The Cook Islands
The Cook Islands is a self-governing territory in free association with New Zealand. This means that while the Cook Islands has its own government and is responsible for its internal affairs, New Zealand provides defence and foreign policy representation on its behalf. The local currency is the New Zealand Dollar. The Cook Islands has a parliamentary democracy with a system based on the British Westminster model. The country is divided into constituencies, and elections are held every four years to elect members of Parliament. The Prime Minister is the head of government, while the King of England is the symbolic Head of State.
The Cook Islands is widely recognized as the leading asset protection jurisdiction for offshore trust structures and provides extremely favorable conditions for companies and foundations. Throughout the 1980s Southpac worked with leading attorneys to develop legislation which continues to offer the gold standard in asset protection today.
Southpac Trust Limited offers International Trusts, Limited Liability Companies (LLCs), International Companies (ICs) and Foundations in the Cook Islands. It can also offer trust protector services, corporate managers for LLCs, and corporate council members/enforcers for foundations.
Legislation governing our Cook Islands products is available through the Cook Islands Financial Supervisory Commission website.
Cook Islands International Trust
Key Features
- Assets settled into trust prior to a creditor’s cause of action accruing are fully protected from the date of settlement.
- Assets settled into trust more than two years after a creditor’s cause of action has accrued are fully protected from the date of settlement unless that creditor has already commenced proceedings against the settlor in respect of that cause of action.
- Assets settled into trust within two years of a creditor’s cause of action accruing are fully protected if the creditor fails to commence proceedings in respect of that cause of action within one year of the date of settlement.
- Any claims to set aside a transfer to trust must be brought in the Cook Islands High Court within two years of the date of transfer.
- For a fraudulent transfer claim to be successful, the creditor must prove to the Cook Islands High Court beyond reasonable doubt that the disputed transfer was made by the settlor with principal intent to defraud that particular creditor and had the effect of leaving the settlor unable to meet that creditor’s claim.
- Cook Islands international trusts are not subject to forced heirship legislation in jurisdiction of settlor or any trust beneficiary.
- Trusts may be of perpetual duration, allowing for the creation of multigenerational dynastic trusts.
- Robust privacy provisions make it an offence to disclose information relating to an international trust to a third party unless authorized or required by law to do so.
- Multiple and custodian trustees permitted. A Cook Islands international company may act as a private trustee company of up to three trusts. Records of all trust assets and transactions must be retained at registered office of Cook Islands trustee.
Cook Islands International Relationship Property Trust
Key Features
- New type of trust established in 2021 and unique to the Cook Islands which provides intergenerational wealth preservation opportunities.
- Assets settled into trust by two settlors in a relationship are ring-fenced and administered separately in the event of the settlors’ separation.
- Trust property remains intact after settlor separation and is retained and managed in trust for beneficiaries rather than being liquidated (often at a discount) and distributed as part of a divorce settlement. This preserves and retains the value of trust property.
- Allows preservation of family company interests within trust following separation.
- Enables settlors making unequal contributions to ensure assets are dealt with in an agreed manner after separation.
- Foreign judgments ordering the sale, division or distribution of trust property contrary to the terms of the trust instrument are unenforceable.
- Dual registration as a Cook Islands international trust is possible to obtain additional asset protection benefits.
Cook Islands LLC
Key Features
- Offer standalone creditor protection, and ‘double lock’ protection when used in conjunction with a trust.
- Protective legislation based on that of Nevis.
- Legislation allows single-member LLCs which can be member- or manager-managed.
- Substantial flexibility allowed for operating agreement with only limited number of non-waivable provisions set out in legislation.
- Sole remedy available against LLC member is a non-renewable five-year charging order over membership interest, with no power to force distributions, interfere in management decisions or cause the LLC to be liquidated. This remedy is available only from the Cook Islands High Court: foreign judgments are not enforceable.
- Identity of managers, members and beneficial owners is confidential, is not retained in any centralized register, and may not be divulged without reasonable excuse.
- LLC accounts and transactional records must be retained by Cook Islands registered agent.
Cook Islands Foundation
Key Features
- Assets transferred to foundation prior to a creditor’s cause of action accruing are fully protected from the date of transfer.
- Assets transferred to foundation more than two years after a creditor’s cause of action has accrued are fully protected from the date of transfer unless that creditor has already commenced proceedings against the founder in respect of that cause of action.
- Assets transferred to foundation within two years of a creditor’s cause of action accruing are fully protected if the creditor fails to commence proceedings in respect of that cause of action within one year of the date of transfer.
- Any claims to set aside a transfer to foundation must be brought in the Cook Islands High Court within two years of the date of transfer.
- Foreign judgments are not recognized.
- Foundations are not subject to forced heirship legislation in jurisdiction of founder or any beneficiary.
- Foundations may be of perpetual duration.
- Foundations may be for charitable or non-charitable purposes.
- Single-member foundation councils are permitted.
Cook Islands International Company
Key Features
- Sole shareholders are permitted and shareholders may be companies or individuals from any jurisdiction except the Cook Islands.
- No resident director requirements although a resident secretary, which must be an officer of a licensed Cook Islands trustee company, must be appointed.
- Records of shareholders, directors and secretaries are retained by the Registrar but are not available to the public. Any changes in shareholder, director or secretary must be notified to Registrar within 30 days.
- International company accounts and transactional records must be retained by resident secretary.
Cook Islands Yacht Registration
The Cook Islands is a popular jurisdiction for yacht registration and has a reputable yacht registry that is recognized by international maritime authorities. Vessels flagged in the Cook Islands are often owned by a Cook Islands LLC or IC and can therefore benefit from the protections offered by those products – with even stronger protection available if the LLC or IC is owned by an international trust. Southpac can co-ordinate the registration process and liaise with the appropriate parties.
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- No restrictions on crew nationality.
- Registration periods of 1, 3 or 5 years available.
- No size or age limitation for yachts.
- Speedy registration process with most registrations completed within days.
- Cook Islands-registered yachts can stay in EU waters for periods of up to 18 months under the temporary importation scheme and need only exit EU waters for one day to start a further 18-month period.
Additional Advantages of the Cook Islands
- Stable economic environment and political system and well-respected judiciary.
- Income generated from international trusts, LLCs and foundations is not subject to Cook Islands income tax, although must generally be reported and may be taxable in the home jurisdictions of settlors, beneficiaries and/or other controlling persons. ICs which are tax resident in the Cook Islands are subject to Cook Islands income tax.
- Remote location can deter creditors.
- Contingency fees are not permitted so legal fees for creditor attorneys must be paid in advance.
- The Cook Islands does not have beneficial ownership registers. Beneficial ownership information must be retained by trustee companies/registered agents and disclosed to the Cook Islands authorities on request.