Bermuda Trust Law - The Past 30 Years

• Published date: 22 June 2022
• Subject Matter: Corporate/Commercial Law, Privacy, Corporate and Company Law, Privacy Protection, Trusts
• Law Firm: Carey Olsen
• Author: Mr Ashley Fife

With the Society of Trust and Estate Practitioners (STEP) recently celebrating its 30th anniversary, Carey Olsen's Ashley Fife has looked back at the key legislative, regulatory and trust law developments to take place in Bermuda over the past 30 years.

Bermuda remains a preferred jurisdiction in which to establish and maintain trusts (and increasingly, family offices). Bermuda's Courts and regulatory regime carefully balance privacy with the objective of maintaining appropriate regulation to preserve Bermuda's stellar reputation as a premier international financial services jurisdiction.

An important feature of Bermuda trust law is that it contains many provisions that can resolve problems or otherwise address concerns regarding the administration of trusts. This feature is supplemented by Bermuda's Courts' willingness to apply these provisions in a constructive manner. These qualities attract many high net worth families to establish trusts under Bermuda law or (indeed) to change the governing law of trusts to that of Bermuda.

For example:

• Section 47 of the Trustee Act 1975 confers upon the Court the power to grant trustees powers to enter into any transaction not authorised under the trust's terms without requiring the consent of all adult beneficiaries, provided the Court determines that it is expedient to do so. The Bermuda Court has consistently applied section 47 to grant trustees powers to vary not only administrative provisions, but also beneficial interests under a trust.
• Section 4 of the Perpetuities Act 2009 provides the Court a specific streamlined jurisdiction to extend or disapply a perpetuity period of a trust provided the Court determines it expedient to do so. Since 1 August 2009, Bermuda trusts may be established without a perpetuity period, except that Bermuda land may only be held in trust for a maximum of 100 years.
• Section 47A of the Trustee Act (also known as "statutory Hastings Bass") provides the Court the power to set aside a flawed exercise of a fiduciary power if the Court determines that the power holder exercised the fiduciary power without properly considering all material relevant considerations and would have otherwise exercised the power differently, at another time or not at all.
• Bermuda Courts readily grant confidentiality orders (prevent public access to court proceedings and files and anonymising Court lists and judgments) in respect of proceedings concerning the internal administration of trusts, thereby protecting the legitimate interests of families to maintain their privacy.
• Bermuda's laws regarding beneficial ownership registers required for companies, partnerships and limited liability companies reflect that such registers do not serve as a de-facto trust register where there is a trust in such entity's ownership structure.
• Queens Counsel are readily granted access to appear before Bermuda Courts, thereby ensuring that families have maximum access to utilise the best advocates in the world.

Bermuda combines a beautiful island with a strategic and convenient location and extensive direct air connectivity. The island's modern infrastructure and robust legal system provides many of the advantages of an onshore jurisdiction. This, combined with the highest quality of professional services firms, low direct taxation and a high degree of innovation makes Bermuda a particularly attractive jurisdiction to establish trusts and family offices.

Key Trust Legislative Developments Over The Past 30 Years

Trustee Act 1975 amendments:

1999 - The Act was amended to provide trustees powers, subject to a contrary intention expressed in the trust instrument, to (1) exercise a broad range of investment powers that may not have been expressly authorised under the trust instrument; (2) delegate investment management and other powers; (3) advance capital on very flexible terms, including on discretionary trusts; and (4) provide for the appointment (if so provided in the trust instrument) of a managing trustee where certain powers may be reserved to a managing trustee with the other (administrative/custodian) trustee(s) not being liable for the managing trustee's acts or omissions in respect of such powers.

2014 - The Act was amended to introduce s47A (known as "statutory Hastings Bass"), which essentially overturns the UK Supreme Court decision in Pitt v Holt 2013 and restores the "rule in Hastings Bass". Section 47A provides the Court a statutory power to set aside innocent flawed exercises of fiduciary powers if the fiduciary did not take into account one or more relevant considerations and if the fiduciary had done so would have exercised the powers differently, another time or not at all. To exercise its powers under s47A the Court does not need to find the fiduciary liable for a breach of its duties or negligence.

Trusts Special Provisions Act (1989) amendments:

1998 - Non-charitable purpose trusts - Section 12A of the Act was introduced to provide that a non-charitable purpose trust may be created under Bermuda law provided the purposes are (1) sufficiently certain to allow the trust to be carried out; (2) lawful; and (3) not contrary to public policy. A subsequent amendment in 2009 did away with the statutory requirement for an enforcer to be appointed to enforce the purposes of a trust so that, essentially, any person that the Court determines has a "sufficient interest" in the enforcement of the trust may apply to Court to enforce the trust.

2014 - Reserved powers legislation - Section 2A of the Act introduced modern and extensive reserved power trust legislation that essentially...