The jurisdiction of Labuan, Malaysia's International Business and Financial Centre located off the coast of Borneo, has set its sights on becoming a leading wealth management centre for Asian investors. To serve the burgeoning needs of the private banking sectors in Asia Pacific, Labuan has re-drafted its trust laws which were enacted on 11 February 2010.
In this article, Mark Lea (Partner of Lea & White and Managing Director of Lea & White International Advisers Limited) provides some highlights on the new Labuan trust laws, which were drafted with the assistance of Lea & White, a leading trust law specialist in the region.
CONTROL OF THE TRUST
Retention of control by a Settlor or Protector is one of the most sought after features in Trust Law, particularly in Asia. The Labuan Trusts Act ("LTA") offers reserved powers to a Settlor, similar to Jersey.
Also, similar to the Bitish Virgin Islands Special Trusts Act ('VISTA'), LTA includes the 'Labuan Special Trust' (LST) to 'enable a trust of company shares' to be established under which (a) the shares may be retained indefinitely (b) the management of the company may be carried out without power of intervention by the trustees.
Compared to VISTA, LST is more contemporary as the trustee is not liable for losses from speculative or imprudent activities of the company, and despite the trust to retain the designated shares, the trustee has power to sell them as well as protection when exercising the power
DURATION OF THE TRUST
Another sought after feature is for the trust to exist in perpetuity. Bermuda, Guernsey, Jersey, Dubai and now Labuan allows perpetual trusts as a default provision. There is flexibility for a fixed term trust to be converted to a perpetual trust and vice versa; shorten or extend the duration; and making this retrospective for existing trusts.
UNENFORCEABLE FOREIGN CLAIM
Protection against a foreign law claim or enforcement of a foreign law judgement is provided for in Labuan, which compares favourably with Dubai, Bahamas, Bermuda, BVI, Guernsey and Jersey and to a limited extent, Singapore.
TYPES OF TRUSTS
Labuan has introduced Purpose Trusts thus comparing favourably with Cayman's STAR Trusts, Guernsey, Dubai, BVI, Jersey, Bermuda and Mauritius. It has included the promotion of art, science, religion and unique to Labuan, 'the advancement of human rights and fundamental freedom'.
TRUSTEES' POWERS AND DUTIES
In place of the 'statutory duty of care', Labuan has the common...