Private/Non-Pension Trusts Part III - Commercial Trust Arrangements

In part 1 of this (very) occasional series of blogs on private and other non-pension trusts, we looked at the origins of trust law and the basic concept of trusts.  It is simple enough - someone (the settlor) gives property of any kind to one or more persons (the trustees) to hold for the benefit of others (the beneficiaries).  

In part 2 we examined some of the uses of trusts in the private sphere, such as family trusts.  In this part 3 of the series, we will consider the uses of trusts in commercial transactions, such as trusts to ensure commercial anonymity, security trusts, share arrangements and the like. As with private trusts, we will explain ourselves by way of some examples.

Trust arrangements are used in a wide variety of commercial transactions and for various commercial purposes, including:

• Holding loan security. A security trustee may be appointed for the simple but important purpose of holding security over land or other assets on behalf of a group of private or pension investors in a property development or for more complex and high value syndicated loan arrangements. 
• Commercial supply arrangements. A trust may be put in place to provide security for one party for the performance of the other’s obligations.  It could be as straightforward as funds being placed in an account to be held by a trustee to be released in specified situations, potentially in tranches to a supplier, to give the supplier confidence that the funds are available once it performs its own obligations.
• Asset holding. An asset, be it a property or another type of asset, may be held by a nominee because the beneficial owner is not in a position to hold the asset itself, perhaps for regulatory reasons or for commercial anonymity.
• Share voting. Parties to a commercial arrangement may place shares in the hands of a trustee to ensure agreed corporate strategies are adhered to by the parties concerned.
• Exempt unit trusts. Such vehicles may be used for investment by tax-exempt investors such as charities and pension schemes.

The involvement of an independent professional trustee:

1. ensures proper and compliant governance of the structure;
2. provides reassurance to the participants;
3. ensures external factors, including legislative and regulatory developments, are recognised and addressed;
4. provides impartiality and expertise in relevant decision-making;
5. provides ready access to a market-wide perspective on all aspects of the structure; and
6. is, in certain circumstances, required by legislation.

With its long experience of providing trustee and administration services and an in-house team of legal, tax and trust practitioner experts, ITL can discuss with you and your advisers, and provide, the appropriate commercial trustee services for your requirements.

For further information, please contact Jeremy Mitchell, our Trustee Services Director, for information on ITL’s commercial trust services:

T: +353 1 614 8064

E: jeremy.mitchell@trustee.ie

_{*Please note this content is the view of the author and not of Independent Trustee Company}