An Act to make special provision for trusts of shares in companies
and for related matters, including provision for the retention by
trustees of shares in a company irrespective of the financial advantages
of disposal, for prohibiting trustees from intervening in the management
of the company except in certain circumstances, and for the appointment
and removal of directors of the company in accordance with the terms of
the trust instrument.
| Short title and
commencement. |
1. |
This Act may be cited
as the Virgin Islands Special Trusts Act, 2003 and shall come
into force on such date as the Governor may, by Proclamation
published in the Gazette, appoint. |
| Interpretation |
2. |
(1) |
In this Act, unless the
context otherwise requires |
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"business" in relation
to a company includes the holding of shares or other assets and
non-commercial activities; |
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"business risk" in
relation to a company includes |
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(a) |
any risk attached to
any business of the company, or any connected company, when
conducted in the manner in which it has in fact been conducted;
or |
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(b) |
any risk which can be
expected to be attached to any projected business of the
company; |
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"court" means the High
Court; |
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"designated shares"
means Virgin Islands shares comprised in a trust fund and in
respect of which a valid direction under section 4(1) has been
made; |
| No. 9 of 1990 |
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"designated trustee"
means a holder of a trust license under the Banks and Trust
Companies Act, 1990; |
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"interested person" in
relation to a trust means |
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(a) |
a beneficiary of the
trust; |
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(b) |
an object of a
discretionary power over any of the capital or income of the
trust; |
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(c) |
a parent or legal
guardian of any minor person falling within paragraphs (a) or
(b); |
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(d) |
where any of the
purposes of the trust are exclusively charitable, the Attorney
General; |
|
Cap. 303 |
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(e) |
an enforcer referred to
in
section 84A of the Trustee Ordinance; |
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(f) |
a protector; or |
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(g) |
an appointed enquirer. |
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"intervention call"
means a call by an interested person under section 9(1) for a
trustee to intervene in the affairs of a company; |
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"legal guardian" in
relation to a minor person means a person legally recognised as
his guardian in any jurisdiction with which the minor has a
substantial connection; |
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"office of director
rules" means rules referred to in section 7(1) and any
amendments thereto for the time being in force; |
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"trust fund" in
relation to a trust means property for the time being subject to
the trust; |
|
Cap. 285
Cap. 291 |
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"Virgin Islands shares"
means shares in a company incorporated under the Companies Act
or the International Business Companies Ordinance which is not |
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(a) |
a company which has a
license under the Banks and Trust Companies Act, 1990; |
| No. 5 of 1994 |
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(b) |
a company which is
licensed as an insurer under the Insurance Act, 1994 or which is
authorised to act as an insurance manager under that Act; |
| No. 6 of 1996 |
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(c) |
a company which is
registered as a public fund, or recognised as a private fund,
under the Mutual Funds Act, 1996; |
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(d) |
a company which is
licensed as a manager or administrator of mutual funds under the
Mutual Funds Act, 1996; |
| No. 8 of 1990 |
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(e) |
a company which has a
license under the Company Management Act, 1990. |
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(2) |
In this Act, |
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(a) |
references to voting
powers in respect of shares shall be taken to include references
to powers to direct the voting of shares held by a nominee; |
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(b) |
references in relation
to a trust to a protector are to any person or committee whose
consent is requisite for the exercise of any powers; |
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(c) |
references in relation
to a trust to an appointed enquirer are to any person who by, or
under any power conferred by, the terms of the trust is
appointed to make intervention calls |
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(d) |
references to the
memorandum and articles of a company are to its memorandum of
association and its articles of association; |
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(e) |
a company shall be
taken to be connected with another company if |
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(i) |
that other company holds, directly
or through a nominee, shares in it; |
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(ii) |
it is controlled directly or
indirectly by that other company; or |
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(iii) |
it is connected with a company
which is itself connected with that other company; |
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(f) |
a ground for complaint
concerning the conduct of a company's affairs is permitted if it
is specified as such in the trust instrument, and the expression
"permitted ground for complaint" shall be construed accordingly. |
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(3) |
In this Act, the
following definitions shall, where the context admits, apply in
relation to, or in the context of a provision referring to,
designated shares: |
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"company" means the
company that has issued the designated shares; |
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"disposal" means |
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(a) |
the exercise of voting
powers leading, or capable of leading, to the liquidation of the
company or the cancellation of the shares or of any rights
attached to them; |
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(b) |
the creation of any
legal or equitable interest in the shares; |
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and "dispose" shall be
construed accordingly; |
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"settlor" means the
person by whom the trust was created; |
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"trust" means the trust
on which the designated shares are held; |
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"trustee" means the
trustee for the time being of the trust; |
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"trust instrument"
means the instrument containing the terms of the trust. |
| Primary purposes of
this Act. |
3. |
The primary purpose of
this Act is to enable a trust of company shares to be
established under which |
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(a) |
the shares may be
retained indefinitely; and |
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(b) |
the management of the
company may be carried out by its directors without any power of
intervention being exercised by the trustee. |
| Designated shares.
