Update On Trust Law In Macau

Trust law is an important part of the legal system in Macau. This area of law covers a wide range of topics, from estate planning to asset protection. If you are considering doing business in Macau, it is important to understand the trust law landscape and how it may impact your transactions.

In this Q&A, we spoke with CFB lawyers in Macau to find out more.

Conventus Law: What are the listed Macau entities allowed to provide trust services?

CFB – The new draft trust law as approved in general by the Macau SAR´s General Assembly (hereinafter, “Trust Law”) determines that only a certain number of entities may provide services as trustees, namely the following:

• credit institutions (as per Decree Law No. 32/93/M of 5 July);
• finance companies (as per Decree Law No. 15/83/M of 26 February);
• wealth management companies (as per Decree Law No. 25/99/M of 28 June);
• investment funds management companies (as per Decree Law No. 83/99/M of 22 November);
• insurance companies (as per Decree Law No. 27/97/M of 30 June);
• retirement funds management companies (as per Decree Law No. 6/99/M of 8 February); and/or
• other entities authorized to conduct trust activities in conformity with special legislation.

Therefore, the Trust Law basically follows the pattern of regulatory systems in existence in foreign jurisdictions (especially in common law systems, wherein the concept and regulation of trusts has enjoyed a long and successful history), pursuant to which, trustees of commercial trusts are usually banks or other financial institutions.

Under the proposed Trust Law, what is the nature of trust activities and what should be covered for its setting up, termination and winding up?

Pursuant to the Trust Law, a trust consists of a legal relationship under which the trustor transfers the rights over certain specific assets to the trustee, so the latter manages these as its own (always having in consideration the best interests of the trust´s beneficiary). Notwithstanding, it should be noted that the assets forming the trust shall be deemed separate and independent from those assets of the trustee, trustor and beneficiary.

The Trust Law appears to only allow and regulate (or, at the very least, it is mainly focused on) trusts which are established for commercial purposes, seemingly leaving aside specific provisions regarding the setting up of trusts for noncommercial purposes – such as civil and charitable trusts.

The trust incorporation act must necessarily address (and regulate) a minimum number of requirements, inter alia, (i) the scope of the trust, (ii) the identity of trustor(s) and trustee(s), (iii) the powers ascribed to the trustee(s) (i.e., any potential powers of disposal or acquisition of assets), and (iv) the identification of the beneficiary(ies) or the adequate procedure for its/their identification, as well as the content of the trust benefit.

As per the applicable provisions of the Trust Law, any person or entity capable of disposing of its assets shall be able to set up a trust. By the same token, any person or entity (including the trustee) may be appointed as a beneficiary of a trust – with one relevant restriction, given that, although trustees may be appointed as beneficiaries of a trust, they will not be permitted to be appointed as sole beneficiaries.

The Trust Law stipulates as well that trusts are theoretically set up for an indefinite period (or without term), unless otherwise provided for in the trust incorporation act. Inter alia, trusts are to be terminated (i) in accordance with the relevant provisions of the trust incorporation act, (ii) fulfilment of its purpose (or if the same becomes impossible to attain), (iii) revocation, expiry of its term, or (iv) due to the loss of the totality of the trust´s assets.

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