The trust has achieved a separation of the legal and equitable ownership by imposing on the legal owner, the trustee, an obligation to hold the trust properties for the benefit of the beneficiaries. That obligation is a characteristic feature of the trust. The unit trust involves a split of that trust obligation into the custody of the trust corpus and the management of that corpus. If the trust is a manipulation of the facets of ownership’ resulting in a two-party relationship, the unit trust is a furtherance of that manipulation which results in a tripartite relationship. Read the rest of this entry »
The trust in a unit trust is a trust with two limbs, a primary trust and a secondary trust. The primary trust is a trust whilst the scheme is a going concern. It may be interpreted as a trust of the Re Denley’s type or as a trust subject to the contractual provisions of the trust deed and, in the case of an authorized unit trust, the regulations made under section 81 of the Financial Services Act 1986. The secondary trustonly arises at the very moment when the trust scheme is terminated. It is a trust for sale and distribution.
The provisions to which the primary trust is subject depend on whether the unit trust is an authorized unit trust or non-authorized unit trust. The most important of these provisions will be those along the line of regulation 7.02.2 and regulation 7.09.1. Regulation 7.02.2 provides: Read the rest of this entry »
The power is to direct the investment of the capital in such investments as the testatrix’s son may from time to time direct. Upon the language of the power as a whole, in my judgment, provided he acts in good faith, [the son] is entitled to give directions to the trustees to realise any investments constituting the trust fund which they from time to time may hold. In my judgment, upon the language of the clause, the trustees are bound to comply with those directions save that they are to satisfy themselves, the shares not being shares in which there is a free and open market, that the price which they pay for them is a reasonable and proper price at the time they make the purchase. Read the rest of this entry »
Under the Financial Services (Regulated Schemes) Regulations 1991, there are many situations where the trustee has to obtain the ‘consent‘, `approval’ or ‘agreement‘ of the manager, and vice versa. There are also provisions that require a party not to act without ‘consulting’ the other party.
For example, the manager ‘may instruct’ the trustee to create and to cancel units but the trustee may refuse to follow these instructions `[w]here . . . the trustee is of the opinion that it is not in the interests of participants‘. Similarly, the trustee may refuse to comply with the manager’s instructions to create units in exchange for assets if the trustee is not satisfied that there is no ‘material prejudice to the interests of participants or potential participants’. Read the rest of this entry »
The question before the court was the liability of the trustee to income tax on the interest. The relevant tax legislation made no provision for the deduction of tax from payments of income out of trust estates. The trustee argued, relying on Baker, that the liability to tax of income received by trustees depended upon the position as regards liability of the beneficiary; that in this case the interest received was treated as capital as a matter of ordinary principles of accounting between trustees and income- beneficiaries; that the beneficiaries would never receive the interest as income and therefore no liability to tax was possible. It was held by the Scottish Court of Session that on construction of the statute the interest was income and the trustees were the persons receiving or entitled to the income. Read the rest of this entry »
The trust is by nature a relationship fastened upon the properties of the trust. Considerable debate has been focused upon the rights of a beneficiary in the trust properties.5 In a private trust, the trust is a means of disposition of properties by way of gift. The trust corpus in the private trust, even when the settlor is one of the beneficiaries, is the subject matter of a gift. In this sense, the trust has a distributive character that makes use of equity’s recognition of a multiplicity of interests within a trust. A beneficiary’s interest is an interest in a gift. His interest is a matter of degree of ownership. If he is a beneficiary under a discretionary trust, he has nothing more than a right to be considered as a beneficiary. Read the rest of this entry »
This article has been compiled with the help of Arthur Andersen, particularly Victor Levy of Arthur Andersen’s Financial Services tax practice in London. It covers the taxation of futures funds and derivatives in a broader sense for the leading European markets. The author would like to thank him and the European offices of Arthur Andersen for their help.
In Belgium, the law of December 1990 regulated in an extensive way the status of investment funds (initially covered by the law of 1957) and created two new types of investment companies: the SICAV and the SICAF. The SICAV is the société d’investissement a capital variable, while the SICAF is the société d’investissement a capital fixe. Read the rest of this entry »
The policy of most jurisdictions is to treat the mutual fund as a company subject to corporate or income tax only on its ordinary business (i.e. net income arising from holding investments), and exempt it from taxation on its gains from buying and selling investments. In the US, provided the gains and net income are distributed, the fund does not pay federal income tax on either. Taxes are the responsibility of and paid by the shareholders under a ‘pass-through’ arrangement, whether they choose to receive cash or reinvest their entitlement. Read the rest of this entry »