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4. |
(1) |
Where a trust fulfils
the conditions specified in subsection (4), the terms of the
trust may, subject to subsection (3), direct that the provisions
of this Act shall apply |
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(a) |
to all Virgin Islands
shares comprised in the trust fund; or |
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(b) |
to such Virgin Islands
shares comprised in the trust fund as may be specified in the
direction. |
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(2) |
For the purposes of
subsection (1), Virgin Islands shares comprised in the trust
fund shall be taken to include Virgin Islands shares becoming so
comprised at any time after the creation of the trust, whether
added to the trust fund by way of additional settlement by the
original settlor or any other person, acquired on a new issue by
the company or in the course of management or administration of
the trust fund, or acquired in any other manner. |
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(3) |
A direction under
subsection (1) shall not be made in respect of shares added to
the trust fund by a trustee of another trust in the exercise of
a power in that other trust. |
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(4) |
The conditions referred
to in subsection (1) are |
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(a) |
the trust is created by
or on the terms of a written testamentary or inter vivos
instrument; |
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(b) |
a designated trustee is
sole trustee of the trust; |
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(c) |
the terms of the trust
require that any successor trustee (mediate or immediate) is a
designated trustee acting as sole trustee; |
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(d) |
the trust is not
created in the exercise of a power conferred by another trust. |
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(5) |
A direction under
subsection (1) may identify the shares to which it relates
either specifically or by any general description. |
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(6) |
Subject to subsection
(7), where a person ("the first person") is a settlor in
relation to a trust of designated shares and additional property
is settled on the terms of the trust by another person, the
first person shall be considered for the purposes of this Act as
the settlor in relation to the trust of the additional
property. |
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(7) |
If the trust instrument
provides that subsection (6) shall not apply, then, in the case
of a trust comprising property which has been provided by more
than one person, this Act shall apply as if each person had
created a separate trust in relation to the property which he
has provided. |
| Trustee's duties in
relation to designated shares. |
5. |
(1) |
Subject to section 9,
designated shares shall be held by the trustee on trust to
retain them. |
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(2) |
The trustee's duty to
retain designated shares shall have precedence over any duty to
preserve or enhance the value of the trust fund. |
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(3) |
Without prejudice to
subsection (2), the trustee shall not be accountable for losses
arising directly or indirectly from holding, rather than
disposing of, designated shares, including, in particular,
losses arising from any of the factors specified in subsection
(4). |
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(4) |
The factors referred to
in subsection (3) are |
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(a) |
the absence, or
inadequacy, of financial return from any designated shares; |
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(b) |
a decrease in value of
any designated shares; |
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(c) |
speculative or
imprudent activities of the company or depletion of the
company's assets by disposition; |
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(d) |
any act or omission of
the directors of the company, regardless of whether it is made
or carried out in good faith; |
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(e) |
liquidation or
receivership of the company; |
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(f) |
share market
fluctuation; |
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(g) |
the loss of opportunity
to make gains from reinvestment of the proceeds of designated
shares; |
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(h) |
the liabilities and
expenses of the company, including directors' remuneration and
expenses. |
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(5) |
Every reference in
subsection (4) to the company shall include a reference to any
company connected to it. |
| Restrictions on
trustee's powers. |
6. |
(1) |
Subject to the terms of
the trust and to sections 7 and 8, the obligations specified in
subsections (2) and (3) shall apply to a trustee of designated
shares. |
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(2) |
Voting or other powers
in respect of designated shares shall not be exercised by the
trustee so as to interfere in the management or conduct of any
business of the company, and in particular, the trustee |
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(a) |
shall leave the conduct
of every such business, and all decisions as to the payment or
non-payment of dividends, to the directors of the company, |
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(b) |
shall not require the
