In today’s business landscape, the needs of private and institutional clients are no longer as distinct as they once were, especially regarding corporate structures. Traditionally, the fiduciary sector adopted separate approaches for each client category, based on the perception that their requirements were very different. However, modern regulatory pressures—such as increased transparency, corporate governance, and accountability—have led to a notable convergence between these two groups. Understanding this convergence is essential for companies and investors seeking efficient corporate structures in today’s global context.
What Can Corporate Structures Provide for Private Clients?
Private clients typically have diversified portfolios that may include investments, real estate, operational companies, yachts, art, and other luxury assets. The role of a corporate services provider is often multifaceted, involving day-to-day management, interaction with family members, and proactive advice on operational procedures and structural changes. Governance is key for private clients, especially when family members wish to participate on the board of directors, emphasizing the importance of effective decision-making processes and corporate governance.
Private clients are increasingly adopting sophisticated corporate structures to meet their evolving needs. While trusts and foundations remain common, alternative structures such as Private Trust Companies (PTCs), General Partnerships (GPs), Limited Partnerships (LPs), Protected Cell Companies (PCCs), and Private Investment Funds (PIFs) are gaining popularity. These structures offer greater flexibility, allowing clients to retain control while complying with governance standards.
Institutional Clients: Specific Requirements and Modern Trends
Institutional clients, on the other hand, often have more structured requirements due to their size, regulatory environments, and established advisors. Their focus typically includes ensuring strict reporting standards, corporate compliance, and maintaining consistent governance practices across multiple jurisdictions. These clients may require specialized services, such as escrow services, securitization, and employee benefit schemes, in addition to standard corporate services like tax compliance, accounting, and others.
To serve institutional clients, it is essential to ensure that their corporate entities meet both regulatory and legal obligations, particularly in cross-border activities. This requires a high level of precision in corporate administration and governance, often necessitating the involvement of external auditors and group reporting standards.
Are Private and Institutional Clients Really That Different?
The convergence of needs between private and institutional clients has become increasingly evident. Although their specific assets and objectives may differ, the underlying services required are largely the same. Both groups need strong corporate governance, tax compliance, and administrative support to ensure their structures comply with evolving global regulations.
For both clients, solid relationships with service providers are crucial. Whether for a private client opening a bank account for a family office or an institutional client managing cross-border transactions, the ability to rely on well-established corporate networks can make a significant difference in optimizing operations and meeting regulatory requirements.
The Importance of Double Taxation Treaties
The use of Double Taxation Treaties is another area where private and institutional clients converge. Portugal, for example, has positioned itself as a strategic business hub in Europe thanks to its extensive network of Agreements with more than 80 countries. These Agreements reduce or eliminate the risk of double taxation, making Portugal an attractive destination for international business.
The main benefits of Portugal’s Agreements include:
- Reduction of withholding tax rates on dividends, interest, and royalties.
- Clarification of tax rights on cross-border income.
- Clear guidelines on permanent establishment (PE) and taxation of company profits.
For private clients with diversified portfolios and institutional clients managing multinational operations, these Agreements are essential for optimizing tax planning strategies, reducing costs, and ensuring compliance across multiple jurisdictions.
What Private and Institutional Clients Are Learning from Each Other
The exchange of best practices between private and institutional clients is becoming increasingly evident. Private clients are adopting corporate structures more commonly associated with institutional entities, such as PTCs and PIFs, which offer greater flexibility and transparency. Conversely, institutional clients are recognizing the value of long-term, trust-based relationships with service providers—a hallmark of private client-service provider relationships.
This convergence is reshaping the way fiduciary services are delivered, with both client groups benefiting from the exchange of knowledge and experience. By adopting best practices from each other, both private and institutional clients can better navigate the complexities of today’s regulatory environment.
The distinctions between private and institutional clients, regarding corporate structure needs, are becoming less pronounced. Both groups face similar challenges, particularly in terms of regulatory compliance, corporate governance, and the need for efficient tax planning through the use of Double Taxation Treaties. As these pressures continue to increase, the fiduciary sector must adapt to provide a unified solution that meets the needs of both groups.
By leveraging shared needs, companies can ensure they are well-positioned to navigate the complex global landscape, benefiting from efficient corporate structures and comprehensive administrative support.
If you believe that your business or portfolio can benefit from the implementation of corporate structures that meet governance and tax optimization demands, we are here to help. Contact us to discover how our solutions can simplify regulatory compliance.
