Articles

Master’s Directive regarding the appointment of Independent Trustees

The Master’s directive of requiring an independent Trustee to be appointed as a trustee where the Trust is registered for the first time with the Master and it emerges from the Trust deed that the Trust is a “family business trust” arises as a result of the decision in Land and Agricultural Bank of South Africa v Parker and Others 2005 (2) SA 77 (SCA) .

A Family Business Trust is a Trust with the following combined characteristics:

  1. The Trustees have the power to contract with independent parties, thereby creating Trust creditors;
  2. The Trustees are all beneficiaries; and
  3. The beneficiaries are all related to one another.

Why the requirement for an independent trustee?

In the Parker case Appellate Judge Cameron stated the following:

‘…the Master should in carrying out his statutory functions ensure that an adequate separation of control from enjoyment is maintained in every Trust. This can be achieved by insisting on the appointment of an independent outsider as Trustee to every Trust in which (a) the Trustees are all beneficiaries and (b) the beneficiaries are all related to one another… ’

An independent trustee:

  1. Must be an independent outsider who understands the responsibilities of a Trust;
  2. May be a professional accountant, admitted attorney, advocate who is affiliated to the relevant professional body or association;
  3. Has no family relation, connection to any of the of existing or proposed trustees, beneficiaries or founder of the Trust;
  4. Is not disqualified by the Trust Property Control Act, 1988 from acting as trustee

Under certain circumstances, the Master may repeal the requirement for an independent Trustee if the founder can show good cause why it is not necessary to appoint one, or if the Master requests that the annual financial statements be audited.

The independent Trustee must also ensure that the trust is tax compliant.

The cost associated with the appointment of an independent Trustee is relative to each Trust and depends on the complexity of the Trust, the risks involved, and the nature of the assets that are being managed.

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