declaration or payment of any dividend by the company or
exercise any power the trustee may have of compelling any such
declaration or payment. |
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(3) |
A trustee of designated
shares |
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(a) |
shall take no steps to
instigate or support any action by the company against any of
its directors for breach of duty to the company; |
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(b) |
shall take no steps to
procure the appointment or removal of any of the directors; |
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(c) |
subject to section 9,
shall take no steps to wind up the company; and |
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(d) |
subject to the
provisions of this Act, shall not apply to the court for any
form of relief or remedy in relation to the company. |
| Provisions relating
to directors. |
7. |
(1) |
The trust instrument
may contain rules for determining the manner in which voting and
other powers attributable to designated shares should be
exercised by the trustee in relation to |
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(a) |
the appointment of
directors of the company, |
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(b) |
the removal of
directors, |
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(c) |
the remuneration of
directors, or |
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(d) |
any of the matters
referred to in subsection (2), |
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and may make provision
for those rules to be amended. |
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(2) |
The office of director
rules may, in particular |
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(a) |
require the trustee to
ensure that a particular person holds or retains office as
director; |
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(b) |
require any person to
be appointed to the office of director at some future date or
upon some future event; |
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(c) |
require the removal of
a director in specified circumstances; |
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(d) |
prescribe, subject to
the requirements of the memorandum and articles of the company
and the law of the Territory, the minimum and maximum number of
directors (whether one or more) to hold office at any time or
times; |
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(e) |
require the trustee, in
relation to the appointment and removal of directors, to act,
generally or in any specified circumstances, on the decision of
a third person or committee; |
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(f) |
provide for the
conferral of fiduciary duties on a person or committee referred
to in paragraph (e); or |
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(g) |
provide for the
establishment, continuance, and procedures of a committee
referred to in paragraph (3). |
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(3) |
Subject to subsection
(9) and to section (8), the trustee shall at all times use its
voting and other powers, so far as those powers allow, to ensure |
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(a) |
that the company has at
least the minimum number of directors to meet the requirements
of its memorandum and articles and the law of the Territory; and |
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(b) |
that, except in an
exempted case, the identity of the directors of the company
conforms with the office of director rules, if any, for the time
being applicable. |
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(4) |
No person becoming or
remaining a director of the company, whether in consequence of
the office of director rules or otherwise, shall, in the
capacity of director, owe fiduciary or other obligations under
the trust, or have any fiduciary or other obligations to the
trustee, but nothing in this subsection shall affect any duty
which that person owes, as director, to the company. |
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(5) |
Persons for whose
appointment the office of director rules may provide include |
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(a) |
any settlor or
protector of the trust; |
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(b) |
both ascertained and
ascertainable persons. |
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(6) |
A trustee shall incur
no liability for securing, sanctioning or not opposing the
appointment of a director where that appointment is in
conformity with the office of director rules. |
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(7) |
Where there are no
office of director rules, and in an exempted case, a trustee
shall incur no liability for securing, sanctioning, or not
opposing, the appointment of a director of the trustee's own
selection, if |
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(a) |
the trustee concludes
in good faith that the appointment in questions is consistent
with the wishes of the settlor; and |
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(b) |
the selection is not
motivated by a desire on the part of the trustee to reduce
business risk, except to the extent, if at all, that the trustee
in good faith concludes that a reduction would be consistent
with the wishes of the settlor. |
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(8) |
For the purposes of
this section, an exempted case is any case in which either |
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(a) |
the office of director
rules make no provision in that case; or |
