Introduction
Scope of draft law
Comment


Introduction

In November 2021, the government of the Macau Special Administrative Region (MSAR) made its 2022 policy address to the public. The development of the modern financial sector and the strengthening of the financial infrastructure are among the government's top priorities to achieve the long-awaited economic diversification.

The development of the financial sector will include:

  • bond issuance;
  • wealth management;
  • green finance;
  • financial leasing;
  • a financial infrastructure data centre; and
  • a faster payment system.

Legislation and directives regarding the financial sector are the main aspects on which the government will concentrate its actions in 2022.

As part of this effort, a draft Trust Law was introduced to the Legislative Assembly of the MSAR on 25 November 2021 and has been assigned to the Second Standing Committee for review. The introduction of the draft states that it is considered as a measure to promote and develop activities in relation to wealth management and improve legislation and directives regarding the financial sector.

Scope of draft law

The draft aims to promote the development of trust activities by establishing a legal framework for trusts and regulating, in particular:

  • the establishment and extinction of trusts;
  • trust property; and
  • the capacity, rights and duties of trustors, trustees and beneficiaries.

The draft is divided into eight chapters and is composed of 38 articles. It defines a "trust" as a legal relationship in which a trustor transfers its property rights to the trustee, so that the trustee, in its own name, manages or disposes of the trust properties in the interest of the beneficiary or for a specific purpose.

Furthermore, the draft provides that a contractual trust can, in general, be made by means of a private document, unless the properties or rights to be included require otherwise. Also, should a contractual trust be subject to filing with official registries, the failure to carry out such filing will result in it being ineffective against third parties.

Regarding the necessary elements of the constituent document of a trust, they must include:

  • the purpose of the trust;
  • the list of assets and rights to be included in the trust properties and their identification or the procedure for their identification;
  • the identity of the trustor or trustors;
  • the identity of the trustee or trustees;
  • the powers assigned to the trustee or trustees, and in particular, any disposition and acquisition powers;
  • the identity of the beneficiary or beneficiaries or the procedure for their identification; and
  • the content of the beneficiary's or beneficiaries' right to the trust (benefício fudiciário).

Given the specific nature of trust activities, trustees that exercise them have duties of:

  • care;
  • loyalty;
  • impartiality;
  • conservation and updating of records;
  • property separation;
  • secrecy; and
  • information.

Trustees must be one of the following types of entity:

  • a credit institution (Decree Law No. 32/93/M of 5 July);
  • a finance company (Decree Law No. 15/83/M of 26 February);
  • a wealth management company (Decree Law No. 25/99/M of 28 June);
  • an investment fund management company (Decree Law No. 83/99/M of 22 November);
  • an insurance company (Decree Law No. 27/97/M of 30 June);
  • a retirement fund management company (Decree Law No. 6/99/M of 8 February); or
  • an entity authorised to conduct trust activities in accordance with special legislation.

In accordance with the constituent document of the trust, the beneficiary:

  • possesses the right to the trust properties;
  • may request the trustee to hand over the trust properties; and
  • may request information from the trustee on the management of the trust.

Additionally, should a trust property be wrongfully transferred – that is, when such transfer is made in violation of the objective of the trust or the stipulations of its constituent document – the trustor, the beneficiary or another trustee (when applicable) can request the annulment of such transfer.

Finally, the draft under discussion establishes methods for the extinction of trusts. In particular, it is clarified that testamentary trusts must follow the relevant rules of the Macau Civil Code on testaments.

Comment

Trusts have their roots in common law jurisdictions and, under private international law, civil law jurisdictions often have difficulties in recognising trusts in their original form – that is, the Anglo-American concept of a trust. Legislating such institutions in Macau is a big step forward, particularly when attempting to articulate them within the traditional property right principles of civil law jurisdictions. The MSAR is not alone in this respect, and many experiences from other civil-law jurisdictions, such as China, Japan, South Korea and Taiwan, may be deemed valuable to the current legislative process of the draft law.

It is expected that the financial law landscape of Macau will be renovated in the coming years. As indicated in the consultation document of the Second Five-Year Plan for Economic and Social Development (2021-2025), which aims to revamp the laws and regulations regarding the financial sector, Decree-Law No. 32/93/M (the Macau Financial System Act), Decree-Law No. 7/95/M (the Macau Currency Issuance Act) and Decree-Law No. 83/99/M (the Establishment and Functioning of Investment Funds and Investment Fund Management Companies), among others, are the laws subject to amendments or alterations. It is also expected that another main legislation for the financial sector may begin its journey shortly.

For further information on this topic please contact Calvin Tinlop Chui at Rato, Ling, Lei & Cortés Advogados by telephone (+853 2856 2322) or email ([email protected]). The Rato, Ling, Lei & Cortés Advogados website can be accessed at www.lektou.com.