| Short title and commencement. |
1. |
This Act may be cited as the Virgin
Islands Special Trusts Act, 2003 and shall come into force on such date as
the Governor may, by Proclamation published in the Gazette, appoint. |
| Interpretation |
2. |
(1) |
In this Act, unless the context
otherwise requires |
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"business" in relation to a company
includes the holding of shares or other assets and non-commercial
activities; |
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"business risk" in relation to a
company includes |
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(a) |
any risk attached to any business
of the company, or any connected company, when conducted in the manner in
which it has in fact been conducted; or |
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(b) |
any risk which can be expected to
be attached to any projected business of the company; |
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"court" means the High Court; |
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"designated shares" means Virgin
Islands shares comprised in a trust fund and in respect of which a valid
direction under section 4(1) has been made; |
| No. 9 of 1990 |
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"designated trustee" means a holder
of a trust license under the Banks and Trust Companies Act, 1990; |
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"interested person" in relation to
a trust means |
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(a) |
a beneficiary of the trust; |
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(b) |
an object of a discretionary power
over any of the capital or income of the trust; |
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(c) |
a parent or legal guardian of any
minor person falling within paragraphs (a) or (b); |
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(d) |
where any of the purposes of the
trust are exclusively charitable, the Attorney General; |
|
Cap. 303 |
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(e) |
an enforcer referred to in
section 84A
of the Trustee Ordinance; |
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(f) |
a protector; or |
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(g) |
an appointed enquirer. |
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"intervention call" means a call by
an interested person under section 9(1) for a trustee to intervene in the
affairs of a company; |
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"legal guardian" in relation to a
minor person means a person legally recognised as his guardian in any
jurisdiction with which the minor has a substantial connection; |
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"office of director rules" means
rules referred to in section 7(1) and any amendments thereto for the time
being in force; |
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"trust fund" in relation to a trust
means property for the time being subject to the trust; |
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Cap. 285
Cap. 291 |
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"Virgin Islands shares" means
shares in a company incorporated under the Companies Act or the
International Business Companies Ordinance which is not |
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(a) |
a company which has a license under
the Banks and Trust Companies Act, 1990; |
| No. 5 of 1994 |
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(b) |
a company which is licensed as an
insurer under the Insurance Act, 1994 or which is authorised to act as an
insurance manager under that Act; |
| No. 6 of 1996 |
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(c) |
a company which is registered as a
public fund, or recognised as a private fund, under the Mutual Funds Act,
1996; |
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(d) |
a company which is licensed as a
manager or administrator of mutual funds under the Mutual Funds Act, 1996; |
| No. 8 of 1990 |
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(e) |
a company which has a license under
the Company Management Act, 1990. |
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(2) |
In this Act, |
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(a) |
references to voting powers in
respect of shares shall be taken to include references to powers to direct
the voting of shares held by a nominee; |
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(b) |
references in relation to a trust
to a protector are to any person or committee whose consent is requisite for
the exercise of any powers; |
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(c) |
references in relation to a trust
to an appointed enquirer are to any person who by, or under any power
conferred by, the terms of the trust is appointed to make intervention calls |
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(d) |
references to the memorandum and
articles of a company are to its memorandum of association and its articles
of association; |
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(e) |
a company shall be taken to be
connected with another company if |
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(i) |
that other company holds, directly or through a
nominee, shares in it; |
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(ii) |
it is controlled directly or indirectly by that
other company; or |
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(iii) |
it is connected with a company which is itself
connected with that other company; |
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(f) |
a ground for complaint concerning
the conduct of a company's affairs is permitted if it is specified as such
in the trust instrument, and the expression "permitted ground for complaint"
shall be construed accordingly. |
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(3) |
In this Act, the following
definitions shall, where the context admits, apply in relation to, or in the
context of a provision referring to, designated shares: |
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"company" means the company that
has issued the designated shares; |
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"disposal" means |
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(a) |
the exercise of voting powers
leading, or capable of leading, to the liquidation of the company or the
cancellation of the shares or of any rights attached to them; |
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(b) |
the creation of any legal or
equitable interest in the shares; |
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and "dispose" shall be construed
accordingly; |
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"settlor" means the person by whom
the trust was created; |
