This briefing considers some relevant considerations and challenges for trustees during these unprecedented times of COVID-19.

Fiduciary Duties, Trust Property and Investments

While there is no way to tell the global economic damage from Covid-19, it will have a severe negative impact.  The Chief Economist for OECD recently commented that, “the shock to the world economy and living standard is absolutely unprecedented and it will have long-lasting effects” stressing that, “all OECD countries are in recession and a large number of them are in a double digit recession”. This means trillions of dollars in economic output has been lost and the value of property and investments held in trust will be affected.

Trustees’ duties do not change because of the impact of Covid-19. These duties include statutory duties in respect of, among other things, specific investment and delegation.  We explore the specific duties for trustees in each jurisdiction below.  Additionally, the trust documents, and commercial agreements entered into by trustees, may also put trustees under further duties or obligations which must be met.  Trustees cannot contract out of their duties, but they may seek to re-negotiate obligations under commercial agreements, if other parties are willing.  Accordingly, trustees need to be constantly mindful of their duties and obligations and be proactive in taking steps as required to ensure they adhere to them.  In doing so, trustees should undertake an analysis of the property held in trust and the likely impact of Covid-19. This may involve: (1) reviewing investment portfolios (whether under advisory or management) and reconsidering any investment strategies; (2) reviewing real estate investments, any associated borrowing and rental incomes; (3) considering liquidity for loans made or due whether with financial institutions or beneficiaries; and (4) ensuring possession of up-to-date financial information for companies held in trust to consider any shareholding position.

Trustees also need to consider third parties, such as protectors or settlors, who have either positive or negative powers vested in them by the trust documents; particularly in respect of investment control.  In the event of the death or incapacity of third parties, trustees need to ensure that either: (1) the mechanics under trust documents work effectively to replace these persons to ensure administration is not hindered; or (2) they know if such vested powers revert back to the trustees as a default (which would add to existing duties).

Trust Documents in the Time of Covid-19

Social lock-down, remote working and social distancing as a result of Covid-19 have led to a re-examination of the requirements for the execution and witnessing of trust documents.  Below we discuss the execution requirements (and challenges) for executing and witnessing trust documents in each of our key jurisdictions.  However, in all cases it remains important for trustees to check:

  1. any required formalities or restrictions imposed by trust documents; a trust document may define certain formalities such as an “instrument in writing”, or require independent witnesses and may specify a signature “in person” and the execution of a document is likely to be void if these formalities are not adhered to;
  2. in the case of a corporate trustee, any requirements or restrictions under its constitutional documents or internal and regulatory procedures (including the use of electronic signatures); and
  3. the requirements and formalities of any foreign law-governed documents to be executed.

Trustee Meetings

The impact of Covid-19 has meant trustees cannot meet face-to-face to hold meetings.  Nevertheless, trustees need to resolve decisions in accordance with formal requirements in a meeting or by written resolution.

The use of virtual meetings by telephone or video conference, or the use of written resolution circulated electronically, means it is important for trustees to check that: (1) the trust documents permit or at least do not restrict the use of virtual meetings or written resolutions; and (2) any applicable articles of association of corporate trustees permit the use of electronic communications or written resolutions.  Otherwise, the resolutions made are likely to be void.

It is particularly important for a private trust company to check any bespoke requirements in its articles of association and how decisions of the trustee should occur.  For example, there could be provisions requiring meetings to be undertaken in certain locations, be face-to-face or require a combination of different classes of directors.  If actions need to be taken by the trustee, changes may need to be made to the articles of association or alternate directors may be appointed for particular actions.

Bermuda

Statutory fiduciary and investment duties and delegation of powers

Bermuda’s principal statute governing trusts and their administration is the Trustee Act 1975 (Trustee Act). This statute is largely patterned on the English Trustee Act 1925.  The Trustee Act applies in Bermuda in respect of trusts and trustees generally.

Specific duties and powers are placed upon trustees by the trust instrument, while other duties and powers are set out in statute or are derived from general legal principles which have been established by English courts over centuries.  Fundamentally, the general legal duties imposed upon trustees reinforce that a trustee must act in the interests of beneficiaries at all times.  Importantly, trustees are subject to a “duty of care” which is a standard that they must meet in every aspect of the performance of their role as trustees.  While the standard applied to the duty of care differs for lay and professional trustees, both types of trustee are subject to the standard.

