Coffee Break – When the Sands Shift: What Disruption Means for Your PTC

Private Trust Companies have become the structure of choice for many of the Gulf’s most sophisticated family wealth holders. Over the years we have worked with families across the Kingdom of Saudi Arabia, the UAE, Kuwait and beyond, and the picture is consistent: well-established PTCs, often Jersey or Guernsey-governed, with genuine governance architecture in place – investment committees, advisory boards, family office representatives, independent directors, and increasingly, next-generation members beginning to take their seats at the table.

The structures are mature. The governance, in many cases, has been carefully built. And yet the question we find ourselves returning to with greater urgency is this: how does that governance hold when it is tested?

The Disruption Is Rarely the One You Planned For

For Middle Eastern families, disruption rarely arrives in a single form. It comes in layers.

There is the personal: the death or sudden incapacity of a founding principal who was, in practice, the centre of every major decision, regardless of what the governance documents said. There is the generational: a next-generation family member who inherits a board seat without the experience, relationships or authority to exercise it effectively. There is the internal: a family dispute that fractures the PTC board, creating deadlock in a structure that depends on collegiate decision-making to function at all.

And then there is the geopolitical – which for families whose wealth, assets and relationships span the Gulf, Europe, UK and beyond, is not an abstract risk. Sanctions regimes shift. Regulatory environments evolve. Regional instability affects the movement of people, capital and trust. A director who cannot travel. A bank relationship that becomes complicated. A jurisdiction that suddenly requires re-evaluation. These are not hypothetical scenarios for the families we work with. They are lived experience and true to today’s scenario.

Ensuring PTCs Are Not Exposed to Vulnerability

The PTC’s great strength – that more control remains within the family, is also the source of its vulnerability. In a conventional trust arrangement, a licensed professional trustee can act with continuity even when family circumstances are in flux. In a PTC, decision-making is embedded in the board itself. If the board is impaired, through vacancy, incapacity, deadlock or the absence of a key individual, the operation of the underlying trusts may be impaired.

Jersey and Guernsey both offer well-developed legal frameworks for PTCs, and both jurisdictions have robust regulatory environments that provide a credible foundation. But the legal framework only works if the governance infrastructure built on top of it is equally robust – and that is a question of design, maintenance and professional support, not jurisdiction alone.

We asked senior offshore counsel, Angela Calnan of Collas Crill LLP in Guernsey, for her perspective on good governance for PTCs.  Angela has particular expertise in establishing PTCs for clients from the Gulf:

“We advise clients that a blended PTC board at the outset is prudent so that a local professional licenced entity (like HIGHVERN) has a seat at the boardroom table to ensure regulatory compliance and good information flow without impacting client control.

For mature PTCs, where the family have become comfortable with the involvement of the professional entity we would then look to dial back the number of family members/trusted advisers on the blended board or take them off entirely and leave family influence in a more informal but still very impactful capacity such as a Family Council.  That way, the PTC itself can stay really nimble and effective and those involved in formal decision-making are in less volatile jurisdictions.  Successor or alternate PTC board members can also work really well to cater for geopolitical risk with trigger events drafted into the constitutional documents. 

We also advise clients to take the same approach to reserved matters (i.e. matters where the family keep control of decision-making).  These matters may comprise quite a lengthy list at the outset of the structuring but, as the family get used to the operational workings of the PTC and the professional licenced entity, we can start to scale back the reserved matters – often just restricted to dealings with the shares in the family’s golden egg businesses.

As with anything, it is important that the structures are reviewed regularly and are drafted in such a way that they can be adapted to evolve with legal, regulatory and geopolitical factors”.

What Good Looks Like

In our experience, the PTCs that navigate disruption most effectively share certain characteristics. Their governance documents are living documents – reviewed, not filed. Succession to board seats is identified and documented before it is needed. Reserved matters are clearly defined so that no single point of failure can paralyse the structure. A professional fiduciary sits within or alongside the board with sufficient standing and visibility to act as a genuine anchor when family dynamics make that difficult.

For families with significant Middle Eastern connections, there is also an increasing recognition that geopolitical scenario planning needs to be part of governance conversations – as prudent stewardship of structures that may need to flex across decades and across very different political landscapes.

The Conversation We’re Having

These questions sit at the heart of what we do every day. We work closely with families, family offices, and their legal and investment advisers to ensure that the governance surrounding a PTC is as considered as the structure itself.

If any of the scenarios above feel closer to home than you’d like – we’d welcome a conversation.