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"trust" means the trust on which
the designated shares are held; |
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"trustee" means the trustee for the
time being of the trust; |
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"trust instrument" means the
instrument containing the terms of the trust. |
| Primary purposes of this Act. |
3. |
The primary purpose of this Act is
to enable a trust of company shares to be established under which |
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(a) |
the shares may be retained
indefinitely; and |
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(b) |
the management of the company may
be carried out by its directors without any power of intervention being
exercised by the trustee. |
| Designated shares. |
4. |
(1) |
Where a trust fulfils the
conditions specified in subsection (4), the terms of the trust may, subject
to subsection (3), direct that the provisions of this Act shall apply |
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(a) |
to all Virgin Islands shares
comprised in the trust fund; or |
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(b) |
to such Virgin Islands shares
comprised in the trust fund as may be specified in the direction. |
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(2) |
For the purposes of subsection (1),
Virgin Islands shares comprised in the trust fund shall be taken to include
Virgin Islands shares becoming so comprised at any time after the creation
of the trust, whether added to the trust fund by way of additional
settlement by the original settlor or any other person, acquired on a new
issue by the company or in the course of management or administration of the
trust fund, or acquired in any other manner. |
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(3) |
A direction under subsection (1)
shall not be made in respect of shares added to the trust fund by a trustee
of another trust in the exercise of a power in that other trust. |
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(4) |
The conditions referred to in
subsection (1) are |
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(a) |
the trust is created by or on the
terms of a written testamentary or inter vivos instrument; |
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(b) |
a designated trustee is sole
trustee of the trust; |
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(c) |
the terms of the trust require that
any successor trustee (mediate or immediate) is a designated trustee acting
as sole trustee; |
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(d) |
the trust is not created in the
exercise of a power conferred by another trust. |
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(5) |
A direction under subsection (1)
may identify the shares to which it relates either specifically or by any
general description. |
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(6) |
Subject to subsection (7), where a
person ("the first person") is a settlor in relation to a trust of
designated shares and additional property is settled on the terms of the
trust by another person, the first person shall be considered for the
purposes of this Act as the settlor in relation to the trust of the
additional property. |
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(7) |
If the trust instrument provides
that subsection (6) shall not apply, then, in the case of a trust comprising
property which has been provided by more than one person, this Act shall
apply as if each person had created a separate trust in relation to the
property which he has provided. |
| Trustee's duties in relation to
designated shares. |
5. |
(1) |
Subject to section 9, designated
shares shall be held by the trustee on trust to retain them. |
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(2) |
The trustee's duty to retain
designated shares shall have precedence over any duty to preserve or enhance
the value of the trust fund. |
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(3) |
Without prejudice to subsection
(2), the trustee shall not be accountable for losses arising directly or
indirectly from holding, rather than disposing of, designated shares,
including, in particular, losses arising from any of the factors specified
in subsection (4). |
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(4) |
The factors referred to in
subsection (3) are |
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(a) |
the absence, or inadequacy, of
financial return from any designated shares; |
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(b) |
a decrease in value of any
designated shares; |
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(c) |
speculative or imprudent activities
of the company or depletion of the company's assets by disposition; |
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(d) |
any act or omission of the
directors of the company, regardless of whether it is made or carried out in
good faith; |
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(e) |
liquidation or receivership of the
company; |
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(f) |
share market fluctuation; |
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(g) |
the loss of opportunity to make
gains from reinvestment of the proceeds of designated shares; |
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(h) |
the liabilities and expenses of the
company, including directors' remuneration and expenses. |
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(5) |
Every reference in subsection (4)
to the company shall include a reference to any company connected to it. |
| Restrictions on trustee's
powers. |
6. |
(1) |
Subject to the terms of the trust
and to sections 7 and 8, the obligations specified in subsections (2) and
(3) shall apply to a trustee of designated shares. |
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(2) |
Voting or other powers in respect
of designated shares shall not be exercised by the trustee so as to
interfere in the management or conduct of any business of the company, and
in particular, the trustee |
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(a) |
shall leave the conduct of every
such business, and all decisions as to the payment or non-payment of
dividends, to the directors of the company, |
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(b) |
shall not require the declaration
or payment of any dividend by the company or exercise any power the trustee
may have of compelling any such declaration or payment. |
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(3) |
A trustee of designated shares |
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(a) |
shall take no steps to instigate or
support any action by the company against any of its directors for breach of
duty to the company; |
