1. Paradise Papers: Hinduja Group used trust structure to waive $78 mn in debt

Paradise Papers: Hinduja Group used trust structure to waive $78 mn in debt

The Hinduja Group, with revenues of over $25 billion and employing 100,000-plus people, effectively utilised a “trust” structure and its opaqueness to waive over $78 million in debt to a group holding company despite the trustees pointing out that the act would benefit the Hinduja family members, Appleby records show.

By: | New Delhi | Published: November 7, 2017 5:55 AM
Hinduja Group, Hinduja Group paradise papers leak, paper about hinduja group Initially hesitant to sign off on the holding company’s accounts, the trustees, eventually, agreed after extracting an indemnity bond from Prakash Hinduja protecting them from any future damages.

The Hinduja Group, with revenues of over $25 billion and employing 100,000-plus people, effectively utilised a “trust” structure and its opaqueness to waive over $78 million in debt to a group holding company despite the trustees pointing out that the act would benefit the Hinduja family members, Appleby records show. Initially hesitant to sign off on the holding company’s accounts, the trustees, eventually, agreed after extracting an indemnity bond from Prakash Hinduja protecting them from any future damages. Legal advice stating that the waiver of the debt would not be construed as an aggressive tax-avoidance scheme was also furnished to the trustees. Records show that documentation of the loan was created between June 30, 2007, and December 3, 2007. Appleby had pointed out, records investigated by The Indian Express show, that once the loan was waived by the Hinduja family trust called The Acorn Trust, the holding company, headquartered in Luxembourg, AMAS Holding SPF, would recognise the profit in its financial statements. This profit would be available to be distributed to the shareholders. AMAS’s entire shareholding is with The Acorn Trust whose beneficiaries are the Hinduja family. In the case of Hinduja Group, Appleby worked during 2014-15 to replace Jersey-based Rozel Trustees (Channel Islands) Limited and Novatrust Ltd as the trustee for The Acorn Trust. This information came to light because the takeover got delayed and “frustrating” for the Hinduja Group, with existing trustees creating a demand for an indemnity for the loan waiver. In email exchanges, both the Hinduja Group and Appleby guess this might have been the case as they to expedite the process.

On May 12, 2015, Appleby facilitated setting up of another trust, The Pine Trust, for the Hinduja family. The beneficiaries of the trust are Ajay P Hinduja, Kamal P Hinduja, Sareeta S Hinduja, Sadhna Gopichand Hinduja, Sanjay Gopichand Hinduja, Dheeraj Gopichand Hinduja, Vinoo Srichand Hinduja and Shanu Hinduja. The protector for this trust is also Protectus Anstalt, the same as that for The Acorn Trust.

Information collated from exchange of mails and records show that The Acorn Trust, set up on June 14, 1990, sits at the top of the Hinduja Group’s structure. It came formally under the Appleby fold in January 2015 (there is a letter of engagement dated January 22, 2015 to the trustees of the Acorn Trust spelling out the basis to provide services). Its settlor is Prakash Parmanand Hinduja, the third of the four Hinduja brothers. Its beneficiaries are relatives of the four brothers — Srichand, Gopichand, Prakash and Ashok.

A Liechtenstein foundation, Protectus Anstalt, is the Protector of the Trust. The Trustees are Rozel Trustees (Channel Islands) Limited. The Trust’s only unlisted investment is in AMAS, which is fully subscribed to by the trust. Records show Prakash Hinduja, born in Mumbai, is a Swiss national, but a Monaco tax resident. Srichand and Gopichand are UK citizens, and Ashok is an Indian citizen. There is huge to-and-fro within the Appleby compliance team about the status of the Hinduja brothers, but eventually, they settle to term the whole family as PEPs (Politically Exposed Persons).

Records show the holding structure of the group’s flagship in India — Ashok Leyland Ltd, the country’s second largest commercial vehicle manufacturer after Tata Motors. It also has other interests in sectors such as oil, power, banking and finance, etc.

The umbrella investment firm for all its Indian ventures is also AMAS Holding SPF. SPF essentially is in the nature of a Private Asset Management Company. SPFs obviously have huge tax advantages. They do not pay corporation tax, municipal tax or wealth tax. Further, they don’t have to pay capital gains tax or withholding tax on interest payments.

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