The Chief Master announced new changes to the administration of trusts to be administered by the various Masters’ offices, by way of a directive number 2 of 2017, issued in March this year. The most important of the changes relates to the appointment of independent trustees.
As a new rule the Master must now appoint an independent trustee where the trust is registered for the first time with the Master and the trust is a so-called “Family Business Trust”.
A “Family Business Trust” is a trust with the following three characteristics:
In addition, an independent trustee is required to be a person with knowledge, integrity, skill and a professional approach. The following characteristics are advised:
The Master may in certain circumstances dispense with the appointment of an independent trustee and make use of one of the following alternatives:
It is probably likely that where the Master is faced with a request to dispense with the need of an independent trustee he is going to insist on security by the trustees and require the financial statements of the trust to be audited.
Nomination of the independent trustee
Should the trust instrument not make provision for the appointment of an independent trustee, and the Master deems it necessary to appoint such trustee in terms of section 7(2) of the Trust Property Control Act, the following persons must be consulted to obtain nominations for an independent trustee:
The Master is not bound by the nomination and may appoint a suitable person other than those nominated. Masters are advised in the directive to do so only in exceptional circumstances.
Resignation of the Independent trustee
If the independent trustee was appointed in the trust deed and the trust deed makes provision for the replacement of such trustee, the provisions in the trust deed for such replacement should prevail, and the Master should authorise such a replacement trustee provided such person meets the requirements of independence.
Where the independent trustee resigns after being appointed by the Master, he may, if he or she considers it desirable, replace the independent trustee. The replacement trustee should be identified in the same manner in which the independent trustee who is to be replaced was identified.
The independent trustee’s remuneration
An independent trustee is entitled to a fee as any other trustee in that trust. If the trust deed contains a prescription regarding fees, the trustee is entitled to that fee. If the trust deed does not specify the fee to which the trustee is entitled, and the parties cannot agree on a fee, the Master will have to use section 22 of the Trust Property Control Act, 57 of 1988 to determine a reasonable fee. In Griese v Bonkkorp Trust Bpk 1990 (2) SA 328 (0) the court provided guidance to the Master when determining the trustee’s fee.
Given the direction in which trust administration and the focus on trusts in SA is heading, it is advisable therefore for the settlor to consider appointing independent trustees from the start, a step which will seem to avoid an interference by the Master in the administration of the trust.
ASL Trust can act as an independent trustee and if you wish to discuss our services in this regard in more detail, you are welcome to contact your Relationship Director.