_{Question 11 Settlor was born and is domiciled in State A, but has resided temporarily for the last three years in State B. The laws of State B include exchange controls which prohibit residents domiciled overseas from transferring assets outside the jurisdiction. Notwithstanding such law, Settlor creates a trust expressly governed by the laws of State C and transfers $1 million to Trust Company, the trustee thereof, a firm located and licensed to undertake trust business in State D.}

_{Which laws govern the issue of whether Settlor had lawful capacity to create the trust and transfer the trust fund to Trust Company?}

_{A The laws of State A.}

_{B The laws of State B.}

_{C The laws of State C.}

_{D The laws of State D}

_{Question 12 The Statute of Elizabeth 1571 included some new and farreaching provisions relating to individuals who conveyed assets to third parties without (full) valuable consideration. In most offshore jurisdictions, Fraudulent Disposition laws have replaced the Statute of Elizabeth. In this regard, which of the following statements are correct?}

_{I A conveyance made in 1572, at a time when the settlor had no liabilities, would be deemed void, and therefore available for his future creditors, provided they brought an action for recovery within six years of the debt becoming due.}

_{II If a creditor brings a successful action against the trustees using the provisions of the Statute of Elizabeth, the trustees are bound to pay that creditor in full, together with all legal costs incurred by both sides, before continuing to manage the trust as they had previously.}

_{III Typical Fraudulent Disposition laws enacted in the offshore jurisdictions brought a fairer balance between the rights of the creditor and the debtor. Only those debts incurred before the settlor conveyed funds to the trustee are deemed 'fraudulent' and in the absence of fraud, the only remedy available to the creditor is to bring an action against the settlor in his private capacity.}

_{IV In the event of a successful claim by a creditor using the provisions of offshore fraudulent disposition laws, if there are insufficient assets remaining in the trust to settle the debt, the Trustees may be forced to return fees that they had previously received.}

_{A None of the above.}

_{B I, II and III.}

_{C I, III and IV.}

_{D III only.}

_{Question 13 A trust instrument states:}

_{'Trustee may invest the Trust Fund in or upon whatever investments Trustee considers appropriate provided that Trustee shall, prior to investing the Trust Fund, obtain the prior written consent of Protector.'}

_{Protector, Settlor's attorney is not a beneficiary of the trust. Which one of the following statements is not correct?}

_{A The limitation found in the investment clause constitutes an unlawful restriction upon Trustee's powers of investment under common law principles, and renders the trust liable to be set aside as a sham unless it is governed by modern reserved powers legislation.}

_{B The limitation found in the investment clause confers upon Protector a valid power of veto over the investment of the Trust Fund.}

_{C The clause imposes a duty upon Trustee to obtain Protector's consent prior to investing or varying investments of trust property.}

_{D Protector must exercise the powers conferred upon him in relation to investments in good faith and in the best interests of the beneficiaries.}

_{Question 14 Settlor transfers $1 million to Trustee to hold upon discretionary trusts for future generations of Settlor's family. The trust instrument makes no reference to the investment of the trust fund and Trustee is now considering an appropriate investment strategy. Trustee should invest the trust funds with which one of the following objectives?}

_{A To protect the capital against loss, even though the nominal (real) return does not keep pace with inflation.}

_{B To achieve an income yield that is reasonable in the circumstances, but no less than the government base rate for borrowing.}

_{C To invest in an appropriate and prudent manner with a view to achieving a reasonable return, but without speculating or exposing the trust fund to unreasonable levels of risk.}

_{D To achieve modest capital growth in line with the usual stock market indices (such as the S&P in the US, or the FTSE in the UK).}

_{Question 15 Trustee is a trustee of a discretionary trust established by Settlor, which contains the following express provision: 'During the lifetime of Settlor, Trustee shall exercise his dispositive powers in strict accordance with Settlor's instructions, provided such instruction shall be communicated in writing by letter, fax or email'. Which one of the following statements is not correct?}

_{A In accordance with the principles laid down in Rahman the trust is voidable as a result of Settlor's lack of capacity in so far as Settlor failed to transfer dominion and control of the trust assets to Trustee.}

