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Labuan’s Special Trust

Trust is one of the succession vehicles available in common law country and has always been considered as one of the best succession vehicles that can be used for the purpose of holding assets.

However, many high network individuals or family find a conventional trust is not an attractive vehicle to hold such assets as the rights of the assets has to be transferred under the name of the trustee.

As a result, they will not have any powers or rights to dedicate on how the assets should be managed or invested. The trust may be considered as a sham if the settlor has any power or rights to manage the assets that have been transferred to the trust.

The new and amended Labuan Trusts Act (LTA) 1996, have introduced a new trust product called Labuan Special Trust. The Labuan Special Trust is suitable for individuals or families who are planning to establish or set up a trust, for the purpose of holding assets without losing any power or rights on the management of the assets.

The Labuan Special Trust is very similar to ‘VISTA’ Trust, which originated from British Virgin Island.

Key features

Labuan Special Trust is uniquely designed for the ownership of shares in private companies with minimum intervention from the trustee.

The Labuan Special Trust offers great flexibility as the trust can be tailored to meet the particular needs and objectives of the settlor. Under Labuan Special Trust, an individual or a family can use the trust to hold shares in a Labuan company that may own assets such as cash, real estate, business and other valuable assets.

The trustee of the trust will only hold the shares of the Labuan company, but will have no responsibility or power to manage the assets of the company. The directors of the company will be responsible to manage the assets.

Below are the key features which make a Labuan Special Trust unique:- Can be used to hold shares in a Labuan Holding Company, which own assets The settlor of the trust can involved in the management of the Labuan company, by be appointed as the company’s director The fiduciary role for the management and investment of the assets will be handled by the company directors The shares of the Labuan company will be held by the trustee on “trust to retain” only. There will be no intervention by the trustee on the management of the company The trustee is not liable for any losses occurred from any investment activities of the company, as the directors of the company are responsible for the management and investment activities of the company The settlor of the trust may reserved powers to dispose the shares of the company without intervention of the trustee

The Labuan Special Trust can also be established under Islamic syariah principles under Labuan Islamic Financial Services and Securities Act 1990, a special feature that not available in other jurisdiction.

Advantages and benefits

Below are the summarise of advantages and benefits for using a Labuan Special Trust:

Clear separation of duty – There is a clear separation of duty between the trustee who hold the shares of the company on behalf of the trust, and the directors whom are responsible for the management and investment of the company’s assets.

Generate more wealth – The settlor has the power and rights to manage the investment portfolio, diversify the company businesses and investments, and venture into a high-risk business or investments which in return will generate more profits and income.

Enhance the company’s growth – The directors of the company have the ability to plan a long-term planning of the company and this can enhance the prospect of the company’s growth in a long term, due to non interference from the trustee.

Asset protection elements – Protection against foreign law claims or unenforceable claims are provided under LTA 1996, for Labuan Special Trust.

Special Purpose Vehicle – Labuan Special Trust can be used and structured as a special purpose vehicle entity.

Confidentiality and secrecy – Labuan IBFC has numerous stringent provisions about confidentiality and secrecy, ensuring the trustee to keep any records of the trust secret.

Conclusion

With stringent confidentiality and secrecy provisions, competitive tax regime and a newly revamped legislation, Labuan IBFC is a great choice for those seeking highly efficient tax planning and wealth management solutions.

Labuan Special Trust is one of the great trust product offered in Labuan, and has unique key features that have been so appealing to high net worth individuals and families.

Some of these unique features are not available in other jurisdictions.

For more information about Labuan Special Trust in Labuan IBFC, you can log on to www.labuanfsa.gov.my and www.labuanibfc.my.

Sazali Suzin is a Trust Officer and Chartered Accountant at Labuan Borneo Trustees Limited. He has deep knowledge about Labuan International Business Financial Centre (IBFC) structures and finance.