BERMUDA
BRITISH VIRGIN ISLANDS
CAYMAN ISLANDS
DUBAI
HONG KONG
LONDON
MAURITIUS
SINGAPORE
conyersdill.com
July 2014
Bermuda Introduces Unprecedented
Changes to Legislation on Settlor
Reserved Powers
The reservation or grant of certain powers by settlors has always been possible under
Bermuda’s trust legislation but historically, there has been some uncertainty about exactly
how far settlors could go without calling the validity of the trust structure into question. The
recently passed Trusts (Special Provisions) Amendment Act, 2014 (the “Amendment Act”) now
provides statutory clarity and certainty in this area.
Helpfully, the Amendment Act expressly lists certain interests and powers which can be
retained by a settlor or granted to a third party, for example, a protector or beneficiary,
without prejudicing the validity of a trust. It also clarifies that the retention or grant of these
powers and interests will not cause the property in the trust to become part of the settlor’s
estate - introducing certainty in this area distinguishes Bermuda from some of the other
major offshore jurisdictions.
The Amendment Act expressly states that any and all of the following interests or powers
can be reserved by the settlor or granted to a third party:
a) (in the case of a reservation to the settlor or other donor of trust property) a power to
revoke the trust in whole or in part;
b) a power to vary or amend the terms of a trust instrument or any of the trusts,
purposes or powers arising thereunder in whole or in part;
c) a power to decide on or give directions to advance, appoint, pay, apply, distribute or
transfer the trust property;
d) a power to act as, or give directions as to the appointment or removal of directors or
officers of companies owned by the trust, or to direct the trustees how to exercise
voting rights with respect to the shares of such companies;
e) a power to give directions in connection with investments or the exercise of any
powers or rights arising from such trust property;
Settlor Reserved Powers
f) a power to appoint, add, remove or replace any trustee, protector, enforcer or other
office holder or advisor;
g) a power to add, remove or exclude any beneficiary, class of beneficiaries or purpose;
h) a power to change the governing law and the forum for administration of the trust;
and
i) a power to restrict the exercise of any powers, discretions or functions of a trustee by
requiring that they shall only be exercisable with the consent, or at the direction, of a
person or the persons specified in the trust instrument.
This is a very wide suite of powers and interests compared to those contained in the
reserved powers legislation of some other offshore jurisdictions. It paves the way for the
creation of valid trusts where the settlor can retain (or grant to a trusted family friend,
protector or beneficiary) a fairly large degree of control over the wealth settled on trust.
Fiduciary Provisions and the Effect on Trustees’ Duties and
Liabilities
The Amendment Act makes it clear that trustees will not be in breach of their fiduciary or
equitable duties for complying with the valid exercise of the powers listed in the
Amendment Act. In addition the Amendment Act provides that no person (unless formally
appointed as trustee) shall be deemed to be a trustee by reason only of the grant or
reservation of any of the powers specified in the Amendment Act. This is a helpful
provision because if settlors or protectors are deemed unintentionally to be trustees by
virtue of their control over the trust property, this could be problematic; most other offshore
jurisdictions do not expressly clarify this point.
The Amendment Act also clarifies that the terms of a trust deed governed by Bermuda law
may expressly provide that the person who holds the powers listed in the Amendment Act
shall not be subject to a fiduciary duty. This approach (which is unique to Bermuda 1) is
useful where, for example, powers are being given to protectors who may be trusted family
friends and on whom there is no desire to impose strict fiduciary standards of liability.
Uniquely, the new provisions of the Amendment Act create presumptions which apply to
Bermuda trusts created after the new legislation comes into force; these presumptions are
subject to contrary intention, and can be overridden by express provision in the trust deed.
For such new trusts only, it shall be presumed that if:
1 Unique to Bermuda statute and most other offshore jurisdictions but note that Guernsey provides automatically
that such powers are non-fiduciary subject to the terms of the trust.
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Settlor Reserved Powers
a) the powers are granted to a beneficiary or reserved by a settlor, those powers will be
personal and non-fiduciary (as long as the power-holder is not the sole trustee); and
b) in any other case those powers will be fiduciary.
By setting out presumptions, Bermuda’s amended legislation not only creates certainty, but
also flexibility, since the presumptions can be overridden by express terms in the trust.
Conclusion
These new legislative provisions will render Bermuda trusts more attractive to the
international settlor. In particular, they will appeal to clients from jurisdictions which do not
recognise trusts, since clients from such jurisdictions are typically unfamiliar with the trust
concept and often reluctant to release full control over their assets to trustees.
The new legislation not only provides clarity as to what interests and powers can be
retained or granted to third parties. It also provides flexibility, where, for example, a settlor
wishes to appoint a family member or friend to oversee certain aspects of the trust
administration (e.g. monitoring of investment managers), and at the same time ensure that
the friend or family member is absolved of any fiduciary liability.
Bermuda now has the most comprehensive reserved powers legislation of any offshore
jurisdiction, emphasising its position as a modern, innovative and sophisticated domicile for
the international trust.
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Settlor Reserved Powers
Contact Us
Global Contacts
Authors
Alec Anderson
Director
+1 441 299 4945
alec.anderson@conyersdill.com
Kerri Lefebvre
Director, Head of Dubai Office
+9714 428 2900
kerri.lefebvre@conyersdill.com
Helen Cooper
Director
+1 441 299 4956
helen.cooper@conyersdill.com
Christopher Bickley
Partner, Head of Hong Kong Office
+852 2842 9556
christopher.bickley@conyersdill.com
Nicola Bruce
Associate
+1 441 299 4936
nicola.bruce@conyersdill.com
Charles Collis
Director, Head of London Office
+44 (0)20 7562 0345
charles.collis@conyersdill.com
Alan Dickson
Director, Head of Singapore Office
+65 6603 0712
alan.dickson@conyersdill.com
This article is not intended to be a substitute for legal advice or a legal opinion. It deals in broad terms
only and is intended to merely provide a brief overview and give general information.
About Conyers Dill & Pearman
Founded in 1928, Conyers Dill & Pearman is an international law firm advising on the laws of Bermuda,
the British Virgin Islands, the Cayman Islands and Mauritius. With a global network that includes 140
lawyers spanning eight offices worldwide, Conyers provides responsive, sophisticated, solution-driven
legal advice to clients seeking specialised expertise on corporate and commercial, litigation,
restructuring and insolvency, and trust and private client matters. Conyers is affiliated with the Codan
group of companies, which provide a range of trust, corporate secretarial, accounting and management
services.
For further information please contact:
Leslie Cline / leslie.cline@codancanada.com
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