Investment structures and family governance series – 1 / 1 观点
A Family Investment Company (FIC) is a private company incorporated in England & Wales whose shareholders are members of the same family (or could be family trusts).
Like any other UK company, a FIC is a company governed by the Companies Act 2006 and is incorporated at Companies House with the usual procedures.
A FIC operates in the same way as any UK limited company and therefore there is no magic to the form of the vehicle. However, a FIC can have tailor-made characteristics which make it suitable as a vehicle to hold and control significant family wealth (like other comparable structures such as trusts and foundations). FICs can have different classes of share, with different voting and economic rights in terms of the distribution of the profits of the FIC or assets on a winding-up. FICs can be funded using cash (or other assets) through share subscription or using debt (commonly – interest free loans) or a combination of equity and debt.
When incorporating FICs for clients, it is important to keep in mind that FICs can be structured to promote asset protection benefits and cater for the wishes and requirements of the family. This can be achieved through numerous means including bespoke Articles of Association and Shareholders' Agreements (the main constitutional documents for the company) and through the amount and nature of shares that each shareholder receives. Specific provisions can be included in the constitutional documents such as restrictions on the issue of shares and transfer of existing shares (for example in the event of divorce or on death). While Articles of Association are public documents available on Companies House, Shareholders' Agreements are not required to be publicly available and so bespoke provisions included in Shareholders' Agreements can remain private.
While each client should receive specialist advice on whether a FIC could be appropriate for them, and consider the associated tax implications, FICs are common vehicles for holding significant family wealth for UK domiciled individuals and have some key advantages compared with holding investments directly. It was well documented that FICs were recently under closer scrutiny by the UK Revenue (HMRC). While that review ended with HMRC concluding that FICs are used primarily to transfer wealth between generations rather than avoid tax, there is of course no guarantee that FICs (or other comparable structures) could not be subject to legislative reform in the future.
For more information on FICs, please see our private wealth flyer on Family Investment Companies. If we can support you or your clients with advice on investment structures and family governance or other matters, please do not hesitate to get in touch.
This summary is part 1 of our 4-part series on investment structures and family governance. Part 2 will cover Family Limited Partnerships (FLPs) and will be available next month.