_{B Under common law principles, the trust is at risk of being set aside as a formal sham.}

_{C The trust is valid and effective if its validity is determined under modern reserved powers legislation such as that enacted in the Cayman Islands.}

_{D If the trust is valid, Settlor's oral instructions are ineffective unless and until confirmed in writing.}

_{Question 16 A high networth individual ('HNWI') is a UK citizen residing in London. He incorporates a Business Company in the British Virgin Islands (BVI BC) and, in exchange for the issue of the company's entire share capital, transfers the sum of $1 million to the company. The company places the $1 million on deposit in a BVI bank. You may assume that the UK has enacted typical 'controlled foreign company' antitax avoidance legislation. Which one of the following statements does not contain an accurate description of the tax implications of this structure?}

_{A HNWI is required to declare his interest in BVI BC to the UK's revenue authorities in his annual Tax Return and will be obliged to pay income taxes upon the interest generated by the deposit.}

_{B HNWI has effectively sheltered the $1 million beneath a traditional BVI tax shelter, in which case the interest income earned is that of the company and accrues free from all UK taxes, provided it is not distributed to HNWI in the UK.}

_{C The British Virgin Islands do not impose any corporation taxes or other taxes upon profits earned by BVI BC.}

_{D HNWI is liable to pay income taxes to the UK's revenue authorities upon dividends declared by BVI BC.}

_{Question 17 Service Provider incorporates Company in a typical offshore jurisdiction in order to hold the investments of Client. Which one of the following statements about the board of directors of Company is correct?}

_{A Service Provider provides the directors of Company to ensure that it is managed and controlled offshore to avoid the imposition of corporation taxes.}

_{B Typically it is the company secretary who, by written resolution, appoints the company's first directors.}

_{C Client, as the person who introduces financing to the company, is usually appointed as its sole director.}

_{D The board of directors of Company must exercise their dispositive powers of distribution in the best interests of Client.}

_{Question 18 You are a company administrator in charge of the administration of Offshore Company Ltd. Offshore Company Ltd has been dormant for a number of years and has no assets save for a nominal sum held in a corporate checking account. When the funds in its account expire, you have no money to pay the annual fees of the company and it is struck off the Register of Companies. Which one of the following statements is correct?}

_{A The proper method of voluntarily dissolving a solvent company is not by allowing it to be struck off, but by way of voluntary winding up initiated by shareholders' resolution.}

_{B Any remaining assets owned by Offshore Company Ltd at the date it is struck off must be used to pay corporate debts and the balance, if any, can be used to distribute to shareholders.}

_{C Offshore Company Ltd. can be reinstated by the regulator, namely the Registrar of Companies, upon the beneficial owner paying a significant fine measured by the number of days it has been struck off.}

_{D When a company is stuck off in these circumstances, final accounts ought to be prepared by a liquidator and filed with the court.}

_{Question 19 Which of the following powers are typically conferred upon the directors of a private company, according to standard Table A articles adopted in circumstances when the company is to be used for assetholding purposes?}

_{I The power to borrow money on behalf of the company.}

_{II The power to enter into business contracts on behalf of the company.}

_{III The power to wind up the company. IV The power to issue new shares in exchange for share capital.}

_{V The power to amend the company's memorandum of association.}

_{A I, II and V.}

_{B I, II and IV.}

_{C II, III and V.}

_{D I, II, IV and V}

_{Question 20 You manage a private company incorporated in a typical offshore jurisdiction with companies legislation based upon the English 1948 Act. The company is designed to hold investments for Beneficial Owner, and has issued just two shares, both of which are held by you on behalf of Beneficial Owner. Which of the following statements accurately describe the way in which this company is likely to be funded?}

_{A The company will issue shares in consideration for additional funds to invest.}

_{B The company will borrow funds from a bank or other lending institution.}

_{C The company will borrow funds from Beneficial Owner in consideration for a promise to repay the same upon demand.}

_{D The Beneficial Owner will transfer funds to the company by way of voluntary transfer or gift.}