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(b) |
shall take no steps to procure the
appointment or removal of any of the directors; |
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(c) |
subject to section 9, shall take no
steps to wind up the company; and |
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(d) |
subject to the provisions of this
Act, shall not apply to the court for any form of relief or remedy in
relation to the company. |
| Provisions relating to
directors. |
7. |
(1) |
The trust instrument may contain
rules for determining the manner in which voting and other powers
attributable to designated shares should be exercised by the trustee in
relation to |
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(a) |
the appointment of directors of the
company, |
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(b) |
the removal of directors, |
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(c) |
the remuneration of directors,
or |
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(d) |
any of the matters referred to in
subsection (2), |
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and may make provision for those
rules to be amended. |
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(2) |
The office of director rules may,
in particular |
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(a) |
require the trustee to ensure that
a particular person holds or retains office as director; |
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(b) |
require any person to be appointed
to the office of director at some future date or upon some future event; |
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(c) |
require the removal of a director
in specified circumstances; |
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(d) |
prescribe, subject to the
requirements of the memorandum and articles of the company and the law of
the Territory, the minimum and maximum number of directors (whether one or
more) to hold office at any time or times; |
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(e) |
require the trustee, in relation to
the appointment and removal of directors, to act, generally or in any
specified circumstances, on the decision of a third person or committee; |
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(f) |
provide for the conferral of
fiduciary duties on a person or committee referred to in paragraph (e); or |
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(g) |
provide for the establishment,
continuance, and procedures of a committee referred to in paragraph (3). |
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(3) |
Subject to subsection (9) and to
section (8), the trustee shall at all times use its voting and other powers,
so far as those powers allow, to ensure |
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(a) |
that the company has at least the
minimum number of directors to meet the requirements of its memorandum and
articles and the law of the Territory; and |
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(b) |
that, except in an exempted case,
the identity of the directors of the company conforms with the office of
director rules, if any, for the time being applicable. |
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(4) |
No person becoming or remaining a
director of the company, whether in consequence of the office of director
rules or otherwise, shall, in the capacity of director, owe fiduciary or
other obligations under the trust, or have any fiduciary or other
obligations to the trustee, but nothing in this subsection shall affect any
duty which that person owes, as director, to the company. |
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(5) |
Persons for whose appointment the
office of director rules may provide include |
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(a) |
any settlor or protector of the
trust; |
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(b) |
both ascertained and ascertainable
persons. |
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(6) |
A trustee shall incur no liability
for securing, sanctioning or not opposing the appointment of a director
where that appointment is in conformity with the office of director rules. |
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(7) |
Where there are no office of
director rules, and in an exempted case, a trustee shall incur no liability
for securing, sanctioning, or not opposing, the appointment of a director of
the trustee's own selection, if |
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(a) |
the trustee concludes in good faith
that the appointment in questions is consistent with the wishes of the
settlor; and |
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(b) |
the selection is not motivated by a
desire on the part of the trustee to reduce business risk, except to the
extent, if at all, that the trustee in good faith concludes that a reduction
would be consistent with the wishes of the settlor. |
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(8) |
For the purposes of this section,
an exempted case is any case in which either |
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(a) |
the office of director rules make
no provision in that case; or |
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(b) |
the rules make provision but the
trustee concludes in good faith that it would be impossible, unlawful,
impracticable, or plainly inconsistent with the wishes of the settlor, to
ensure compliance with the rules in that case. |
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(9) |
A trustee shall have no duty |
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(a) |
to act pursuant to subsection (3)
unless and until it receives actual notice that circumstances requiring such
action have arisen; or |
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(b) |
to enquire as to whether
circumstances requiring action pursuant to subsection (3) exist. |
| Cap. 304 |
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(10) |
Where, on any question concerning
the appointment of a director, a trustee makes application to the court
under section 6 of the Trustees' Relief Act, the court, in giving its
opinion, advice, or direction, shall not seek to reduce business risk,
except to the extent, if at all, that the court concludes that a reduction
would be consistent with the wishes of the settlor. |
| Intervention by trustee in
management in prescribed circumstances |
8. |
(1) |
Where, in relation to a trust of
designated shares, an interested person has a complaint concerning the
conduct of the company's affairs, and the ground for that complaint is
permitted, he may, in writing, call upon the trustee to intervene in the
affairs of the company to deal with the complaint. |
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(2) |
