Lending To Trustees And Managers Of Unit Trusts...What Could Go Wrong?

Just when you thought the transaction was going to be straightforward, you are told that one of the borrowers is a manager of a unit trust governed by the laws of an offshore jurisdiction. The manager says the trustee need not be a party to the transaction and insists that liability should be limited to trust property (to which it does not have title). With completion just days away, where do you start?

INTRODUCTION

Promoters of investment funds often consider common law unit trusts to be attractive structures due to the flexibility they provide. The terms of a trust and the trustee's powers are not constrained by corporate law requirements including those relating to maintenance of capital and distributable profits. Trusts may be tailored to effectively achieve the objectives of the promoter and the investors.