What are the merits of modernising the Trustee Ordinance (“TO”)?
Reforming Hong Kong’s trust law is a key component in the Government’s strategy to enhance Hong Kong’s position as a major asset management centre in Asia. Our asset management business has huge potential notwithstanding the recent setback under the financial tsunami.
Modernising our trust law will strengthen the competitiveness and attractiveness of our trust services industry. It will encourage more local and overseas settlors to choose Hong Kong law as the governing law of their trusts and to administer their trusts in Hong Kong.
A modern and user-friendly TO will benefit the settlors, trustees and beneficiaries by providing more clarity and certainty in law. It will provide trustees all modern powers necessary for the efficient management of trusts.
Why review is needed?
Some of the provisions in the TO, especially those concerning the powers and duties of trustees, are outdated. They were last enacted in 1934. The rules against perpetuities and excessive accumulations of income in trusts under the Perpetuities and Accumulations Ordinance (“PAO”) are complex and fail to meet market needs.
How is the review conducted?
We have benefited from the inputs of the Hong Kong Trustees’ Association Limited (“HKTA”) and the Society of Trust and Estate Practitioners (Hong Kong Branch) (“STEP”). In addition to working closely with the relevant Government departments and financial regulators, we have also engaged some lawyers, academics and practitioners specialised in the trust field.
Comparable common law jurisdictions like the United Kingdom (“UK”) and Singapore have reformed their trust laws in recent years. We can leverage from their reform experience. We have also critically reviewed some of the reform proposals in the light of the experience learned from the financial crisis. (For example, instead of following the UK and Singapore in giving trustees a general power of investment, we are inclined to retain the range of authorised investments in the Second Schedule (“Schedule 2”) to the TO as “safe harbour” limits that can be overridden by trust instruments or orders of the court.)
We will also invite public views on several proposals put forward by the trust services industry to promote the use of Hong Kong trust law. These proposals are mainly based on the experiences of off-shore jurisdictions such as the British Virgin Islands, Cayman Islands and Jersey. We will form a view on these proposals after hearing the views of all stakeholders.
Charitable trusts may need to be treated differently in several areas, such as trustees’ power to employ agents and professional trustees’ entitlement to receive remuneration. We will engage them in the consultation process.
What is the consultation and review timeframe?
The consultation will last 3 months (from 22 June to 21 September). We aim to draw consultation conclusions by the end of 2009, with a view to introducing legislative amendments into the Legislative Council in 2010-11.
Reforming Hong Kong’s trust law is a key component in the Government’s strategy to enhance Hong Kong’s position as a major asset management centre in Asia. Our asset management business has huge potential notwithstanding the recent setback under the financial tsunami.
Modernising our trust law will strengthen the competitiveness and attractiveness of our trust services industry. It will encourage more local and overseas settlors to choose Hong Kong law as the governing law of their trusts and to administer their trusts in Hong Kong.
A modern and user-friendly TO will benefit the settlors, trustees and beneficiaries by providing more clarity and certainty in law. It will provide trustees all modern powers necessary for the efficient management of trusts.
Why review is needed?
Some of the provisions in the TO, especially those concerning the powers and duties of trustees, are outdated. They were last enacted in 1934. The rules against perpetuities and excessive accumulations of income in trusts under the Perpetuities and Accumulations Ordinance (“PAO”) are complex and fail to meet market needs.
How is the review conducted?
We have benefited from the inputs of the Hong Kong Trustees’ Association Limited (“HKTA”) and the Society of Trust and Estate Practitioners (Hong Kong Branch) (“STEP”). In addition to working closely with the relevant Government departments and financial regulators, we have also engaged some lawyers, academics and practitioners specialised in the trust field.
Comparable common law jurisdictions like the United Kingdom (“UK”) and Singapore have reformed their trust laws in recent years. We can leverage from their reform experience. We have also critically reviewed some of the reform proposals in the light of the experience learned from the financial crisis. (For example, instead of following the UK and Singapore in giving trustees a general power of investment, we are inclined to retain the range of authorised investments in the Second Schedule (“Schedule 2”) to the TO as “safe harbour” limits that can be overridden by trust instruments or orders of the court.)
We will also invite public views on several proposals put forward by the trust services industry to promote the use of Hong Kong trust law. These proposals are mainly based on the experiences of off-shore jurisdictions such as the British Virgin Islands, Cayman Islands and Jersey. We will form a view on these proposals after hearing the views of all stakeholders.
Charitable trusts may need to be treated differently in several areas, such as trustees’ power to employ agents and professional trustees’ entitlement to receive remuneration. We will engage them in the consultation process.
What is the consultation and review timeframe?
The consultation will last 3 months (from 22 June to 21 September). We aim to draw consultation conclusions by the end of 2009, with a view to introducing legislative amendments into the Legislative Council in 2010-11.
Consultation Paper (PDF format)
FAQ (PDF format)
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