In The Matter Of The AB Settlement [2022] SC (Bda) 92 Civ

• Law Firm: Carey Olsen
• Subject Matter: Litigation, Mediation & Arbitration, Tax, Insolvency/Bankruptcy/Re-structuring, Financial Restructuring, Trials & Appeals & Compensation, Tax Authorities
• Author: Mr Keith Robinson and Laura Kearns
• Published date: 09 January 2023

The recent judgment issued by the Supreme Court of Bermuda in the case of In the Matter of the AB Settlement [2022] SC (Bda) 92 Civ provides very helpful authority on the question of whether trust restructurings under Bermuda statute constitute resettlements.

The case concerned a substantial English law trust, referred to in the judgment as the AB Settlement. The trustees of the AB Settlement considered that it would be advantageous to the beneficiaries for (1) the trust period of the AB Settlement to be extended beyond its termination date in 2047 and (2) the AB Settlement to be varied to modernise its terms, enable provision to be made for charity and increase flexibility in relation to the beneficiaries.

The trustees devised a restructuring plan by which they would exercise their power to change the governing law of the AB Settlement from the law of England & Wales to that of Bermuda and then apply to the Bermuda Court for an extension of the trust period under s.4 Perpetuities and Accumulations Act 2009 and a variation of the settlement's terms under s. 47 Trustee Act 1975.

The trustees were however mindful of UK tax implications if the restructuring were to amount to a resettlement of the AB Settlement. The Court was therefore asked to consider whether the change of governing law to Bermuda, subsequent extension of the trust period and variation under s.47 Trustee Act 1975 would create a new settlement. Chief Justice Hargun held that the changes were not sufficient to amount to a resettlement of the AB Settlement.

Whilst of...