Justice Select Committee reports on Trusts Bill

Regulatory Update: Trusts Bill – 1 November 2018

The Justice Select Committee released its report on the Trusts Bill yesterday, following public submissions, which closed on 5 March 2018.

The Bill is the first significant reform in New Zealand trust law in over 60 years and will replace the Trustee Act 1956 and the Perpetuities Act 1964. It seeks to restate and reform New Zealand trust law by clarifying and simplifying trust law and trustee obligations. If enacted in its current form, the Bill would apply to all new and existing express trusts, including trusts used to facilitate commercial transactions and charitable trusts, and comes into force 18 months after it receives Royal assent.

Key features of the Bill as reported back from Select Committee include:

• application to trusts used in commercial transactions, such as trusts regulated by the Financial Markets Conduct Act 2013, trusts for commercial purposes, wholesale financing trusts and security trusts;
• in respect of trusts that are regulated by the Financial Markets Conduct Act 2013, regulations may be made to disapply the Bill and limited powers for the Financial Markets Authority to grant exemptions from the Bill; and
• restrictions on limitation of liability and indemnity clauses, with guidance on what constitutes "gross negligence".

Russell McVeagh's submission on the Bill to the Select Committee (both in writing and in person) focused on how the Bill will impact on trusts used to facilitate legitimate and important commercial transactions. The Bill only provides partial relief from its provisions for such trusts, and so the terms of these trusts (in particular those that are not regulated by the Financial Markets Conduct Act 2013) will need to be carefully considered ahead of the Bill coming into force.

We will be hosting a CPD session for our clients in late November 2018 to consider the impact of the Bill and the impact this will have on both existing and future commercial transactions. Please contact us if you are interested in attending or if you would like to discuss the Bill.