HK Trust Law (Amendment) Ordinance 2013
Hong Kong is a major asset management centre in Asia.
HK trustee’s law is based on the HK’s trustee Ordinance that had been practically untouched for the last 85 years is based on the English trustee act 1925, until the new Trust Law (Amendment) Ordinance 2013.
Some major common law jurisdictions like the UK and Singapore have reformed their trust regulations in the recent years to facilitate trust administration and attract more trust businesses making it more imperative than ever for HK to modernize its outdated trust laws in these aspects and to adapt to the evolving market’s needs.
The Trust Law (Amendment) Ordinance 2013 is intended to strengthen the clarity and certainty of Hong Kong trust law, and grant trustees modernized powers necessary for the efficient management of trusts in Hong Kong.
The ordinance updates the existing legislation in certain specific aspects of HK trust law regime by enhancing trustees default powers, abolishing rule against perpetuities and changing the rule against excessive accumulation of income. In practice though, in most cases there will be a trust deed drafted to govern the powers and obligations of the professional trustees.
Here is a brief summary of the main changes to HK trust legislation:
Introduction a statutory duty of care for trustees when they are exercising their powers in relation to investment, delegation, and appointment of nominees.
General power for trustees to appoint agents, with specified safeguards.
Abrogation of the existing rules against perpetuity in respect of new trusts to be set up
Abrogation of the rules against excessive accumulation of income in respect of new trusts to be set up, except that charitable trusts.
Granting of more powers to insure trust assets against risk of loss or damage by any event, and pay the premium out of the trust funds.
Having considered the essential features of the Trust Law (Amendment) Ordinance 2013, the advantages for the settlor in setting up a trust based in HK and with a HK trustee will depend mostly on the settlor’s personal circumstances and country of residence. Some may be attracted by the fact that HK is a major finance and business centre well known internationally compared to “exotic” jurisdictions.