What is a UBO in practice? For court decisions, debts, legal action

[OKboomer]

Having asked a dozen of lawyers and another dozen of bankers, I realized they all give me slightly different variations of an answer to the basic question: what is the UBO? Not , duh , the ultimate beneficial owner holds ultimate ownership/ control over the company, but the actual legal implications of being a UBO.

To illustrate, there are known faraway jurisdictions offering asset protections via trusts and foundations. However, both their agents or for instance banks subsequently, insist that the settlor of trust, or founder of foundation is the UBO. Now, in theory those trusts/foundations should put a legal wall/distance between the person and their assets, and there are a bunch of nice-looking legal texts affirming that. However, a question begs itself, then why is the very person who is supposed to just start this thing and then not be the main figurehead, is anyway labelled as the main figurehead? More importantly, what are the implications for the legal entities, if a UBO has a court order or debt judgement or any legal claims against them? Would the assets of those trusts or foundations then be by default frozen (if court case against UBO is ongoing) or confiscated (if court enforcement / asset recovery against UBO is in place)? If so, then what is the real benefit of those convoluted structures, if ultimately it boils down to who the UBO is? You may as well own things in your own name with kind of the same outcome, and less hassle of having to explain your complex structure to anyone like bankers. Any possible privacy they may offer also is a mirage,as you have to show the UBO to literally anyone in the financial/ legal / political world you interact with, so they know it's your pocket company / piggy bank.

Am I right or am I missing something?

 

[JohnnyDoe]

You nailed it. UBO is not a legal figure but a definition that was invented to try to simplify things for banks and other types of voyeurs.
In a trust context, there is a beneficiary, not a UBO. If the beneficiary is considered the UBO, then the trust is a sham. You can setup a trust (as the settlor) and in some jurisdictions also be its beneficiary, but you must relinquish all type of control over it in order for the trust to be considered valid.
A properly setup and managed trust can be an effective tool, but not everyone accepts to effectively give away his assets.

 

[OKboomer]

You nailed it. UBO is not a legal figure but a definition that was invented to try to simplify things for banks and other types of voyeurs.
In a trust context, there is a beneficiary, not a UBO. If the beneficiary is considered the UBO, then the trust is a sham. You can setup a trust (as the settlor) and in some jurisdictions also be its beneficiary, but you must relinquish all type of control over it in order for the trust to be considered valid.
A properly setup and managed trust can be an effective tool, but not everyone accepts to effectively give away his assets.

For trusts they insist it's the settlor first and foremost who's the UBO. That's the weird thing. So even if beneficiaries and trustees are third persons, they still stick UBO on settlor first. But then, secondly, they indeed mark beneficiaries as the UBOs. You can't argue with them about it. Despite best lawyers assuring me to the contrary, something tells me, this pretty much makes the trust toothless, and should there God forbid be any test of that in court, it would crumble ...

 

[JohnnyDoe]

For trusts they insist it's the settlor first and foremost who's the UBO. That's the weird thing. So even if beneficiaries and trustees are third persons, they still stick UBO on settlor first. But then, secondly, they indeed mark beneficiaries as the UBOs. You can't argue with them about it. Despite best lawyers assuring me to the contrary, something tells me, this pretty much makes the trust toothless, and should there God forbid be any test of that in court, it would crumble ...

Law theory is one thing, what happens in court is a whole different story.
Long story short, if you really want to protect your assets, choose other solutions (and check the Mentor Gold Group)

 

[OKboomer]

Law theory is one thing, what happens in court is a whole different story.
Long story short, if you really want to protect your assets, choose other solutions (and check the Mentor Gold Group)

Haha practice is all I care about, not theory.
Will check the gold group. So I must have gold,not lite?

 

[JohnnyDoe]

Haha practice is all I care about, not theory.
Will check the gold group. So I must have gold,not lite?

@JohnLocke or @Sols or @Forester can explain how it works

 

[daniels27]

You nailed it. UBO is not a legal figure but a definition that was invented to try to simplify things for banks and other types of voyeurs.
In a trust context, there is a beneficiary, not a UBO. If the beneficiary is considered the UBO, then the trust is a sham. You can setup a trust (as the settlor) and in some jurisdictions also be its beneficiary, but you must relinquish all type of control over it in order for the trust to be considered valid.
A properly setup and managed trust can be an effective tool, but not everyone accepts to effectively give away his assets.

There are, or more have been, many things in the past which made sense back then.

Bearer Shares were a very useful thing. It is like paper money, the guy how has the share (paper) is the owner.
Passbooks were good too, same concept.
Trusts, Foundations, Fideikommiss, etc. these all have their origins in Roman law which dates back millennia. And were indeed useful for handling inheritances among a group of people.

