A GUIDE TO CORPORATE VOTING TRUSTS
Foreign nationals can hold title to US-registered aircraft, but only in limited circumstances. This article explores one solution available to foreign owners: corporate voting trusts.
Learn how these trusts are established under state law to satisfy the FAA’s citizenship requirements.
Still got questions? Contact us to explore your aircraft ownership options.
AIRCRAFT REGISTRATION
The Federal Aviation Administration (FAA) maintains the aircraft registry in the United States. Before a November tail number can be assigned, the FAA must ensure that an aircraft’s proposed ownership structure complies with the current regulations.
Generally speaking, the FAA’s position is quite clear: only “United States citizens” can register aircraft in this country. In practice, however, things work somewhat differently. Many foreign nationals do, in fact, own November aircraft.
This is because the FAA’s definition of “citizenship” is actually quite expansive. The meaning will depend on the kind of entity seeking ownership. The FAA has different rules that apply to (1) natural persons, (2) partnerships, (3) corporations & LLCs, and (4) trusts.
In this article, we’ll explore how foreign nationals can use corporate ownership to beneficially own November aircraft. But keep in mind that, depending on your circumstances, other options may be available if you wish to register your aircraft in the United States. Let’s dig in.
RULES FOR CORPORATE N-REGISTRATION
Under to federal law , corporations (and LLCs) can hold title to November aircraft if:
1. They are organized or incorporated under the laws of a US State, the District of Columbia, or a US territory;
2. The president and at least two thirds of the Board of Directors (and other managing officers) are US citizens; and
3. At least 75% of the voting interest is owned or controlled by persons that are U.S. citizens.
THE SOLUTION: CORPORATE VOTING TRUSTS
The FAA makes a distinction between corporate ownership and voting interest. As a result, voting trusts can be implemented to ensure compliance with US law and, at the same time, allow foreign nationals to own November aircraft.
So how does it work?
In practice, foreign nationals transfer their stock in a US corporation to a voting trustee. Depending on state law, this trustee can either be a natural person or another corporate entity. The relationship between the foreign shareholders and the voting trustee is governed by a Trust Agreement. This Trust Agreement sets forth the working relationship and understanding between the parties involved.
But foreign shareholders should proceed with caution, and always under the advice of a US attorney. There are strict rules that govern voting trusts established to satisfy the FAA citizenship requirement. Notably, voting trustees cannot be (or have been) an officer or agent of any party to the Trust Agreement, as well as a creditor or debtor of the same. In addition, voting trustees must independently satisfy the US citizenship requirements under the applicable law. Finally, there must be a succession plan in the event a voting trustee can no longer serve in that capacity.
Failure to comply with applicable rules may result in revocation of your Aircraft Registration, which may have catastrophic operational consequences. In addition, it may affect underlying security interests registered against the aircraft in question. For that reason, we strongly urge you to consult with an attorney before filing a Registration Application with the FAA.
If you’d like to explore your ownership options, don’t hesitate to give us a call. We routinely prepare corporate voting trust arrangements for foreign nationals. In addition, we can discuss alternative structures, like a traditional aviation ownership trust.