A trustee has a duty to invest property for the benefit of the beneficiaries, even when there is no direction in the trust instrument to do so.  One important aspect of managing trust property is prudent and proper investing. The standard of care is of particular importance in this respect.

Section 55A of the Trustee Act sets out the investment powers of a trustee to allow any reasonable and proper investment or application of trust property, provided that the trustee acts as a prudent investor and exercises reasonable care, skill and caution.  A prudent investor is described as one who considers the purposes, terms, distribution requirements and other circumstances of the trust.  Reasonable care is measured by the general law requirements.  The current statutory investment provisions allow a trustee to invest or otherwise apply trust property in the purchase or acquisition of property of any kind, whether or not situated in Bermuda and whether or not income producing and with or without security.

One of the most important duties in connection with the management of trust property is to keep the suitability of investments under review.

Section 15A of the Trustee Act provides that, subject to the terms of the trust instrument, a trustee may delegate certain functions to a delegate, or to one of its co-trustees, who may be paid out of the trust property for this service.  Only functions of an administrative or managerial nature may be delegated in this manner.  Section 15A stipulates that in exercising any power to delegate, and in supervising the delegate, the trustees must exercise reasonable care, sill and caution.

Section 15B of the Trustee Act sets out certain matters which the Trustees may not delegate, unless expressly authorised to do so in the trust deed:

  • the formulation of policy criteria governing the investment or other application of trust property, and any decision as to the amount of money that may be raised on the security of trust property;
  • the exercise of any discretionary duties or powers concerning distribution of income or capital to, or use of the trust property by, persons beneficially interested under the trust, or the appropriation of trust property in satisfaction of a beneficiary’s entitlement to any capital;
  • the exercise of any power to determine or to alter any interest of a person beneficially interested under the trust, including a power to deal with income or capital expenditure or receipts as if they were not of such income or capital nature and a power to bring forward or postpone the closing date for the total or partial termination of the trust;
  • the exercise of any power to add a person or class of persons to, or exclude a person or class of person from, those who are beneficially interested under the trust;
  • the exercise of any power to add to, revoke or vary the administrative powers under the trust or to release or restrict any powers under the trust;
  • the exercise of any power to appoint or remove trustees; and
  • the exercise of any power to change the proper law governing the validity, administration or any other severable aspect of the trust.

Execution and Witnessing of Trust Documents

Bermuda law recognises the English law concept of a “deed”.  Typically, trust documents of a trust established in Bermuda that is subject to the laws of Bermuda are executed as deeds by two authorised signatories of corporate trustees under common seal (if the company has a seal), signatures of beneficiaries are independently witnessed and all are “wet-ink” signatures.

Section 6A(3) of the Conveyancing Act 1983 provides that a trust instrument is validly executed as a deed by an individual if, and only if (a) it is signed (i) by him in the presence of a witness who attests the signature; or (ii) by some other person at his direction and in his presence and the presence of two witnesses who each attest the signature; and (b) if it is delivered as a deed by him or a person authorised to do so on his behalf.

Bermuda law does not require a corporate trustee incorporated in Bermuda to have a common seal to execute trust documents.  Corporate trustees in Bermuda have the option to execute trust documents under hand rather than common seal (unless the trust instrument or the trustee’s constituting documents require otherwise).

Bermuda law permits the use of electronic signatures under the Electronic Transactions Act 1999 (ETA), which was enacted to facilitate electronic transactions and promote confidence in the validity, integrity, and reliability of conducting transactions electronically, among other things.

Section 11 of the ETA provides that where a person’s signature is required by law, that requirement is met by an electronic record if the method used is able to identify the signatory and to indicate that the signatory intended to sign the document or otherwise adopt the information in the electronic record. In addition, the method used must be reliable, as appropriate, for the purpose for which the electronic record was generated or communicated.

Similarly, where information is required by law to be in writing, the ETA authorises the use of electronic signatures as a valid means of satisfying such requirement, provided the information contained in the electronic record is accessible and capable of retention for subsequent reference.