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(b) |
the rules make
provision but the trustee concludes in good faith that it would
be impossible, unlawful, impracticable, or plainly inconsistent
with the wishes of the settlor, to ensure compliance with the
rules in that case. |
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(9) |
A trustee shall have no
duty |
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(a) |
to act pursuant to
subsection (3) unless and until it receives actual notice that
circumstances requiring such action have arisen; or |
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(b) |
to enquire as to
whether circumstances requiring action pursuant to subsection
(3) exist. |
| Cap. 304 |
|
(10) |
Where, on any question
concerning the appointment of a director, a trustee makes
application to the court under section 6 of the Trustees' Relief
Act, the court, in giving its opinion, advice, or direction,
shall not seek to reduce business risk, except to the extent, if
at all, that the court concludes that a reduction would be
consistent with the wishes of the settlor. |
| Intervention by
trustee in management in prescribed circumstances |
8. |
(1) |
Where, in relation to a
trust of designated shares, an interested person has a complaint
concerning the conduct of the company's affairs, and the ground
for that complaint is permitted, he may, in writing, call upon
the trustee to intervene in the affairs of the company to deal
with the complaint. |
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(2) |
A trust instrument may
specify one or more permitted grounds for complaint, but need
not specify any. |
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(3) |
Upon receiving an
intervention call, the trustee shall, if satisfied that the
complaint is substantiated, take such, if any, action as the
trustee considers appropriate to deal with the complaint in the
interests of the trust. |
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(4) |
Action taken under
subsection (3) may include |
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(a) |
making or procuring
changes in the directorship of the company in accordance with
the provisions of its memorandum and articles and the law of the
Territory, but otherwise on such terms as the trustee thinks
fit, provided that in making, procuring or maintaining any such
change, the trustee may disregard section 7(3)(b) if and for so
long as, in the opinion of the trustee, it is expedient to do so
for the purposes of dealing with the complaint; |
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(b) |
procuring action by the
company to recover any losses caused by the conduct giving rise
to the complaint; or |
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(c) |
seeking such advice on
the complaint and the manner of addressing it as the trustee
considers appropriate. |
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(5) |
In considering and
taking action under subsection (3), the trustee shall |
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(a) |
have regard to |
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(i) |
any wishes of the settlor; and |
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(ii) |
the efficient functioning of the
company; |
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(b) |
disregard business
risk, except to the extent that |
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(i) |
the ground for complaint consists
of or arises from any disagreement among the directors as to the
business risk, or |
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(ii) |
any wishes of the settlor require
business risk to be considered. |
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(6) |
After acting pursuant
to subsection (3), or deciding not to act, the trustee's
obligation to intervene shall be at an end unless and until
another intervention call is made. |
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(7) |
It shall be a ground
for declining to act on an intervention call if, apart from any
other reason for declining, the call is made on substantially
the same ground as one previously made, and there appears to the
trustee to be no reason to alter, or act further on, the
decision previously taken by it. |
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(8) |
Where a trust
instrument specifies one or more permitted grounds for
complaint, the following provisions of this subsection shall
apply: |
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(a) |
an interested person
may request the trustee to provide such information concerning
the affairs of the company and any connected company as is
reasonably required for that person to judge whether an
intervention call is necessary, and the trustee shall use all
reasonable endeavours to provide that information and may, if
considered necessary for this purpose, procure the replacement
of any of the directors with the trustee's own representative; |
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(b) |
where there is an
appointed enquirer he shall be under the following duties: |
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(i) |
a duty to make reasonable enquiries
as to whether there is a permitted ground for complaint as often
as appears appropriate in the circumstances, and not less than
once in any period of twelve months; |
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(ii) |
a duty to make an intervention call
under this section, and provide the trustee with evidence of the
relevant ground for complaint, whenever it appears to him to be
appropriate; |
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(c) |
