Cook Islands Foundation

Overview of a Cook Islands Offshore Foundation

The Cook Islands are situated in the south pacific ocean and are officially an associated state and a part of the “Realm of New Zealand”. Cook Islands Offshore Foundations are useful offshore financial vehicles, most commonly used for estate planning and asset protection. The islands are more popularly known for their Cook Islands Trust, which is one of the most respected and ironclad structures in the world.

However, the foundation does provide an appealing alternative if cost is a factor, as the trust can cost upwards of 10,000USD the Foundation is much more reasonably priced at 3,000-5,000USD.  The Cook Islands Foundation offers all the features of a typical foundation, with some additional benefits which are unique to the jurisdiction which will be discussed below.

Cook Island foundations are governed by the Foundation Act of 2012, which provides a number of favorable clauses and protective measures for foundations. 

Foundations can be entirely foreign-owned, are easy and affordable to form, and offer a very high degree of privacy, asset protection, and tax efficiency. 

Other Cook Islands structures that are popular on the islands are the:

• Cook Islands LLC
• Cook Islands IBC

The use of the above structures will be slightly different than the Foundation, however, there is a lot of overlap. Get in touch to know more.

Go here, for more information on the Cook Islands as an offshore tax haven.

Advantages & Top Uses of a Cook Islands Foundation

Advantages

• Complete foreign ownership is permitted. Founders can be foreigners of any nationality, with beneficiaries and assets located in any country.
• There is no taxation applicable to Cook Islands Foundations.  
• Privacy and confidentiality is ensured with a Cook Islands Foundation.
• Details about the founders, beneficiaries, council members and enforcers do not appear in any public records, nor do the details of the foundation’s assets. 

• Quick and easy formation: the required documents can be prepared and registered in 3-5 days.
• High level of asset security: The Cook Islands do not recognize other jurisdictions’ laws which may otherwise threaten the foundation’s assets (e.g. forced heirship laws are excluded by the Act, foreign orders including those related to divorce are notrecognized, it is extremely difficult and arduous for creditors to file claims against the foundation’s assets, etc.).
• There are no minimum capital requirements.
• The official language is English. 

Top Uses

• One of the most common uses is Estate planning. The fact that the Act does not recognize other countries’ laws about forced heirship, the high level of confidentiality, zero taxation, and the fact that foundations do not have a limited lifespan, all make it ideal for use as an estate-planning vehicle.
• Foundations can also be used for general asset protection, minimization of taxes, international trading and as a means to ensure confidentiality. 
• Foundations can be used for charitable or non-charitable purposes or both. They can be established to benefit a specific person or persons, or for another specified purpose. 

Key Corporate Features of a Cook Islands Foundation 

Cook Islands Foundation Details

Principal Corporate Legislation 

Cook Islands foundations are governed by the Foundation Act of 2012. 

Confidentiality, Disclosure and Asset Protection

Cook Islands Foundations provide the utmost privacy. Although nominee founders are not permitted, the names and information of the founders, the beneficiaries and the council members are not published in any public records. There are even provisions in the Act that make it illegal to disclose unauthorized information about the foundation and the identities of its associated parties.  

In addition, information pertaining to the foundation’s assets is very well protected, and so are the assets themselves. The following stipulations make it extremely difficult for claims to be made against the foundation’s assets:

• The only jurisdiction where creditors can file lawsuits against foundations is in the Cook Islands.
• Foreign court orders, including those related to divorce, will not be recognized in the Cook Islands.
• Creditors can only file claims against specific foundation assets within two years of when the asset was transferred to the foundation. 
• Creditors are required to prove “beyond a reasonable doubt” that the founder was insolvent or was intentionally trying to defraud the creditor at the time the asset/s in question was transferred to the foundation. 

Registration Requirements

There is only one legal document, the “foundation instrument”, which needs to be filed with the Registrar for the formation of a foundation. This document contains basic information such as the foundation’s name, its purpose, and the name and address of the local registered agent.

Taxation

Cook Islands foundations are not subjected to any form of taxation. This does not mean that one is completely relieved of all taxes though, as some jurisdictions (like the US) may impose taxes on their citizens’ global income. 

Foundation Structure

A foundation resembles a combination of a company and a trust. In many ways, it operates like a company, but it does not have shareholders and other distinct features of a company. Its governance is similar to a trust and, like a trust, it has beneficiaries. However, it does not have a limited lifespan and is regarded as a separate legal entity. 

Cook Islands foundations are divided into Founders, Council Members and Beneficiaries. Beneficiaries are not strictly required, but each foundation must have a specified purpose which can be either charitable or non-charitable. The purpose can also be to benefit a specific natural person or persons.

Founders

Founders are those who create the foundation rules and provide funds and assets to the foundation. They can be natural persons or legal entities from any country. 

Foundation Council Members

Cook Island foundations are managed by their respective council. Only one council member is officially required. The manager of the foundation is known as the enforcer. Council members may be natural persons or legal entities from any country.  

Beneficiaries

A Cook Islands Foundation may specify beneficiaries of the foundation, but they are not mandatory. They may be citizens/residents of any country. The beneficiaries do not have any legal or beneficial interest in the foundation’s assets. The council does not have any fudicial duties towards the beneficiaries. 

Foundation Enforcer

The foundation should appoint an enforcer who is responsible for ensuring that the council fulfills its stipulated duties which are described in the foundation rules. These rules should also describe the duties and powers of the enforcer.

Required Capital

There are no minimum capital requirements; however the founder/s is required to contribute assets and/or funds to the foundation. Assets can also be provided by any third party, but this will not automatically make them a founder.

Type of Law

English common law.

Powers of the Company

A Cook Islands foundation is regarded as a separate legal entity (similar to a company/corporation), and can therefore exercise the same powers as a natural person. Founders’ liabilities are limited to the amount which they have invested/endowed to the foundation.

Local Presence Requirements

The foundation must appoint a local registered agent and maintain a local registered office. The address of the office can be the same as that of the local agent. The registered agent/office must keep the following in its possession:

• A copy of the foundation rules,
• A register with the names and addresses of the council members, 
• Details of the Enforcer, including their date of appointment,
• All powers which have been exercised by the council members through written resolutions,
• Financial records describing the current financial position. 

None of the above documents are publicly accessible.

Official Language

English.

Language of legislation and Corporate Documents

English 

Financial Reporting and Auditing requirements

Foundations are required to maintain financial statements which accurately reflect their financial position, but these do not require auditing, nor do they need to be filed.

Time required to form a foundation

It can take approximately 3-5 working days to form and register a foundation.

Foundation Name Requirements

The name of the foundation must be unique, i.e. it cannot be the same or very similar to any other legal entities in the Cook Islands. The name should end with the word “Foundation”. The name should not be deemed “offensive, misleading or otherwise undesirable”. 

Trading Restrictions

The primary purpose of a foundation is not generally to engage in regular commercial/trade activities. However, a foundation may engage in such commercial activities provided they are related to its stated purpose.