The Labuan Trusts Act 1996 was amended in 2010 to create a new range of trust products, one of which was the Labuan special trust. It is best described as a new incarnation of a common law trust where the settlor retains full control of the trust himself. This is a major benefit, as offering reserved power to the settlor/and or protector means he can administer the assets of the trust himself with little interference from the trustees. The framework is similar to the VISTA trust of the Virgin Islands and the STAR trust, which is the Cayman Islands equivalent.

The trust assets consisting of holding shares in a Labuan Company will fall under the ambit of the Labuan Companies Act 1990 and the governing laws of Malaysia.

Labuan Special Trust can also be established under Islamic Shariah principle pursuant to Labuan Islamic Financial Services & Securities Act 2010. This is a special feature in Labuan, which is not offered or available in any other IBFC jurisdiction.

Key features of Labuan Special Trust

Labuan Special Trust

Details

Settlor – person setting up the trust

Malaysian resident or non-resident

Trustee

  • One trustee must always be a licensed Labuan Trust Company
  • More trustee(s) can be appointed if required

However, a trustee shall not be a director of the company where shares are held by the said trustee.

Enforcer / Protector

  • Additional parties such as Enforcers / Protectors could be appointed to oversee / supervise trust administration
  • These parties can also act on advisory / consultancy basis

Assets of the Trust

  • May encompass Malaysian assets – however consent from the Labuan Financial Services Authority (“Labuan FSA”) needs to be obtained if Malaysian assets are to be injected into Trust
  • No consent of Labuan FSA is required for injection of non-Malaysian assets

Duration of Trust

No perpetuity period

Shares held

  • Trustee owns shares in an underlying asset holding vehicle (Labuan Company) on an “own and retain” basis
  • Trustee will not get involved in the day-to-day running of the underlying company
  • Allows for the separation of the custodianship of the assets from the investment of the assets

Letter of Wishes

Settlor can also use Letter of Wishes to provide guidance to the Trustee in matters affecting trust (particularly distribution) for situations that may arise post his / her demise

Duration for Set- up

Four Weeks

Advantages of a Labuan Special Trust

  • Trustee does not interfere in the management or conduct of any business of the company, and in particular, it shall leave the conduct of every such business and all decisions as to the declaration of dividends, to the directors of the company.
  • Trustee shall not instigate or support any action by the company against any of its directors for breach of duty to the company or procure the appointment or removal of any of the directors.
  • There are provisions for unenforceable claims; a two- year claw-back period and requirements for legal procedures should a creditor attempt to prove a trust is fraudulent.
  • Meets the contemporary needs of High Net worth Individuals or families who recognize that members of the next, younger and better educated generation may wish to attempt more sophisticated investment options; yet by separating the roles indicated above, the founders of wealth (the older generation) can still keep the original legacy intact. This feature is one of the most sought after in Trust Law.
  • Existence of the trust in perpetuity.
  • Option not to register the trust to protect privacy.
  • No exchange control in Labuan.
  • Double Taxation Treaty Access.

The Valsen Advantage

  1. Speedy, Efficient and consistent Services.
  2. Relentless effort to obtain bank accounts.
  3. Expert advice on structuring options.
  4. Dedicated ongoing compliance support.