Private Trust Company (PTC) – A flexible succession planning vehicle that allows a family to remain in control

Trusts offer a range of benefits for families with complex assets or family succession issues who are seeking to move away from direct ownership to a structure designed to offer coherency for the future. However, many clients have reservations when it comes to setting up a traditional family trust because the separation of legal control and beneficial interest, which is essential to the nature of a trust, means they will lose direct control of their assets.

This may be an issue either because they want to retain a degree of control over the management of their assets or are unable to find a suitable service provider to act as trustee because the assets placed in trust, such as a family business, are regarded as too complex or high risk for an independent trustee to manage. Keeping their affairs confidential without disclosing to a third party may also be a priority.

For this type of client, a Private Trust Company (PTC) can be the solution. If properly implemented, it can address all the above concerns and even provide additional benefits.

A PTC is a company that is formed solely for the purpose of acting as trustee of a single trust or a group of related trusts. It provides a mechanism for the settlor and his/her family to retain influence over the management of the PTC, and hence the underlying trust assets that it controls, without compromising the validity of the trust.

The most common control structure for a PTC is via the board of directors, which makes and oversees the strategic decisions affecting the trust assets as a whole. The board of directors of a PTC will typically comprise a mixture of the settlor’s trusted advisers and close family members, as well as independent professionals to provide the necessary trust expertise and ensure that the structure complies with the relevant regulatory regimes.

Like any other trustee, the PTC will not be permitted to benefit from the trust assets personally and will be bound by the provisions of the trust deed and the other fiduciary duties of a trustee. However, the composition of the board can be changed from time to time to include, if desired, members of succeeding generations. Changes of trusteeship in the underlying trust or trusts can also be achieved simply through an administration agreement between the PTC and the licensed trustee.

Most PTCs are companies limited by shares, but it may not be desirable for the settlor or other family members to own the shares for a variety of reasons – tax, confidentiality, succession and asset protection. Typically, therefore, the shares in the PTC will be held by a purpose trust which is not required to have named beneficiaries.

This would mean that the shares would not be seen to belong to the settlor or any other person in the event of the settlor’s death and would also not be available to a third party in the event of a successful claim against the settlor. A Guernsey purpose trust can also last indefinitely, which is attractive to high-net-worth families looking to establish a ‘dynastic’ structure.

Case Study:
Mr Chan, aged 90, is a successful businessman. He started a company manufacturing plastic flowers in Hong Kong, and later expanded to produce hair styling tools. In addition to this business, Mr Chan has also purchased several properties in Hong Kong over the years which are now managed by his children.

While Mr Chan had enjoyed the fruits of his labours, he now prioritises the wellbeing of his four children and following generations. A major concern is succession planning. In particular, he would like his eldest son and long-term protégé to take up the helm of his business empire, when the time comes that he can no longer fulfill this role.

A traditional family trust structure would require Mr Chan to pass direct control of his assets and his succession plans to third-party trustees. He does not have any appetite for this. We therefore advise Mr Chan to set up a privately-owned Hong Kong company as a PTC, the shares of which will be held by a Guernsey-based Purpose Trust. Mr Chan will be a director of the PTC and in a position to manage his interests as trustee alongside other trusted advisors who will sit on the board. His eldest son is appointed as ‘Director Successor’.

Mr Chan, as settlor, also transfers his business and other assets into a family trust. His four children, his grandchildren and remoter issue are nominated as trust beneficiaries. We further advise Mr Chan to set out his asset distribution instructions through a Letter of Wishes. As all the terms are clearly laid out, his eldest son will be able to manage the trust through the PTC and execute the distributions according to the terms in the Letter of Wishes.

The PTC structure therefore brings the following benefits to Mr Chan and his family:

  • It allows the settlor and family members to play an active role in managing trust assets and decision-making, which is particularly useful where the assets settled into trust are shares in a family business
  • It addresses the settlor’s concerns around handing over control to third parties
  • It avoids potentially contentious issues between the trustees and the beneficiaries
  • The shares of PTC can remain held by the Guernsey Purpose Trust in perpetuity


Contact Vivian Leung
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