Trading Trusts

Under the terms of a private trading trust, the trust fund is used for the conduct of a business by the trustee.

Where invitations to become beneficiaries are offered to the public, a manager will conduct the business for the benefit of 'investor-beneficiaries'.

The beneficiaries of a trading trust should not exert control over the conduct of the business, or there may be a partnership between the trustees and the beneficiaries.

Since it is the trustees who carry on the business and not the "trust" (which is not a legal entity), the personal contractual liability of the trustees (except as trustees specifically limited in the business documentation) has led to the practice of having a limited liability company with nominal share capital as trustee.