Key Components of a Trust

A Trust consists of several important elements:

• Author: The person who creates the Trust and places confidence in the Trustees.
• Trustee: The individual or entity responsible for managing the Trust Property as per the Trust Deed.
• Beneficiary: The person or group for whom the Trust is established.
• Trust Property: The assets or property held under the Trust.
• Instrument of Trust: The legal document that defines the terms, responsibilities, and conditions of the Trust.

At Alam and Associates, we ensure that every Trust is carefully drafted and structured, clearly defining the roles and responsibilities of all parties to protect the interests of both Authors and Beneficiaries.

As per Section 6 of the Trusts Act, 1882, a Trust is valid when the Author clearly expresses, through words or actions:

(a) the intention to create a Trust,

(b) the purpose of the Trust,

(c) the Beneficiary, and

(d) the Trust Property.

Types of Trusts

Trusts are generally categorized into two main types:

1. Private Trusts: Created for the benefit of specific individuals or a group. These Trusts primarily serve private interests but may also provide incidental public benefits.
2. Public or Charitable Trusts: Established for the public good, such as supporting education, healthcare, or other social causes.

At Alam and Associates, we provide expert guidance on both private and public Trusts, helping clients structure them to achieve personal, family, or charitable objectives.

Purpose and Creation of a Trust

A Trust must have a clear and legal purpose, such as supporting education, medical aid, or charitable activities. If the purpose is vague or unlawful, the Trust may be invalid. At Alam and Associates, we help clients define their Trust’s objectives and ensure full legal compliance. This includes drafting and registering the Trust Deed, which outlines the Trust’s purpose, assets, and the responsibilities of the Trustees. We also ensure the proper transfer of Trust Property in accordance with legal requirements, completing the process smoothly and efficiently.

Formation and Registration of a Trust

Setting up a Trust does not require prior government approval, but registration is mandatory for certain types of property.

Registration Process

Step 1: Identify the Proper Registration Office

For immovable property, the Trust Deed must be registered at the local Sub-Registrar’s office where the property is located, as per Section 28 of the Registration Act, 1908.

For movable property, registration is optional, but it can be done where the Trust operates or where its registered office is located.

Step 2: Determine the Registration Fees

As per S. R. O. No. 254-Law/2014, the fee is 2% of the Trust’s value, with a minimum of BDT 100.

Stamp duty for Trust Deeds is also 2% of the consideration, as per the Stamp Act, 1899.

Step 3: Sign the Trust Deed

The Author and Trustee(s) must sign in front of the registering officer. Two witnesses must also sign the document.

Step 4: Obtain a Certified Copy of the Trust Deed

The Trust’s creator must submit an application to the Sub-Registrar’s office to get a certified copy. After submission, the officer will issue a receipt.

Step 5: Start Operating the Trust

The registered Trust Deed allows the Trust to open a bank account and conduct its activities.

The full registration process typically takes 7-10 working days, but may vary.

Step 6: Register Under the Societies Registration Act, 1860 (For Charitable Trusts)

If a Trust has charitable objectives, it can be registered as a Society under the Societies Registration Act, 1860 through the Registrar of Joint Stock Companies and Firms (RJSC).

Requirements:

• At least 7 members (trustees)
• Draft Articles and Memorandum of Association
• Application to RJSC with all required documents

Registration Steps:

• Obtain name clearance from RJSC
• Submit an application with the Trust Deed and clearance letter
• Pay government fees
• Undergo security checks by law enforcement agencies i.e., Special Branch of Police and National Security Intelligence etc.
• If approved, receive registration certificate
• Additional Registration for Foreign Donations
• To receive foreign donations, the Trust must register with the NGO Affairs Bureau (NGOAB) under the Foreign Donations (Voluntary Activities) Regulations Act, 2016.

This process may take 1-2 months depending on the complexity of the matter.

Extinction of a Trust

A Trust ends when its purpose is fulfilled, becomes illegal, or can no longer be achieved, such as when there are no Beneficiaries. At Alam and Associates, we provide legal guidance throughout the Trust’s lifespan and ensure its proper dissolution when needed, fully complying with legal requirements.

