Hong Kong Gazettes Trust Law Reform
Wednesday, February 13, 2013
The Trust Law (Amendment) Bill 2013, gazetted on February 8, is aimed at modernizing
trust law in Hong Kong by enhancing trustees' default powers while providing
for appropriate checks and balances, thereby making trusts administration more
Secretary for Financial Services & the Treasury, Prof KC Chan, said Hong
Kong must modernize its trust laws to enhance its status as an international
asset-management center. "The bill, if passed, will bolster the competitiveness of Hong Kong's trust
services industry and attract settlors to set up trusts in Hong Kong,"
At the end of 2011, Hong Kong’s trust industry held assets of an estimated
HKD2.6 trillion (USD335bn), and more than 60% of the city’s asset management
business originated from funds from non-Hong Kong investors.
Hong Kong trust law is based mainly on common law, supplemented by the Trustee
Ordinance and the Perpetuities & Accumulations Ordinance, which have not
been substantially reviewed or modified since they were enacted in 1934 and
1970. Some of their provisions are outdated and cannot meet present-day trusts'
Following a review of the Trustee Ordinance and the Perpetuities and Accumulations
Ordinance, and in response to the various modernization proposals put forward
by the trust industry and recent trust law reform in the United Kingdom and
Singapore, the Government conducted public consultations in 2009 and 2012, respectively,
on the reform proposals.
The reform package seeks to clarify trustees' duties and powers and better
protect beneficiaries' interests. The major proposals would therefore introduce
a statutory duty of care on trustees; provide trustees with general powers to
appoint agents, nominees and custodians, as well as to insure trust property
against risks of loss; allow professional trustees to receive remuneration;
provide for a court-free process for the retirement of trustees on beneficiaries'
directions; and impose statutory control on exemption clauses that seek to relieve
professional trustees from liabilities.
In addition, the bill would also allow settlors to reserve to themselves some
limited power; abolish outdated rules against perpetuities and excessive accumulations
of income; and relax the market capitalization and dividend requirements for
investment in the equity market.
Respondents were generally in support of the legislative proposals, considering
that the reformed regime would provide a more robust legal framework facilitating the
effective operation of present-day trusts, which is important for enhancing Hong
Kong's status as an international asset management center.
The Government has taken into account feedback from the industry and other
stakeholders when drawing up the legislative proposals. The bill will be
presented to the Legislative Council for first reading on February 20, 2013.