New Jurisdiction for Offshore Trusts

Bahrain, in a bid to become one of the most important, influential and successful offshore and international financial centres in the Middle East, is following hot on Dubai’s heels and has just established and enacted comprehensive trust laws to govern the actions of trustees and trust administrators and to protect settlors (those who establish trusts) and their beneficiaries.

This means that Bahrain becomes a new jurisdiction for offshore trusts and one governed and protected by the superior rulings of the Trust Law with Royal Decree No. 23 of 2006.  This article provides an overview of the law and a review of Bahrain as an offshore and international financial centre.

The establishment, management and even utilisation of trusts is a relatively new phenomenon in the Middle East but one that is rapidly expanding which is why both Dubai and Bahrain have embraced the concept and worked hard to develop secure laws to protect every aspect of the trust and all those associated with it, and to govern the standards and practices of all those involved in the establishment, administration and ongoing management of a trust.

Offshore trusts can now be established in Bahrain for a period of 100 years which will allow for simplicity of asset transfer from generation to generation as well as immediate and ongoing wealth preservation and development making Bahrain an even more attractive jurisdiction for international individuals and companies seeking a financial centre that has secure laws and is quick to react and develop to embrace and encompass changing demands and requirements from the international financial community.

The availability of trusts in Bahrain will also now mean that the local financial community can develop new and innovative products and solutions which combine the use of trusts for the management and preservation of the wealth of their clients which makes Bahrain an even more attractive fiscal location in the Middle East and raises its profile around the rest of the world.

In terms of the form an offshore trust must take in Bahrain and the rules and guidelines it must adhere to they include: -

A trust can be established for up to 100 years maximum
The trust has to be registered with the Bahrain Monetary Agency (BMA)
Property within the trust can be anything moveable or immovable, tangible or intangible
A trust can have single or multiple trustees (please note for a trustee to be acceptable to the BMA they have to have applied for and been granted a license to operate as a trustee)
Beneficiaries must receive superior protection
The demands and requirements of the trust establisher (settlor) have to be protected and adhered to
And finally – there is extreme emphasis within Trust Law with Royal Decree No. 23 of 2006 on secrecy, security and confidentiality of the trust, actions of the trustees, beneficiaries, settlor etc.  Basically every single aspect of the establishment and ongoing running of the trust must remain absolutely confidential.

The enactment of the Trust Law is being seen by experts as simply the first step in the development and enhancement of Bahrain as a new jurisdiction for offshore trusts, real estate investment trusts, private pension schemes etc., etc…