Advantages of Establishing a Trust

Establishing a Trust in Bangladesh offers several benefits, making it a valuable tool for asset protection, management, and charitable activities. A Trust ensures legal security, allowing assets to be managed and distributed as per the creator’s intentions. It provides tax benefits and financial efficiency, helping to minimize liabilities while safeguarding wealth for future generations. Trusts also enable flexibility in governance, avoiding complex regulatory requirements compared to companies or NGOs. For charitable purposes, a Trust allows long-term impact, as it can receive foreign donations upon registration with the NGO Affairs Bureau (NGOAB). Additionally, confidentiality is a key advantage, as Trusts are not publicly disclosed like companies. Trusts also ensure continuity, meaning assets remain protected even if the founder passes away or becomes incapacitated. At Alam and Associates, we assist clients in establishing and managing Trusts, ensuring compliance with Bangladeshi laws while maximizing benefits for Beneficiaries.

Challenges and Legal Considerations

Although Trusts offer flexibility, they also have certain limitations. Trustees are personally responsible for any breach of trust, and profits cannot be distributed as dividends to board members. Additionally, to receive foreign donations, a Trust must be registered with the NGO Affairs Bureau (NGOAB). At Alam and Associates, we provide expert legal guidance to help clients navigate these challenges, ensuring full compliance with all regulatory requirements.

(i) Nature of Beneficiaries: A Trust can either benefit specific, named individuals (fixed beneficiaries) or allow the trustee to select the beneficiaries at their discretion (discretionary trust).

Beneficiaries are the individuals who receive the Trust’s benefits. They must be clearly identified in the Trust Deed to protect their rights. A Trust that doesn’t specify its Beneficiaries could be invalid. We ensure that the Trust structure clearly defines and secures Beneficiaries’ rights, allowing them to benefit fully.

(ii) Role and Responsibilities of the Trustee: The trustee holds the legal title to the Trust property and is required to manage it carefully, just as a prudent person would manage their own assets. The trustee is personally liable for any breach of trust and must keep accurate and transparent records of the Trust property.

Trustees must manage the property in accordance with the Author’s wishes or, if applicable, with the Beneficiaries’ consent. They must protect the Trust assets, ensure proper management, and act with reasonable care. We provide support to Trustees to ensure they meet their legal responsibilities and protect themselves from potential liabilities.

(iii) Trustee Remuneration: A trustee can only receive payment if the Trust Deed explicitly allows for it.

(iv) Nature of Trust Property: The assets in a Trust can be either immovable (real estate) or movable (personal property).

(v) Foreign Donations: If a Trust wants to receive or use foreign donations, it must obtain approval from the NGO Affairs Bureau (NGOAB) under the Foreign Donations (Voluntary Activities) Regulations Act, 2016 (FDRA), through a process called Foreign Donation Registration (FD Registration).

(vi) Accountability and Transparency: Trustees must maintain clear, detailed records of the Trust property. Beneficiaries have the right to request and review these records.

(vii) Liability for Breach of Trust: If a trustee breaches the Trust, they are responsible for covering any loss to the Trust property or the Beneficiary. However, if the Beneficiary has caused the breach by fraud or has knowingly allowed it, the trustee may not be liable. If a breach occurs, a civil suit can be filed against the trustee for damages, in line with the Limitation Act, 1908.

Annual Returns: An annual return must be submitted to the RJSC to comply with regulations. The list of managing bodies should be filed within 14 days of the AGM or by January if the rules don’t provide for an AGM.

Dissolution: A Trust can be dissolved by a vote of three-fifths of its members. If the government is involved, its permission is required.

How Trust Registration Can Be Helped by us

At Alam & Associates, we are here to help you with every step of setting up, managing, and dissolving Trusts, ensuring your interests are protected and your Trust works as intended. We provide customized legal solutions to meet your needs, ensuring full compliance with all relevant laws and regulations.

Our services include:

• Expert Consultation: We assess your needs and guide you through the eligibility requirements set by the relevant authorities for trust registration.
• Document Preparation: Our team helps you gather and prepare all necessary documents to ensure compliance with regulations.
• Application Management: We manage the entire application process, from submission to approval, ensuring all steps are followed correctly.
• Continuous Follow-up: We stay in regular contact with regulatory bodies to monitor your application status and address any queries or additional requirements.
• Inspection Preparation: We help you get ready for any regulatory inspections, ensuring your infrastructure and operations meet all required standards.
• Lobbying with Authorities: We assist in communicating with government authorities to streamline the registration process.

By choosing Alam & Associates, you can navigate the complex regulatory environment confidently, allowing you to focus on growing your trust operations.