Hong Kong trust law amendments enacted at last
Among other things, they create a statutory duty of care similar to that of the UK's, and establish a beneficiary's rights to remove trustees without resort to the courts.
Other significant aspects of the Amendment Bill are:
- the abolition of the rule against perpetuities and the rule against excessive accumulation of income;
- New statutory trustees' powers to insure and to appoint agents nominees and custodians, along with corresponding new duties and liabilities for trustees;
- statutory control of trustees exemption clauses;
- statutory provisions concerning the validity of reserving investment powers to settlors;
- anti-forced heirship provisions.
The jurisdiction is in strong competition with other financial centres, especially Singapore, for estate planning business. But the 1934 legislation imposed only common law duties on trustees, which is not acceptable to many settlors. So negotiations have been under way for several years to set the powers and duties of trustees on a fully statutory basis, making them liable for negligence as well as fraud.
‘The amendments provide a significant modernisation of Hong Kong trust law by updating the powers of trustees and the rights of beneficiaries,’ said Samantha Bradley, Chairman of STEP Hong Kong. They should make Hong Kong law a more attractive choice as the governing law of private trusts, which may in turn result in a greater number of existing and new trusts being administered in Hong Kong.
STEP's Hong Kong branch played a big part in the drafting and eventual enactment of the amendments, through its participation in the Joint Committee on Trust Law Reform with the Hong Kong Trustees' Association. The process has taken eight years, culminating last year in a final consultation to iron out all the details.
A series of talks on the details of the amended trust law is being planned for September 2013.
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