where there is no
appointed enquirer, the trustee shall use all reasonable
endeavours to ensure that at all times at least one interested
person of full capacity is given the following documents and
information concerning the trust, but without prejudice to any
right of that person to documents and information apart from
this paragraph: |
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(i) |
a copy of the trust instrument and
other trust documents, |
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(ii) |
the name and address of the
trustee, |
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(iii) |
the name, registered office, and
principal place of business, of the company, |
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(iv) |
the names and addresses of all
directors of the company, |
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(v) |
the nature of the current
activities of the company, |
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provided that , where
practicable, any person to whom information is given under this
paragraph shall be a person who, in the reasonable opinion of
the trustee, has acquired, or is likely to acquire, by
appointment or otherwise, a substantial equitable interest in
some or all of the designated shares or their proceeds or is the
parent or legal guardian of such a person. |
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(9) |
All expenses incurred
in dealing with an intervention call or considering the
complaint on which it is based, including trustee remuneration
where applicable, and the cost of any advice, shall be borne by
the trust fund and its income in such proportions as the trustee
decides, and if there is any deficiency in liquid funds the
trustee may take such steps as are available to the trustee
under the memorandum and articles of the company and the law of
the Territory to make up the shortfall out of dividends from the
company and may, if considered necessary for this purpose,
procure the replacement of any of the directors with the
trustee's own representative. |
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(10) |
The trustee shall,
where practicable, procure the removal from office of a director
appointed for the purpose specified in subsection (8)(a) or (9)
when the purpose for which the director was appointed is
achieved, if removal is appropriate for the purpose of any
action decided upon by the trustee pursuant to subsection (3)
or, subject to such action, for the purpose of compliance with
the office of director rules. |
| Power to dispose. |
9. |
(1) |
This section shall
apply to a trust of designated shares. |
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(2) |
Subject to subsection
(3) and to the terms of the trust instrument, the trustee shall
have power, in the management and administration of the trust
fund, to sell or otherwise dispose of designated shares, but the
existence of this power |
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(a) |
shall not carry an
implied duty to exercise it for the purpose of preserving or
enhancing the value of the assets of the trust or to consider
its exercise for that purpose; and |
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(b) |
shall not render the
trustee liable, in consequence of not exercising it, for losses
of this kind referred to in section 5(3). |
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(3) |
Subject to section 11,
the trustee shall not, unless the trust instrument otherwise
provides, sell or dispose of designated shares in the management
or administration of the trust fund without |
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(a) |
the consent of the
directors of the company or of a majority of them if more than
one; and |
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(b) |
such, if any, consents
as are made requisite by the trust instrument. |
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(4) |
A sale or other
disposal in exercise of the power conferred by subsection (2)
shall be made in such manner, and upon such terms and
conditions, as the trustee, acting in its fiduciary capacity,
thinks fit. |
|
Cap 303 |
|
(5) |
Section 59 of the Trustee Ordinance shall not apply to the
trust to the extent that it permits the court to confer upon the
trustee any power of sale or other disposal. |
| Enforcement. |
10. |
(1) |
Where in the case of a
trust of designated shares there is a breach of a duty or
obligation imposed on this Act on its trustee, any of the
persons specified in subsection (3) may, subject to the terms of
the trust, apply to the court for relief. |
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(2) |
The court shall, if
satisfied that the application under subsection (1) is well
founded, grant relief by |
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(a) |
making such order as it
considers appropriate to attain, as nearly as may be, the
outcome that the court considers would have been, or would most
likely have been, attained in respect of the trust, the company,
its directors and generally if the breach had not occurred; |
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(b) |
making such, if any,
supplementary or incidental order as the court deems, in the
circumstances of the case, reasonably required having regard to
the primary purpose of this Act state in section 3, |
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provided that no order
shall be made under this subsection to prejudice any interest in
property which was acquired from the trustee in good faith, for
value and without actual or constructive notice of the trust, or
from the company in good faith and for full consideration, or to
