Limited company as trustee

I act for a trust that owns a landed estate. Some of the trustees wish to retire which would leave one individual as trustee. It has been proposed that two new limited companies with nominal share capital become trustees. I feel uneasy about this but I’m finding it difficult to figure out exactly why. Can anyone convince me that I’m not right to feel uneasy please?

Ann Corke
Humphries Kirk LLP

Who would be the shareholders and directors of these two companies?

Paul Davidoff
New Quadrant Partners Ltd

There are probably many trusts managed by companies (private trust companies?) especially formed for that purpose.

The use of private trust companies offshore is increasingly popular and is seen as enhancing the confidentiality of the trust.

There is probably no fundamental reason why such companies cannot act as trustees of a trust within the UK.

Whoever has the power of appointment of trustees will be exercising a fiduciary power and will need to be satisfied as to the competence of the newly formed companies (or, probably more correctly, their directors) to act as trustee.

Issues that could be of concern include:

  1.       As they each have a nominal share capital, they are the corporate equivalent of men of straw and may be unable to satisfy any claim against them that might arise in the future
    
  2.       If those responsible for running the companies are also beneficiaries, the exercise of any trustee powers in their favour could be impeachable
    
  3.       As they are not trust corporations, neither can be a sole trustee nor enjoy any other benefit that applies to a trust corporation
    
  4.       As a corporate trustee, they may need to register with HMRC to undertake trustee business
    

I suggest it is a case of understanding the rationale why companies should be trustees in the present instance, rather than individuals, which will ease concerns over the proposed arrangement.

Paul Saunders

I can’t see any actual barriers. The downside for the beneficiaries is that their trustees are men of straw - i.e. in the event of a breach they cannot go after companies which have no “personal” assets.

Andrew Goodman
Osborne Clarke LLP

Especially if the trust is large and complex I could foresee advantages from corporate trustees. This should avoid having to put trust assets in the names of new trustees on future changes. A share transfer of the companies would be more straightforward. And if the shares in the companies were owned by the trust a change of trustees would involve no more than a change of the directors.

Jon Zigmond

Would this not involve the companies being on their own share register? I suspect that might pose some other problems. Offshore PTCs are generally owned by a separate purpose trust or family members.

Andrew Goodman
Osborne Clarke LLP

If this were a problem (is it?) the shares could be owned by the trust but registered in the name of a nominee.

Jon Zigmond