You know, back in 1291 according to the legend, Switzerland was founded on a guy shooting an apple off somebody's head. And likewise, when you did not behave properly in your village you were simply kicked out. And of course, you could not take most of your wealth with you. So, people better behaved. Things are different now and growing population and freedom allows people to not behave properly and just take all somewhere else. Hence, people started using those structures in a way that upset the rest of the society. And I am not talking about the ruse of the government, but the society. Hence, the government had to do something and then, they restricted the use of those instruments. Bearer shares have been banned, passbooks became obsolete and for the rest, there is a UBO registry.

As a result, these ways of organisation still exist and it probably still works in certain cases that way, like for inheritance trusts, Nobel Prize foundation, etc. But on the other hand, the usefullness is pretty much undermined for the purposes you are interested in. Now, if you were selling those for ages, would you admit this and stop the sale? No, of course not. You can keep selling them for the purpose they were inteded and keep telling the same thing. While everybody of sound mind would tell you to abstain.

 

[JohnLocke]

Will check the gold group. So I must have gold,not lite?

For just getting into Mentor Group you can take the lite subscription

 

[void]

A properly setup and managed trust can be an effective tool, but not everyone accepts to effectively give away his assets.

this is very difficult mental switch.. to own nothing - I find it very interesting concept with crypto assets in a trust-like vehicle - it's something one doesn't own, fully controls but unlike "physical" asset (real estate, cash in bank accounts, stock portfolio, ...) it still cannot be touched and can even "disappear" in extreme cases

 

[daniels27]

@JohnLocke or @Sols or @Forester can explain how it works

This forum has a tiered membership. The general forum is for general questions were we discuss general matter and help people. Then, there is a Mentor Gold Membership with access to the Gold Forums. Nobody from the outside really knows what is actually there. But that's the place were guides are posted. It offers you value at a mere cost of a bad dinner in the US. You will be able to discuss sensitive information of other people or you can even post your own penalty orders and get help with writing an objection. You will get wisdom and insight that normally is not just handed out to the guys next door. It is like they key to the Inner Party of George Orwell's 1984.

 

[void]

This forum has a tiered membership. The general forum is for general questions were we discuss general matter and help people. Then, there is a Mentor Gold Membership with access to the Gold Forums. Nobody from the outside really knows what is actually there. But that's the place were guides are posted. It offers you value at a mere cost of a bad dinner in the US. You will be able to discuss sensitive information of other people or you can even post your own penalty orders and get help with writing an objection. You will get wisdom and insight that normally is not just handed out to the guys next door. It is like they key to the Inner Party of George Orwell's 1984.

There for example is a guide on how to find a homeless guy in the UK who will then be the director and UBO of your new UK Limited.

I totally accept the business-related reasons for having a premium tier membership
what I don't understand is all the fuss over certain topics not to be discussed in public sections of the forum as it's obvious that buying whatever membership represents absolutely no obstacle for any government institution or other malicious actors...

 

[daniels27]

what I don't understand is all the fuss over certain topics not to be discussed in public sections of the forum as it's obvious that buying whatever membership represents absolutely no obstacle for any government institution or other malicious actors...

I think it is better if it is not indexed by Google and publicly visible with those topics discussed. I mean if you look at the average joe that just signed up and their questions how to hide 1000 EUR income from their government with running their BVI company from Germany to avoid paying taxes...

 

[Forester]

I totally accept the business-related reasons for having a premium tier membership
what I don't understand is all the fuss over certain topics not to be discussed in public sections of the forum as it's obvious that buying whatever membership represents absolutely no obstacle for any government institution or other malicious actors...

I think it is better if it is not indexed by Google and publicly visible with those topics discussed. I mean if you look at the average joe that just signed up and their questions how to hide 1000 EUR income from their government with running their BVI company from Germany to avoid paying taxes...

Yes, exactly this. Thanks for the explanation. (Just adding that not only Google but also more useful/competent search engines do not see it.)

(Do not forget that many troubles are invoked simply by some activist accidentally finding something which attracts his/her interest...)

Just please note that this debate, although really important, is completely OT here. If anyone wants to continue, please open a new thread in Forum News and Announcements (I can copy/move the relevant posts there afterwads). Thanks

 

[Forester]

For trusts they insist it's the settlor first and foremost who's the UBO. That's the weird thing. So even if beneficiaries and trustees are third persons, they still stick UBO on settlor first. But then, secondly, they indeed mark beneficiaries as the UBOs. You can't argue with them about it. Despite best lawyers assuring me to the contrary, something tells me, this pretty much makes the trust toothless, and should there God forbid be any test of that in court, it would crumble ...