prejudice any interest deriving from such an interest. |
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(3) |
The persons referred to
in subsection (1) are |
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(a) |
any interested person; |
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(b) |
any director of the
company; |
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(c) |
any person who, under
applicable office of director rules, would be a director if the
trustee had complied with its obligations under section 7. |
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(4) |
Without prejudice to
subsection (1) to (3), but subject to subsection (5), where in
the case of a trust there is a breach of a duty or obligation
imposed by this Act on its trustee, the breach shall be, and be
actionable in civil proceedings as, a breach of the trust. |
| |
|
(5) |
Where civil proceedings
are instituted in relation to a breach of a duty or obligation,
the court shall, in granting any remedy, take account of any
relief granted or available in respect of the breach on an
application under subsection (1). |
| |
|
(6) |
References in
subsection (4) to a breach shall be taken to include references
to a prospective breach. |
| |
|
(7) |
Subject to the terms of
the trust and to sections 7 and 8, where designated shares are
held on trust, no act or omission of a director of the company
shall be a ground for any person to seek intervention by the
court in the affairs of the trust. |
| Power of court to
order disposal. |
11. |
(1) |
Where it is shown to
the court that the retention of the shares is no longer
compatible with the wishes of the settlor, the court shall have
power, on the application of any interested person, to order or
authorise a sale or other disposal of any designated shares, and
a sale or other disposal so ordered or authorised shall not
require any consent referred to in section 9(3). |
| |
|
(2) |
In making an order, or
giving authority, under this section, the court may impose such,
if any, terms and conditions in relation to the sale or other
disposal as it thinks fit. |
| Modification of
rule in Saunders v. Vautier. |
12. |
(1) |
Notwithstanding any
rule of equity or practice of the court to the contrary, but
subject to subsection (2), neither a beneficiary who is solely
interested in any designated shares, nor all the beneficiaries
who together are the persons interested in any designated
shares, shall be entitled, although in existence and ascertained
and of full capacity, to call for or direct a transfer of those
shares or to terminate or modify the trust relating to them if
and so far as that entitlement is, without offending any rule of
perpetuity or remoteness, excluded by the trust instrument. |
| |
|
(2) |
No such exclusion of
entitlement shall have effect, or continue to have effect, after
the expiration of 20 years from the creation of the trust. |
| |
|
(3) |
Where a person who
receives designated shares, or an interest in them, is a person
who, by virtue of such an exclusion or entitlement, has no
present right to receive the shares or that interest, he shall,
without prejudice to the generality of subsection (1), hold
those shares or that interest on trust to transfer the same to
the trustee, and the court shall order him so to do on the
application by the trustee or any person specified in section
10(3). |
|
Cap. 303 |
|
(4) |
During any such
exclusion of entitlement,
section 58 of the Trustee Ordinance shall not apply to the
trust. |
| Disqualification of
trustee as a director. |
13. |
A trustee of designated
shares shall not be, or become, a director of the company. |
| Ascertaining wishes
of settlor. |
14. |
(1) |
Where it is necessary
under this Act for the court or a trustee to ascertain the
wishes of the settlor, the following provisions of this section
shall apply. |
| |
|
(2) |
Where the settlor is
alive, the settlor shall, where possible and practicable, be
consulted as to his wishes. |
| |
|
(3) |
Where the settlor is
dead, or it is not possible or practicable to consult him, his
wishes shall be taken to be |
| |
|
|
(a) |
such wishes as he has
most recently communicated to the trustee, or |
| |
|
|
(b) |
where no wishes or
relevant wishes have been communicated, such as the court, or
the trustee in good faith, believes most likely to have been his
wishes from the evidence available to it. |
| Limitation of
trustee's duties. |
15. |
(1) |
A trustee of designated
shares shall have no fiduciary responsibility or duty of care in
respect of the assets of, or the conduct of the affairs of, the
company, except when acting, or required to act, on an
intervention call. |
| |
|
(2) |
Without prejudice to
the generality of subsection (1), a trustee of designated shares |
| |
|
|
(a) |
shall not be required
to make any enquiry as to whether any facts exists which would,
or may, whether with or without any other information, form the
basis of an intervention call; |
| |
|
|
(b) |
shall not be obliged to
inform any interested person of any fact of which it becomes
aware, or which it suspects, concerning the assets of the
company or the conduct of its affairs; |
| |
|
|
(c) |
shall not incur
liability as accessory to a director's breach of duty by reason
of any omission on the part of the trustee to take action where
the trustee is aware, or suspects, that there has been or will
be such a breach, or by reason of any act or omission in
compliance with the provisions of section 7. |
| Regulations. |
16. |
The Minister may make
regulations for the purpose of carrying the provisions of this
Act into effect. |
V. Inez
Archibald,
Speaker.
Clerk of
the Legislative Council.