British Virgin Islands

Statutory Fiduciary and Investment Duties and Delegation of Powers

The key statute governing trusts in the British Virgin Islands (BVI) is the Trustee Ordinance (Cap. 303), as amended (Trustee Act).  A separate trust regime is created by the Virgin Islands Special Trusts Act, 2003, as amended (VISTA Act).

The Trustee Act does not expressly prescribe fiduciary duties.  Trusts established in the BVI under the Trustee Act and subject to BVI law are strongly influenced by English common law and fiduciary duties owed by trustees under common law are applicable to trustees in the BVI.

Section 3 of the Trustee Act provides that a trustee may at any time invest any portion of the trust funds in any kind of investment wherever that investment is situate and may vary the investment or retain it in its original state “as long as he exercises the diligence and prudence that a reasonable person would be expected to exercise in making an investment as if it were his own money”.  The Trustee Act thus incorporates the “prudent man of business” rule, a general principle of general trust law which was developed by the English courts.  Essentially, the rule provides that a trustee has a duty to take due care and to act prudently when making decisions concerning the investments comprised in a trust fund, including a regular monitoring of their performance.  At common law, the duty of a trustee is to preserve the capital of the trust for the benefit of the beneficiaries.  In the absence of careful documentation, therefore, a trustee will be restricted to a balance of conservative investments.

Section 5 of the Trustee Act provides that every power conferred by sections 3 and 4 shall be exercised according to the discretion of the trustee, but subject to any consent or direction required by the document, if any, creating the trust with respect to the investment of the trust funds.  Aside from a trustee’s obligation to maintain records and underlying documentation of the trust whether within or outside the BVI and to retain those records and underlying documentation for a period of at least five years, the Trustee Act does not otherwise impose any investment duties on a trustee.

Section 24 of the Trustee Act states that trustees may, instead of acting personally, employ and pay an agent, whether a solicitor, banker, stockbroker or other person, to transact any business or do any act required to be transacted or done in the execution of the trust, including the receipt and payment of money, and shall be entitled to be allowed and paid all charges and expenses so incurred, and shall not be responsible for the default of any such agent if employed in good faith.  Under section 24, trustees may also appoint any person to act as their agent or attorney for the purpose of selling, converting, collecting, getting in and executing and perfecting assurances of, or managing, cultivating or otherwise administering any property subject to the trust in any place outside the BVI, or executing or exercising any discretion or trust or power vested in them in relation to any such property, with such ancillary powers, and with and subject to such provisions and restrictions as they may think fit, including a power to appoint substitutes, and shall not, by reason only of their having made such appointment, be responsible for any loss arising thereby.

A separate trust regime was established for so-called VISTA trusts under the VISTA Act, specifically designed for a trustee holding shares only in a BVI-incorporated company.  In enacting VISTA, Government’s objective was to create a system whereby the corporate owner of a family business is able to set up a trust comprised of the shares of his or her company under which: (1) the company shares can be retained in trust indefinitely; and (2) the trustee’s monitoring and intervention obligations under the general trust law are removed and the trustee is disengaged from all management responsibility in the company which can instead be carried out by the company’s directors without concern for any unwanted interference by the trustee in the company’s affairs.  The trustee has a statutory duty to retain the shares which are the subject of the VISTA trust and any duty to preserve or enhance the value of the trust fund is subservient to this duty (the duty to retain may be modified by a limited power to dispose of the shares in circumstances expressed in the trust deed).  The trustee cannot intervene in the management of the company except in order to resolve specific problems and then only in prescribed circumstances which need to be outlined expressly in the trust deed.  An “intervention” call may be made by any “interested person” (e.g. a beneficiary, a protector, etc.), which calls upon the trustee to intervene in the affairs of the company, but only in circumstances specified in the trust deed.  The trustee has no fiduciary duty in relation to the assets or the affairs of the company unless there is an intervention call.

Execution and Witnessing of Trust Documents

BVI law recognises the English law concept of a “deed”.  Typically, trust documents of a trust established in the BVI that is subject to the laws of the BVI are executed as deeds by one authorised signatory of corporate trustees with or without a common seal, signatures of beneficiaries (if required) are independently witnessed and all are “wet-ink” signatures.  If the trust document contains an “execution in counterparts” clause, the various parties would sign their own counterpart in wet ink, scan it to the trustee which would be the last to sign, compiling all the signatures and dating the document on the date it signs.

