Articles
HKTO Amendment Bill
(a) The long journey
Hong Kong is a major financial services and trust centre, but its primary trust law, the HKTO, has not been modified since 1934 while other comparable jurisdictions have embarked on modernizing their trust legislation over the past decade. The HKTA and STEP saw the need to modernise our trust law and over the last 8-9 years, we have worked closely with, and provided substantive support to, the FSTB. Today I am very happy to report that the Amendment Bill was passed by the Legislative Council, which will take effect on 1 December 2013.
A supplemental press statement on the passage of the Bill is hereby enclosed.
My thanks go to the members of the Joint Committee on Trust Law Reform and HKTA Executive Committee for their hard work and support in bringing this initiative to fruition.
(b) Quote from Professor KC Chan, Secretary for FSTB
On the occasion of the passage of the bill, Prof. KC Chan, Secretary for FSTB, said, “The Bill marks an important milestone in the development of our trust law. Through the Bill, we seek to modernise our trust law and bolster the competitiveness and attractiveness of Hong Kong's trust services industry, thereby enhancing Hong Kong's status as an international asset management centre. We are delighted to receive the support from the LegCo Bills Committee and the industry for the policy objectives of and the detailed proposals in the Bill. We believe that the proposals in the Bill would facilitate trustees in their administration of trusts, better protect the interests of beneficiaries and attract more settlors to set up trusts in Hong Kong.”
(c) Highlights of the Bill
Enhancing trustees’ default powers
o power to appoint agents, nominees and custodians;
o to insure trust property against risk of loss or damage;
o enabling trustees acting in a business or profession to receive remuneration;
o scope of authorized investments (e.g. revising the conditions regarding investment in shares specified in the Second Schedule)
· Provide for appropriate checks and balances so that trustees will exercise the new powers properly
o Introduce a new default statutory duty of care
o Statutory control on exemption clause for trustees acting in a professional capacity – subject these clauses not to allow trustees to be exempted from liability arising from fraud, willful misconduct and gross negligence.
o For appointment of agents, nominees and custodians: trustees is required by law to give clear guidance to agents who are delegated with asset management functions; restrictions on choice of nominees and custodians
o Beneficiaries’ (of full age and capacity and are absolutely entitled to the trust property) rights to appoint and retire trustees
· Provide for validity of certain trusts – reserved powers by settlors (such as the power of investment or asset management functions)
· Abolish the rule against perpetuities and change the rule against excessive accumulation of income – with prospective effect for new non-charitable trusts and allow settlors to set up perpetual trusts in HK. Retain certain restrictions on accumulations of income for new charitable trusts.
Provision against forced heirship rules – introduce a statutory provision to the effect that foreign forced heirship rules will not affect the validity of a lifetime transfer of movable assets to a trust expressed to be governed by HK law.