The importance of corporate structuring
The rise Middle Eastern superyacht owners embracing corporate structures exemplifies their significance.…
As explored in this SuperyachtNews article, the employment of family offices for Middle Eastern superyacht clients is growing in order to accommodate the needs of UHNW wealth management in today’s economy. In addition to wealthy families needing to understand complex fiscal structures, Katherine Ellis, Boston Multi Family Office explains how the region is accepting the importance of corporate structuring surrounding superyacht ownership, highlighting the advantages of such an arrangement.
“We are seeing a move towards families looking to put structure around their broader wealth and also wanting to understand what the structuring possibilities are, due to the personal liability issues of owning such an expensive and potentially dangerous asset in one’s own name,” begins Ellis. In addition to the privacy that corporate structures afford, the primary reason for superyachts to be owned in a corporate situation is to limit the scope of legal and financial responsibility.
“It ring fences liability,” offers Ellis, “We would always recommend that when you set up a company to own a superyacht, you only put one superyacht in that company. You want to contain your liability to just that asset, whereas if you had a fleet of ten yachts in one company, the liability, should something go wrong, is the value of all of those yachts sitting in that company.” For example, if there was to be an accident on board and either a client or crewmember wished to sue the owner for damages, the reach of that lawsuit would be limited to the assets of the corporate structure - or overarching business - that owns the yacht, rather than the entire wealth of the owner.
“Obviously there’s insurance and there are various safeguards you can put in place to manage those risks,” she continues, “But what we would always recommend our clients to do is to own very large, expensive potentially dangerous assets in a corporate structure, because you then limit the liability to the assets of that corporation.” It is because of these structures that the term ‘beneficial owner’ is often used within the market. The beneficial owner retains control of the asset, but technically the liability and registration will be linked to an individual company. The separation of the owner’s personal wealth and their yacht is a core level of protection, ensuring that the rest of the owner’s portfolio is not jeopardized in the event of litigation.
It is commonplace for European and American owners to own superyachts within a corporate framework. This is because their wealth is often more structured than the family-centred financials of Middle Eastern families. “It is a cultural difference. A typical Middle Eastern family will have a patriarch who owns everything in his own name and who will then start transitioning some of his wealth down. In this case, corporate structuring and ring fencing liability is definitely more relevant - and more of an education thing - for our Middle Eastern clients,” explains Ellis.
This move away from a single family member owning such a valuable asset in their own name signifies how the attitudes towards ownership is changing. With Middle Eastern superyacht owners beginning to structure the ownership of their assets in this way, with the help of family offices, it is a strong indication that such structures should be considered best practice when it comes to superyacht ownership strategy.
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