by Carlos de Serpa Pimentel and Esmond Brown Appleby From Mondaq

The well-established regime for trusts in the Cayman Islands has been improved by significant changes to the Trusts Law (2018 Revision) (Trusts Law) pursuant to The Trusts (Amendment) Law, 2019 (Amendment), gazetted on 15 May 2019. The Amendment is to come into force at a future date by way of a commencement order.

The Amendment furthers Cayman’s reputation as a world class trusts jurisdiction by enhancing the inherent jurisdiction of a Cayman Islands court in relation to the administration of trusts. The changes, brought about as a result of a report by the Cayman Islands Law Reform Commission on Cayman’s trusts law, have the support of Cayman’s Judiciary and Cayman’s STEP branch.

Existing Regime

The primary trusts legislation in the Cayman Islands is the Trusts Law, supplemented by the Fraudulent Dispositions Law and the Perpetuities Law. However, Cayman Islands trusts law is not fully prescribed by statute; trusts established in the Cayman Islands and subject to domestic law are strongly influenced by judicial decisions of the English courts in trust cases as well as the decisions of Cayman Islands courts.

Key Changes under the Amendment

When the Amendment comes into force, the Trusts Law is amended:

• to replace the definition of “trust corporation” to mean “a body corporate licensed to conduct trust business, with or without restrictions, under the Banks and Trust Companies Law … or registered under that Law as a controlled subsidiary or a private trust company” (s. 2);
• to include a new section (a) setting out the circumstances in which the Court has jurisdiction to set aside the mistaken exercise of fiduciary power by a trustee and (b) identifying the persons who may apply to the Court to invoke its jurisdiction in those circumstances (s. 64A);
• to include a definition of “trust litigation” (meaning “litigation invoking the inherent jurisdiction of the Court in relation to the administration of trusts”) and a new section which, in relation to the exercise of the Court’s jurisdiction to approve compromises of trust litigation affecting minor or unborn beneficiaries, replaces the “for the benefit” test with a “not to the detriment” test (ss 2 and 64B);
• to replace the “for the benefit test” with a “not to the detriment test” in relation to the Court’s jurisdiction to vary trusts (s. 72(1);
• to extend the protection afforded by reference to “a personal relationship to the settlor” (in the context of the application of foreign laws which may prohibit or not recognise the concept of a trust) to include a personal relationship to any beneficiary (whether discretionary or otherwise) (s. 91(b); and
• to empower the Court to make rules in order to give effect to the provisions of the Trusts Law, as amended (s. 111A).

The Amendment will bring further clarification and build on Cayman’s already highly regarded Trusts Law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

SOURCE: http://www.mondaq.com/caymanislands/x/811426/Trusts/Significant+Changes+To+Cayman+Islands+Trusts+Law