The Bare Trust Legal Structure
For our English SPVs we typically use a United Kingdom [Bare Trust structure](https://uk.practicallaw.thomsonreuters.com/0-107-6471?transitionType=Default&contextData=(sc.Default)&firstPage=true#:~:text=The trustee of a bare,the assets held in trust.)
- We create a limited company that holds the shares (or other assets) in trust on behalf of the investors (the beneficiaries) via a tax transparent arrangement.
- The trust’s assets are held in safe custody and administered by an FCA-regulated custodian that we partner with.
- The beneficiaries of the trust (the investors) have an immediate and absolute right to both the capital and income of the trust, excluding any obligations they have to the syndicate leads with regards to carried interest. Any profits are distributed to the beneficiaries who pay tax wherever they are tax-resident. There is no UK tax liability.
- The property is held in the name of the trustee, but the trustee has no discretion over the assets held in trust. The trustee of a bare trust is a mere nominee, in whose name the property is held. The trustee has no active duties to perform. The trustee must simply follow the (lawful) instructions of the beneficiary in relation to the assets held in trust.
- The syndicate lead(s) is/ are beneficiaries of the trust, and the other investors agree to proxy their voting and other rights with regards to the shares to the syndicate lead.
- They may also opt to pay a share of profits on exit to the syndicate lead (carried interest). The syndicate lead may receive the carry wherever it is tax resident, and pays tax as appropriate
- The trust can buy any shares or share-like securities issued by the investee entity (eg. SAFE agreement, convertible debt or an LP holding in a fund).
- The arrangement is not a collective investment scheme, nor is it an AIF (alternative investment fund) - therefore “light” from a regulatory perspective.
One of the key advantages of the nominee structure over something like a limited partnership or an LLP is that you can re-use the same legal entity for multiple deals without contagion of assets. This reduces the administrative cost, and is one of the key reasons Odin is able to offer its services so cost-effectively.
Sample Legal Documents: