Hong Kong trusts law reform takes a step forward

After a number of years in gestation, the Trust Law (Amendment) Bill was gazetted on 8 February 2013. The Bill is widely regarded as a necessary modernisation of Hong Kong's trusts laws, which have remained largely unchanged for decades. This was seen as all the more necessary given the changes made to Singapore's trusts regime in 2006.

The key proposed changes include:

• The provisions which limit the length of the life of a trust (known as the "perpetuity period") are to be abolished such that a Hong Kong trust can now last forever (the existing rules which meant that charities can last indefinitely will continue unaffected).
• The rules against excessive accumulations are also to be abolished.
• Trustees of Hong Kong trusts will be subject to a new statutory duty of care.
• Hong Kong will have its own "firewall" legislation which seeks to limit the impact of forced heirship rules (i.e. rules in certain jurisdictions which limit someone's freedom to dispose of their estate by providing that prescribed portions of their estate must be given to specific heirs).
• Professional trustees will have statutory limits on the exculpation clauses (clauses which seek to limit a trustee's liability) which can be included in trust documentation.
• Statutory provisions will make clear that those setting up trusts (settlors) can reserve powers of investment or asset management to themselves without making the trust invalid.  The reservation of powers to settlors is particularly attractive to settlors in this part of the world and this provision will bring welcome certainty.

Please contact Gareth Thomas or Richard Norridge if you wish to discuss.