The Business Trust Flashcards
Define a Business Trust
A trust that carries on Business, utilize trust assets to carry on business for a profit
Legal nature of a Trust
a Trust is not a Person
The Trustee does not have any personal rights to the trust assets
Trust agreement must be written
requirements for a Creation of a Trust
Founder must intend to create a trust
A will or legal agreement must be legally valid
the Trust assets and beneficiaries must be ascertainable
The Trust must state the objective
list the types Two Business trusts
Private Business - parties are know to each other
i.e partnership, private company or close corporation
Public Business - Public company, invite members of the public to invest capital in the trust, thus they become beneficiaries
Name the statutory measures applicable to a Trust
Collective Investment schemes control act 45 of 2002
- Invited to Invest Money
- Participatory Interest is due to investor
- Share risk of the scheme
Companies ACT 61 of 19273
- Section 143 determines no person shall offer shares to the public other than in accordance with the provisions of the Act
The advantages of a Business Trust are?
a) Limited Liability - The debts of the trust are payable from the Trust estate
b) Continued Existence - The trust may continue is requested
c) Limited Regulatory duties - do not need to comply with rules applicable to close corporations and companies
d) Participation by legal persons - Legal and natural persons may be parties to a trust
e) Flexibility - the trust may be structured in a way that income tax and estate benefits may be obtained
Who are the Main parties to a trust
Founder
Trustee
Beneficiary
What are the duties of a Trustee
a) he must observe his duties of the trust document
b) he must fulfil his duties of impartially
c) he must act with care and skill
d) he must not keep trust assets seperate from his own
e) he must keep it from from liens
f) manage trust assets in order to produce an income
g) he must open a Trust account
h) his address must be made know to the master of court
Power of the Trustee entails
he may not sell, utilize or expose trust assets to business risks
The trustee may earn remuneration for his duty.
Termination of a Trustee :
In the event of the Trustees death
If the trust document dictates reason for termination
if he resigns
if the master/court removes a trustee
Contracting on behalf of a trust
As the trust is not a legal person, it cannot conclude a contract on its own. The trustee, acting as the representative of the trust, concludes any contracts. The trustee acquires his authorisation to contract on behalf of the trust from the trust document. He may, therefore, only act within the limits laid down by the document. If there are two or more trustees, the general rule is that they should act jointly.
Variation of the Trust Document
the provisions of the trust document can be amended in a variety of ways. - the document can usually be amended by agreement between the founder and the trustee (Crookes NO v Watson 1956 1 SA 277 (A)).
Section 13 of the Trust Property Control Act
a court may amend a trust instrument under certain circumstances. When the document contains a provision which brings about consequences which, in the opinion of the court, the founder of a trust did not contemplate or foresee and which:
a) hampers the achievement of the objects of the founder
b) prejudices the interests of the beneficiaries
c) is in conflict with public interest.
Collective Investment Schemes Control Act 45 of 2002
the regulation and control of the establishment and administration of collective investment schemes. The Act does not define a unit trust scheme, but defines collective investment schemes as:
A scheme, in whatever form in pursuance of which members of the public are invited or permitted to invest money or other assets in a portfolio and in terms of which:
1. Two or more investors contribute money or other assets to and hold a participatory interest in a portfolio of the scheme through shares, units or any other form of participatory interest.
2. The investors share the risk and the benefit of the investment in proportion to their participatory interest in a portfolio of the scheme or any other basis determined in the deed, but not a collective investment scheme authorised by any other Act.