BVI law does not prescribe any specific witnessing formalities for trust documents.  Therefore, subject to any requirements of the trust documents or, in the case of a corporate trustee, its articles of association, the usual requirement for independent witnesses to sign and confirm a beneficiary’s signature is for evidential purposes.

While a BVI business company is required under the BVI Business Companies Act, 2004, as amended (BVI BC Act), to have a seal, BVI law does not require a corporate trustee incorporated in the BVI to use its common seal to execute trust documents.  It is standard for articles of association to provide that the common seal is only applied if resolved to do so by the directors.  Therefore, corporate trustees in the BVI always have the option to execute trust documents under hand rather than common seal.

The Electronic Transactions Act, 2001 of the BVI provides for the use of electronic signatures and electronic records generally.  Section 6 of this Act stipulates that information shall not be denied legal effect, validity or enforceability on the sole ground that it is in the form of an electronic record.  Section 7 states that a legal requirement for information to be in writing is satisfied by an electronic record if the information contained therein is accessible so as to be usable for subsequent reference.  However, section 3 of this Act stipulates that the Act (including the above sections 6 and 7) shall not apply to any rule of law requiring writing or signatures in certain specified matters, including “any other thing required to be done by deed”.

For corporate trustees, section 103(4C)(b) of the BVI BC Act provides that an instrument under seal or deed is validly executed where the complete instrument or deed is executed or where any signature or execution page of the instrument under seal or deed is executed separately and then is attached (physically or electronically) to the execution version of that document, provided that the executing party has provided its express or implied consent.

Cayman Islands

Statutory fiduciary and investment duties and delegation of powers

The key statute governing trusts in the Cayman Islands is the Trusts Law (2020 Revision), as amended (Trusts Law). Section 13(1) of the Trusts Law refers to the duty of trustees to beneficiaries to administer the trust in accordance with its terms.  In the context of a special trust – alternative regime (known as a STAR trust), section 101(2) of the Trusts Law stipulates that, subject to evidence of a contrary intention, an enforcer of such a trust is deemed to have a fiduciary duty to act responsibly with a view to the proper execution of the trust.  The Trusts Law does not otherwise expressly prescribe fiduciary duties.  Trusts established in the Cayman Islands and subject to Cayman Islands law are strongly influenced by English common law and fiduciary duties owed by trustees under common law are applicable to trustees in the Cayman Islands.  There is also a deep pool of Cayman Islands case law from which to draw knowledge and certainty on matters of interpretation.

Sections 35 and 36 of the Trusts Law set out investments in which a trustee may invest trust funds, which investments may be varied from time to time.  Section 37 provides that every power conferred by these sections shall be exercised according to the trustee’s discretion, but subject to any consent or direction required by the instrument, if any, creating the trust with respect to the investment of the trust funds.  Aside from an obligation to keep or cause to be kept accurate accounts and records (including underlying documentation) of the trustee’s trusteeship appropriate to the trust and trust property, the Trusts Law does not otherwise impose any investment duties on a trustee.  At common law, the duty of a trustee is to preserve the capital of the trust for the benefit of the beneficiaries.  In the absence of careful documentation, therefore, a trustee will be restricted to a balance of conservative investments.

Section 29 of the Trusts Law states that trustees may, instead of acting personally, employ and pay an agent, whether attorney-at-law, banker, stockbroker or other person, to transact any business or do any act required to be transacted or done in the execution of the trust, including the receipt and payment of money, and shall be entitled to be allowed and paid all charges and expenses so incurred, and shall not be responsible for the default of any such agent if employed in good faith.  Under section 29, trustees may also appoint any person to act as their agent or attorney for the purpose of selling, converting, collecting, getting in and executing and perfecting assurances of, or managing, cultivating or otherwise administering any property subject to the trust in any place outside the Cayman Islands, or executing or exercising any discretion or trust or power vested in them in relation to any such property, with such ancillary powers, and with and subject to such provisions and restrictions as they may think fit, including a power to appoint substitutes, and shall not, by reason only of their having made such appointment, be responsible for any loss arising thereby.