Just a 2 cents worth remark:

UBO is a completely new (in the historical context of law) conception. It's main purpose was helping to fight the tax avoidance and, to some extent, money laundering. These guys who invented it probably were not thinking (or did not care much) about possible implications that it could have re: legal claims against UBO of a trust and similar. Their thinking was probably oriented just in a inverse way: how to make a binding between e.g. profits of the company with a nominee and some another person (UBO).

 

[OKboomer]

Just a 2 cents worth remark:

UBO is a completely new (in the historical context of law) conception. It's main purpose was helping to fight the tax avoidance and, to some extent, money laundering. These guys who invented it probably were not thinking (or did not care much) about possible implications that it could have re: legal claims against UBO of a trust and similar. Their thinking was probably oriented just in a inverse way: how to make a binding between e.g. profits of the company with a nominee and some another person (UBO).

This is precisely what worries me, and makes me wonder whether this concept has really made the whole advertised "asset protection" value proposition of trusts/foundations pretty much disappear.

 

[sebastian]

There will always be options for 'asset protection' no matter what laws are passed or changed. The real question is where your assets come from, who you need to protect them from, where you live, and whether you're willing to relocate if needed.

 

[Forester]

This is precisely what worries me

Well understandable.

whether this concept has really made the whole advertised "asset protection" value proposition of trusts/foundations pretty much disappear.

I have no personal experience with this neither have studied/analysed this deeply (as I did not need); but I am convinced that (as always, actually) the result will heavily depend on the particular jurisdiction. So unless speaking about some particular country and case, this seems to be just an academic debate.

There will always be options for 'asset protection' no matter what laws are passed or changed. The real question is where your assets come from, who you need to protect them from, where you live, and whether you're willing to relocate if needed.

Agree at 100%.

 

[daniels27]

This is precisely what worries me, and makes me wonder whether this concept has really made the whole advertised "asset protection" value proposition of trusts/foundations pretty much disappear.

If you look how asset protection with bearer shares and passbooks disappeared, I would suggest, that it eventually will degrade it. I would expect that there will be many levels. Of course, if you manage the Nobel Price, they won't seize the Nobel Prize assets if you are involved in unlawful activities. But if you are a hard criminal and the day before the police raided your home move all into a trust, trust me nobody is going to brotect you.

 

[jafo]

Having asked a dozen of lawyers and another dozen of bankers, I realized they all give me slightly different variations of an answer to the basic question: what is the UBO? Not , duh , the ultimate beneficial owner holds ultimate ownership/ control over the company, but the actual legal implications of being a UBO.

To illustrate, there are known faraway jurisdictions offering asset protections via trusts and foundations. However, both their agents or for instance banks subsequently, insist that the settlor of trust, or founder of foundation is the UBO. Now, in theory those trusts/foundations should put a legal wall/distance between the person and their assets, and there are a bunch of nice-looking legal texts affirming that. However, a question begs itself, then why is the very person who is supposed to just start this thing and then not be the main figurehead, is anyway labelled as the main figurehead? More importantly, what are the implications for the legal entities, if a UBO has a court order or debt judgement or any legal claims against them? Would the assets of those trusts or foundations then be by default frozen (if court case against UBO is ongoing) or confiscated (if court enforcement / asset recovery against UBO is in place)? If so, then what is the real benefit of those convoluted structures, if ultimately it boils down to who the UBO is? You may as well own things in your own name with kind of the same outcome, and less hassle of having to explain your complex structure to anyone like bankers. Any possible privacy they may offer also is a mirage,as you have to show the UBO to literally anyone in the financial/ legal / political world you interact with, so they know it's your pocket company / piggy bank.

Am I right or am I missing something?

You nailed it. UBO is not a legal figure but a definition that was invented to try to simplify things for banks and other types of voyeurs.
In a trust context, there is a beneficiary, not a UBO. If the beneficiary is considered the UBO, then the trust is a sham. You can setup a trust (as the settlor) and in some jurisdictions also be its beneficiary, but you must relinquish all type of control over it in order for the trust to be considered valid.
A properly setup and managed trust can be an effective tool, but not everyone accepts to effectively give away his assets.

Now, if you were selling those for ages, would you admit this and stop the sale? No, of course not. You can keep selling them for the purpose they were inteded and keep telling the same thing

 

[sebastian]

But if you are a hard criminal and the day before the police raided your home move all into a trust, trust me nobody is going to brotect you.

Are we really at that level now? It's pretty obvious that drug lords, the mafia, and hardcore criminals have their own ways of protection and probably aren't moving their assets into a trust or a fund in Germany.