This year, the Republic of Cyprus ratified The Hague Conventions’ definition of the legislation applicable to trusts and furthering the regulations surrounding their recognition. Cyprus common law now recognises trusts as a unique legal institution under equity.
The term “trust” refers to the legal relationships created during the lifetime or upon death by a certain person, known as the Settlor, when the Settlors assets have been placed under the control of a Trustee for the benefit of a Beneficiary or for a specific purpose. According to the convention, a valid trust must have been created voluntarily, and evidenced in writing as having the following characteristics:
- Certainty of Subject Matter: the assets have to constitute a separate fund and they are not part of the Trustee’s own estate.
- Certainty of Objects: the title to the trust assets must be in the name of the Trustee or in the name of another person on behalf of the Trustee.
- Certainty of Intention: the Trustee must have the power & mental capacity to manage, employ or dispose of the assets in accordance with the terms of the trust and the special duties imposed upon him by law.
A valid express trust is governed by the law chosen by the settlor and the choice must be expressed or implied in the terms of the instrument creating or evidencing the trust in writing. New Cyprus trust law governs:
- The appointment, resignation & removal of the Trustee.
- The capacity to act as a Trustee.
- The rights & duties of Trustees.
- The rights of Trustees to delegate the discharging of their duties or the exercising of their powers.
- Their power to administer or dispose of the trust assets.
- The secured interest of the trust assets.
- The powers of the Trustees to invest the assets.
- The restriction regarding the duration of the trust and upon the power to accumulate the income of the trust.
- The relationship between Trustees & Beneficiaries, including the Trustees duty of care to the Beneficiaries.
- The variation terms or procedure to terminate the trust.
- The distribution of the trust assets & the duty of the Trustees to account for any administrative activity carried out.
The convention institutes common requirements for all contracting jurisdictions, recognises a trust which is created in accordance with the law, providing that the property of the trust constitutes a separate fund, that the Trustee may sue and be sued in his capacity and that he may appear or act in this capacity before any person acting in an official capacity.