Execution and Witnessing of Trust Documents

Cayman law recognises the English law concept of a “deed”.  Typically, trust documents of a trust established in the Cayman Islands that is subject to the laws of the Cayman Islands are executed as deeds by two authorised signatories of corporate trustees under common seal, signatures of beneficiaries are independently witnessed and all are “wet-ink” signatures.

Cayman Islands law does not prescribe any specific witnessing formalities for trust documents.  Therefore, subject to any requirements of the trust documents or, in the case of a corporate trustee, its articles of association, the usual requirement for independent witnesses to sign and confirm a beneficiary’s signature is for evidential purposes.

Cayman Islands law does not require a corporate trustee incorporated in the Cayman Islands to use its common seal to execute trust documents.  It is standard for articles of association to provide that the common seal is only applied if resolved to do so by the directors.  Therefore, corporate trustees in the Cayman Islands always have the option to execute trust documents under hand rather than common seal.

Section 6 of the Electronic Transactions Law (2003 Revision) of the Cayman Islands provides that information shall not be denied legal effect or validity solely on the ground that it is in the form of an electronic record.  Section 7 states that where a document, record or information is required or permitted by any statutory provision, rule of law, contract or deed to be in writing, or is described in any statutory provision or contract as being written, that requirement, permission or description may be met by information in the form of an electronic record.  Therefore, electronic signatures are permitted in the Cayman Islands, provided the constitution of a trustee permits their use, the trustee resolves to execute a document electronically and the law or terms governing the document to be executed permit the use of electronic signatures for execution.

Guernsey

Statutory Fiduciary and Investment Duties and Delegation of Powers

Section 22 of the Trusts (Guernsey) Law, 2007 (Law) provides the general fiduciary duties which trustees must adhere to.  It provides that a trustee shall, in the execution of his functions, observe the utmost good faith and act en bon père de famille (as a good father).  These are far-reaching duties, principally judged objectively and their applicability will change depending on circumstances.

Section 23(b) of the Law stipulates the investment duties imposed upon trustees.  It provides that, subject to the terms of the trust, a trustee shall preserve and enhance, so far as is reasonable, the value of the trust property.  The concept of diversification is not expressly referenced in the Law, but practically the duties at section 23(b) should be achieved by trustees adopting the objective of diversification in making investments.  Whilst it may be the case that many trust instruments under Guernsey law will expressly exclude the duties under section 23(b), trustees should nevertheless remain mindful of them.  It is unlikely that a trustee will be safe-guarded by relying on the exclusion of these duties as the general fiduciary duties will remain applicable and the trustee will be judged by those general fiduciary duties as to any investment losses: would a prudent person not diversify investments?

Except where the terms of the trust specifically provide to the contrary, a trustee may, pursuant to section 33(a) of the Law, delegate the management of trust property to, and appoint, investment managers whom the trustee reasonably considers to be competent and qualified to manage the investment of the trust property.  A trustee may also, pursuant to section 33(b) of the Law, appoint professional persons to act in relation to the affairs of the trust or to hold any trust property.  It would be unusual for a trust instrument not to permit a trustee to delegate or appoint in the manner provided for by section 33.  However, section 33 only protects a trustee from any loss arising from a delegation or appointment provided the trustee acted in good faith and en bon père de famille.  This means trustees must ensure the delegate is suitable and performs, and continues to perform, as required.  If the delegate does not, then the trustee must take action or risk being held personally liable for any losses arising.

Execution and Witnessing of Trust Documents

Typically, trust documents are executed by corporate trustees under common seal by two authorised signatories, signatures of beneficiaries are independently witnessed and, in the normal course, all are “wet-ink” signatures.

Guernsey law does not recognise the English law concept of a “deed” and so it has no specific meaning under Guernsey law, despite it being a widely used term.  Consequently, there are no legal formalities associated with executing a “deed” under Guernsey law.  Sometimes a trust instrument will define a “deed” to mean an instrument in writing signed by the parties and will not elaborate further as to an instrument in writing.

Guernsey law does not prescribe any specific witnessing formalities for trust documents signed by beneficiaries.  Therefore, subject to any requirements of the trust documents, the usual requirement for independent witnesses to sign and confirm a beneficiary’s signature is for evidential purposes.

