IoM Government the financial operation of the limited IoM company, and the ship are both subject to independent annual audit by Ernst & Young with a board / shareholder meeting held at least annually to discuss / accept this.
- It will be an important duty of the owners committee working with the Captain, Chairman and Ernst & Young, Alexanders, Marsh and Lloyd’s as applicable to ensure that Raffles the vessel is always in compliance with all legal, statutory, fiduciary obligations to the Isle of Man Government and that all insurances are in place (without such insurance Raffles cannot legally be operated).
The adoption of Raffles Limited shareholders agreement / by-laws, are all fixed / finalised as soon after the ownership ballot results are known, the register of shareholders confirmed and unless otherwise not possible during the first part Raffles construction and at latest before the second stage payment is made by owners.
Important note:
Under International Maritime conventions, providing Raffles is owned by a limited liability company and that its sole asset is Raffles and that its capital is fully paid up, then liability for any damage caused by the ship is limited to the company, which can only be liable up to the amount / value of the ship remaining.
However as noted elsewhere Raffles will also be a member of the leading protection and indemnity club (P&I) Steamship Mutual with the insurance cover provided by the club in practice sufficient (less deductibles) to cover any claim made against it.
Part 3:
As noted above if the 122 owners decide that the IoM owning company by itself is the only method of ownership that is needed then Part 3 below will not apply.
If the optional / additional Bermuda trust arrangement described below or similar is desired then it will be established working with The Bank and their trustee company in Bermuda taking into account and in consultation with all 122 owners individual needs / desires.
- As an alternative method of ownership and providing in most situations an additional level of protection in terms of the individual owner personal tax liability and inheritance taxation, the option exists to establish in Bermuda to be operated by The Banks trustee company a system of trusts (the structure), shown as an example in the organigram at the end of this section.
- As a private not-for-profit company – trust, with all shares held by the trustees, it is not liable for any form of taxation and subject to the company documentation it is protected by the trustees against any possibility of internal / external take over attempt, or any other undesirable attention.
- Provisionally by the use of 122 sub-trusts the trust arrangements will ensure that the liability of any one individual owner for any taxation due in their personal / another jurisdiction (other than Isle of Man) will not affect Raffles Limited / the other shareholders adversely.
- Under the above, after Raffles legal delivery and as defined by the “wishes” of the owners committee, the trustees / managers will then “operate” or “manage” Raffles Ltd. on the owners behalf, ensuring compliance with all legal, statutory, fiduciary obligations to Isle of Man, and in Bermuda as applicable, plus also such routine matters as maintaining in force Lloyd’s Register classification and the various insurances a vessel must have in order to be able to operate legally in international waters.
- To provide continuity and peace of mind to owners the trusts operation by The Bank / Alexanders can be ongoing after the first operational (guarantee) year, post delivery at the owners’ choice for the life of the vessel but may be subject to review / reconfirmation as to its terms and conditions on an annual basis by both parties.