A trust instrument may specify one
or more permitted grounds for complaint, but need not specify any. |
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(3) |
Upon receiving an intervention
call, the trustee shall, if satisfied that the complaint is substantiated,
take such, if any, action as the trustee considers appropriate to deal with
the complaint in the interests of the trust. |
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(4) |
Action taken under subsection (3)
may include |
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(a) |
making or procuring changes in the
directorship of the company in accordance with the provisions of its
memorandum and articles and the law of the Territory, but otherwise on such
terms as the trustee thinks fit, provided that in making, procuring or
maintaining any such change, the trustee may disregard section 7(3)(b) if
and for so long as, in the opinion of the trustee, it is expedient to do so
for the purposes of dealing with the complaint; |
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(b) |
procuring action by the company to
recover any losses caused by the conduct giving rise to the complaint; or |
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(c) |
seeking such advice on the
complaint and the manner of addressing it as the trustee considers
appropriate. |
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(5) |
In considering and taking action
under subsection (3), the trustee shall |
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(a) |
have regard to |
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(i) |
any wishes of the settlor; and |
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(ii) |
the efficient functioning of the company; |
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(b) |
disregard business risk, except to
the extent that |
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(i) |
the ground for complaint consists of or arises
from any disagreement among the directors as to the business risk, or |
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(ii) |
any wishes of the settlor require business risk
to be considered. |
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(6) |
After acting pursuant to subsection
(3), or deciding not to act, the trustee's obligation to intervene shall be
at an end unless and until another intervention call is made. |
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(7) |
It shall be a ground for declining
to act on an intervention call if, apart from any other reason for
declining, the call is made on substantially the same ground as one
previously made, and there appears to the trustee to be no reason to alter,
or act further on, the decision previously taken by it. |
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(8) |
Where a trust instrument specifies
one or more permitted grounds for complaint, the following provisions of
this subsection shall apply: |
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(a) |
an interested person may request
the trustee to provide such information concerning the affairs of the
company and any connected company as is reasonably required for that person
to judge whether an intervention call is necessary, and the trustee shall
use all reasonable endeavours to provide that information and may, if
considered necessary for this purpose, procure the replacement of any of the
directors with the trustee's own representative; |
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(b) |
where there is an appointed
enquirer he shall be under the following duties: |
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(i) |
a duty to make reasonable enquiries as to
whether there is a permitted ground for complaint as often as appears
appropriate in the circumstances, and not less than once in any period of
twelve months; |
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(ii) |
a duty to make an intervention call under this
section, and provide the trustee with evidence of the relevant ground for
complaint, whenever it appears to him to be appropriate; |
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(c) |
where there is no appointed
enquirer, the trustee shall use all reasonable endeavours to ensure that at
all times at least one interested person of full capacity is given the
following documents and information concerning the trust, but without
prejudice to any right of that person to documents and information apart
from this paragraph: |
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(i) |
a copy of the trust instrument and other trust
documents, |
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(ii) |
the name and address of the trustee, |
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(iii) |
the name, registered office, and principal
place of business, of the company, |
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(iv) |
the names and addresses of all directors of the
company, |
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(v) |
the nature of the current activities of the
company, |
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provided that , where practicable,
any person to whom information is given under this paragraph shall be a
person who, in the reasonable opinion of the trustee, has acquired, or is
likely to acquire, by appointment or otherwise, a substantial equitable
interest in some or all of the designated shares or their proceeds or is the
parent or legal guardian of such a person. |
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(9) |
All expenses incurred in dealing
with an intervention call or considering the complaint on which it is based,
including trustee remuneration where applicable, and the cost of any advice,
shall be borne by the trust fund and its income in such proportions as the
trustee decides, and if there is any deficiency in liquid funds the trustee
may take such steps as are available to the trustee under the memorandum and
articles of the company and the law of the Territory to make up the
shortfall out of dividends from the company and may, if considered necessary
for this purpose, procure the replacement of any of the directors with the
trustee's own representative. |
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(10) |
The trustee shall, where
practicable, procure the removal from office of a director appointed for the
purpose specified in subsection (8)(a) or (9) when the purpose for which the
director was appointed is achieved, if removal is appropriate for the
purpose of any action decided upon by the trustee pursuant to subsection (3)
or, subject to such action, for the purpose of compliance with the office of
director rules. |
| Power to dispose. |
9. |
(1) |
This section shall apply to a trust
of designated shares. |
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(2) |
Subject to subsection (3) and to
