On the evening of 24 July 2019, the Trusts Bill (Bill) passed its third reading. It will now be sent on for Royal Assent, following which it will become law.
We will include a link to the Act as passed once available here.
Who needs to read it? Why?
The Bill itself will have wide application, covering both existing and new trusts, and will be of interest to the many people in New Zealand that deal with them. In the commercial and financial spheres more specifically, trusts are often used to facilitate particular arrangements, so it will be of relevance when understanding how to structure those arrangements.
What does it cover?
The Bill follows a review of trust law that began in 2009, and is intended to make that area of law clearer and more accessible. However, the Bill has been primarily built upon the concept of a discretionary family trust, and many of the provisions do not sit comfortably alongside other forms or uses of trusts.
Proposals around complete exclusions from the Bill for trusts relating to commercial arrangements were rejected, on the basis that doing so would prevent there being only a single universal law of trusts. Nonetheless, certain particular types of trusts were recognised as needing different treatment, namely:
- specified commercial trusts (being wholesale trusts, security trusts, and express trusts created for commercial transactions and with only beneficiaries that became beneficiaries through entering into such commercial transactions)
- debt trusts under the Financial Markets Conduct Act 2013 (FMCA)
- managed investment scheme trusts under the FMCA
- broking trusts under the Financial Advisers Act 2008
Each of these types of trust has a particular set of full or partial exceptions from specific provisions of the Bill. Furthermore, the Bill provides for a list of provisions that any trust may modify or exclude in its terms. Altogether, more than a third of provisions in the Bill are subject to some form of exception.
Our view
The range of exceptions that apply for commercial and financial trusts will reduce the impact that the Bill will have on them. However, the fact that the Bill, at its core, is framed around family trusts means that, through having to navigate new default positions and various exceptions, the impact of the law on financial markets participants remains to be worked through.
What next?
The Act will come into force 18 months after Royal Assent is received, to provide time for trusts to be moved into compliance.
If you have any questions in relation to how this change may affect any of your arrangements, please contact one of our experts.