Guernsey law does not require a corporate trustee incorporated in Guernsey to use its common seal to execute trust documents.  It is standard for articles of incorporation to provide that the common seal is only applied if resolved to do so by the directors.  Therefore corporate trustees in Guernsey always have the option to execute trust documents under hand rather than common seal.

Section 4 of the Electronic Transactions (Guernsey) Law, 2000 (as amended) provides that a signature, seal, attestation or notarisation is not to be denied legal effect, validity, enforceability or admissibility solely because it is in electronic form.  Therefore, electronic signatures are permitted in Guernsey provided the constitution of a trustee permits their use, the trustee resolves to execute a document electronically and the law or terms governing the document to be executed permit the use of electronic signatures for execution.

Isle of Man

Fiduciary Duties, Trust Property and Investments

Trustees stand in a fiduciary relationship vis-à-vis the beneficiaries of the trust.  In carrying out their functions in relation to the trust, trustees are bound by overriding duties to act honestly, in good faith and in the best interests of the beneficiaries.  They must never allow personal interests to conflict with their fiduciary duties.

The Duty of Care

Pursuant to the Trustee Act 2001 (Trustee Act), a trustee has a statutory duty of care when:

  • exercising any power of investment;
  • reviewing and considering from time to time whether to vary the trust’s investments;
  • exercising its duty to obtain and consider proper advice about exercising any power of investment;
  • acquiring or managing land;
  • taking out insurance over property;
  • authorising agents, appointing nominees and custodians to act and reviewing their activities;
  • exercising a power to compound liabilities.

Essentially, the duty of care requires the trustee to exercise such care and skill as is reasonable in the circumstances having regard in particular to his or her special knowledge, experience or professional status.  The statutory duty of care is in addition to, but may not differ very much from, the common law duty of care which also applies to these relationships.  For clarity, the statutory duty of care applies to trusts whenever created.

The statutory duty of care does not apply if or in so far as it appears from the trust deed that the duty is not meant to apply, and therefore may be excluded or restricted by the trust deed.  Trust deeds made after the Trustee Act came into force often expressly exclude the statutory duty of care.  Trust deeds made before then will not have done so, but may have excluded specific duties if permitted under the trust deed.

Investment

Prior to the Trustee Act, trustees were restricted in the investments which could be made on behalf of a trust unless such powers were granted under the terms of the trust deed.  Section 3 of the Trustee Act gives the trustee a general power of investment to make any kind of investment that he could make if he were absolutely entitled to the assets of the trust.  This is a default power of investment for trustees who do not otherwise have sufficiently wide powers of and may be expressly excluded or restricted by the trust deed.  Under the Trustee Act, a trustee must have regard to the suitability of the investment (both generally and specifically) to the trust and the need for diversification.  This requirement cannot be restricted or removed under the terms of the trust and also applies to any agent to whom a trustee delegates its investment management powers (e.g. an asset manager).

Execution and Witnessing of trust documents

Typically, trust documents are executed by corporate trustees by authorised signatories, signatures of beneficiaries are independently witnessed and, in in the ordinary course, all are “wet-ink” signatures.

Manx trust law has its roots in English law.  It is based on common law principles, supplemented and enhanced by legislation which, for the most part, mirrors its English equivalents.  Unlike the other Crown Dependencies, the Isle of Man recognises the English law concept of a “deed”.  Consequently, there are legal formalities associated with executing a “deed” under Manx law.

To be validly executed by an individual a deed must be signed by the individual in the presence of a witness who should sign to acknowledge his or her witnessing of the signature and provide his or her details.  If a deed is to be signed at the maker’s direction, two witnesses are required.

For an Isle of Man company incorporated under the Companies Acts 1931 – 2004 a deed can be executed in the name of the company by affixing the company seal, or, if it does not have a seal, by being signed by two directors or one director and the company secretary.

For an Isle of Man company incorporated under the Companies Act 2006 the requirements are simpler:  a deed may be executed by the affixing of the common seal or on behalf of the company by any person acting under its authority, express or implied.  In other words, the person signing need not be a director and the signature need not be witnessed for the execution to be valid.

