Modernisation of Hong Kong Trust Law – further consultation announced
The Hong Kong Government has announced a further consultation period in its review of the jurisdiction’s trust law. The review is being conducted with the intention of modernising the existing Trustee Ordinance to ensure the trust law is in line with other comparable common law jurisdictions and to provide an improved framework for the operation of trusts in the jurisdiction. The current law dates from the 1930 and is widely viewed as requiring modernisation.
The further consultation period will include a review of the proposed legislative reform of trustees’ powers and duties, and improvements to the protection of beneficiaries interests under a trust. The authorities are also considering updating the law to abolish the rule against perpetuities for new trusts and the rule against excessive accumulations of income for new non-charitable trusts.
Draft amendments to the legislation have now been produced and form the basis of the recently published consultation.
These draft amendments propose the imposition of a statutory duty of care on trustees for acts of negligence, in addition to fraudulent acts. The amendments would also cover an extension of the powers of a trustee to permit the appointment of agents, custodians and nominees, as well as giving the trustees the power to insure trust property against loss. A provision that would permit professional trustees to charge for their trust services has also been included.
Consideration is also being given to additional powers and protection of trust beneficiaries. Amongst the proposals is a new procedure that would allow beneficiaries, acting unanimously, to remove trustees without having to pursue the matter before the courts.
Trustee exemption clauses are also under review with the intention of limiting the use of such clauses, which are included in trust deeds to restrict, limit or exclude the trustees liability. Other jurisdictions permit their use, but only if the to the settlor has been properly advised at to the effect of such clauses.
A broader review has already been conducted on two issues, the beneficiaries’ right to information and the provisions against forced heirship rules, and the conclusions now reported. The consultation on the right of a beneficiary to information, found there were no imminent or compelling reasons to introduce legislation at the present time. In the circumstances, this issue is being kept under review and developments elsewhere are being monitored.
Provisions against forced heirship rules found that further examination is required of the effect and interaction of such rules with existing provisions in foreign jurisdictions. As a result a further examination is being conducted with the intention of incorporating provisions against forced heirship at the conclusion of the study.
The consultation period is open until 21 May and it is anticipated that the final draft of the legislation will be available in the 2012-13 legislative calendar.