the terms of the trust instrument, the trustee shall have power, in the
management and administration of the trust fund, to sell or otherwise
dispose of designated shares, but the existence of this power |
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(a) |
shall not carry an implied duty to
exercise it for the purpose of preserving or enhancing the value of the
assets of the trust or to consider its exercise for that purpose; and |
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(b) |
shall not render the trustee
liable, in consequence of not exercising it, for losses of this kind
referred to in section 5(3). |
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(3) |
Subject to section 11, the trustee
shall not, unless the trust instrument otherwise provides, sell or dispose
of designated shares in the management or administration of the trust fund
without |
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(a) |
the consent of the directors of the
company or of a majority of them if more than one; and |
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(b) |
such, if any, consents as are made
requisite by the trust instrument. |
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(4) |
A sale or other disposal in
exercise of the power conferred by subsection (2) shall be made in such
manner, and upon such terms and conditions, as the trustee, acting in its
fiduciary capacity, thinks fit. |
|
Cap 303 |
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(5) |
Section 59 of the Trustee
Ordinance shall not apply to the trust to the extent that it permits the
court to confer upon the trustee any power of sale or other disposal. |
| Enforcement. |
10. |
(1) |
Where in the case of a trust of
designated shares there is a breach of a duty or obligation imposed on this
Act on its trustee, any of the persons specified in subsection (3) may,
subject to the terms of the trust, apply to the court for relief. |
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(2) |
The court shall, if satisfied that
the application under subsection (1) is well founded, grant relief by |
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(a) |
making such order as it considers
appropriate to attain, as nearly as may be, the outcome that the court
considers would have been, or would most likely have been, attained in
respect of the trust, the company, its directors and generally if the breach
had not occurred; |
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(b) |
making such, if any, supplementary
or incidental order as the court deems, in the circumstances of the case,
reasonably required having regard to the primary purpose of this Act state
in section 3, |
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provided that no order shall be
made under this subsection to prejudice any interest in property which was
acquired from the trustee in good faith, for value and without actual or
constructive notice of the trust, or from the company in good faith and for
full consideration, or to prejudice any interest deriving from such an
interest. |
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(3) |
The persons referred to in
subsection (1) are |
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(a) |
any interested person; |
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(b) |
any director of the company; |
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(c) |
any person who, under applicable
office of director rules, would be a director if the trustee had complied
with its obligations under section 7. |
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(4) |
Without prejudice to subsection (1)
to (3), but subject to subsection (5), where in the case of a trust there is
a breach of a duty or obligation imposed by this Act on its trustee, the
breach shall be, and be actionable in civil proceedings as, a breach of the
trust. |
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(5) |
Where civil proceedings are
instituted in relation to a breach of a duty or obligation, the court shall,
in granting any remedy, take account of any relief granted or available in
respect of the breach on an application under subsection (1). |
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(6) |
References in subsection (4) to a
breach shall be taken to include references to a prospective breach. |
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(7) |
Subject to the terms of the trust
and to sections 7 and 8, where designated shares are held on trust, no act
or omission of a director of the company shall be a ground for any person to
seek intervention by the court in the affairs of the trust. |
| Power of court to order
disposal. |
11. |
(1) |
Where it is shown to the court that
the retention of the shares is no longer compatible with the wishes of the
settlor, the court shall have power, on the application of any interested
person, to order or authorise a sale or other disposal of any designated
shares, and a sale or other disposal so ordered or authorised shall not
require any consent referred to in section 9(3). |
| |
|
(2) |
In making an order, or giving
authority, under this section, the court may impose such, if any, terms and
conditions in relation to the sale or other disposal as it thinks fit. |
| Modification of
rule in Saunders v.
Vautier. |
12. |
(1) |
Notwithstanding any rule of equity
or practice of the court to the contrary, but subject to subsection (2),
neither a beneficiary who is solely interested in any designated shares, nor
all the beneficiaries who together are the persons interested in any
designated shares, shall be entitled, although in existence and ascertained
and of full capacity, to call for or direct a transfer of those shares or to
terminate or modify the trust relating to them if and so far as that
entitlement is, without offending any rule of perpetuity or remoteness,
excluded by the trust instrument. |
| |
|
(2) |
No such exclusion of entitlement
shall have effect, or continue to have effect, after the expiration of 20
years from the creation of the trust. |
| |
|
(3) |
Where a person who receives
designated shares, or an interest in them, is a person who, by virtue of
such an exclusion or entitlement, has no present right to receive the shares
or that interest, he shall, without prejudice to the generality of
subsection (1), hold those shares or that interest on trust to transfer the
same to the trustee, and the court shall order him so to do on the
application by the trustee or any person specified in section 10(3). |
|
Cap. 303 |
|
(4) |
During any such exclusion of
entitlement, section 58 of the
Trustee Ordinance shall not apply to the trust. |
| Disqualification of trustee as a
director. |
13. |
A trustee of designated shares
shall not be, or become, a director of the company. |
| Ascertaining wishes of settlor. |
14.< |