E-signatures have been permitted in the Isle of Man since 2000 pursuant the Electronic Transactions Act 2000 (ETA) and the Electronic Transactions (General) Regulations 2017 provided that it does not constitute what is an “excluded transaction” for the purposes of the ETA.  Therefore, electronic signatures are permitted in Isle of Man provided the constitution of a trustee permits their use, the trustee resolves to execute a document electronically, any other party consents to such execution and the law or terms governing the document to be executed permit the use of electronic signatures for execution.

Jersey

Statutory fiduciary and investment duties and delegation of powers

Article 21(1) of the Trusts (Jersey) Law 1984 (as amended) (Trusts Law) sets out the general fiduciary duties to which trustees must adhere.  It provides that a trustee shall in the execution of his or her duties and in the exercise of his or her powers and discretions: (a) act (i) with due diligence, (ii) as would a prudent person, (iii) to the best of the trustee’s ability and skill; and (b) observe the utmost good faith.  These are far-reaching duties, principally judged objectively, and their applicability will change depending on circumstances.

Article 21(3) of the Trusts Law stipulates the investment duties imposed upon trustees.  It provides that, subject to the terms of the trust, a trustee shall (a) so far as is reasonable preserve the value of the trust property; and (b) so far as is reasonable enhance the value of the trust property.  The concept of diversification is not expressly referenced in the Trusts Law, but practically the duties at article 21(3) should be achieved by trustees adopting the objective of diversification in making investments.  Whilst it may be the case that many trust instruments under Jersey law will expressly exclude the duties under article 21(3), trustees should nevertheless remain mindful of them.  It is unlikely that a trustee will be safe-guarded by relying on the exclusion of these duties as the general fiduciary duties will remain applicable and the trustee will be judged by those general fiduciary duties as to any investment losses: would a prudent person not diversify investments?

Article 25 of the Trusts Law permits a trustee to delegate the execution or exercise of any of his or her trusts or powers (both administrative and dispositive) unless the trust instrument provides to the contrary.  This includes the management of trust property.  It would be unusual for a trust instrument not to permit a trustee to delegate in the manner provided for by article 25.  However, article 25 only protects trustees from any loss arising from a delegation provided they acted in good faith and without neglect in making the initial delegation or permitting its continuation.  This means trustees must ensure the delegate is suitable and performs, and continues to perform, as required.  If the delegate does not, then the trustee must take action to avoid being held personally liable for any losses arising.

Execution and Witnessing of Trust Documents

Typically, trust documents are executed by corporate trustees under common seal by two authorised signatories, signatures of beneficiaries are independently witnessed and, in the ordinary course, all are “wet-ink” signatures.

Jersey law does not recognise the English law concept of a “deed” and so it has no specific meaning under Jersey law, despite it being a widely used term.  Consequently, there are no legal formalities associated with executing a “deed” under Jersey law.  Often, a trust instrument will define a “deed” to mean an instrument in writing signed by the parties and will not elaborate further as to an instrument in writing.

Jersey law does not prescribe any specific witnessing formalities for trust documents signed by beneficiaries.  Therefore, subject to any requirements of the trust documents, the usual requirement for independent witnesses to sign and confirm a beneficiary’s signature is for evidential purposes.

Jersey law does not require a corporate trustee incorporated in Jersey to use its common seal to execute trust documents.  It is standard for articles of association to provide that the common seal is only applied if resolved to do so by the directors.  Therefore, corporate trustees in Jersey always have the option to execute trust documents under hand rather than common seal.

Article 12(3) of the Electronic Communications (Jersey) Law 2000 (as amended) provides that a signature, seal, attestation or notarisation is not to be denied legal effect, validity or enforceability only because it is in electronic form.  Therefore, electronic signatures are permitted in Jersey provided the constitution of a trustee permits their use, the trustee resolves to execute a document electronically and the law or terms governing the document to be executed permit the use of electronic signatures for execution.

Key Contacts

David Dorgan

Group Partner: Jersey

T +44 (0)1534 818 060
E Email David

Vanessa Schrum

Partner: Bermuda

T +1 441 298 3299
E Email Vanessa

Paula Fry

Senior Associate*: Guernsey

T +44 (0)1481 755 907
E Email Paula

Melissa Wong

Associate: Isle of Man

T +44 (0)1624 647 602
E Email Melissa

Andrew Willins

Partner: BVI

T +1 284 393 5323
E Email Andrew

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