LEGAL PERSPECTIVE: Trusts and Reserved Rights of the Settler by Dr AbdelGadir Warsama, Legal Counsel

Dr AbdelGadir Warsama, Legal Counsel

As per Trust Law in Bahrain, “Trust” is a legal relationship created by a “Settler” whereby certain “Trust Property” is held in the name of the “Trustee”. The “Trustee” shall exercise the required duties and powers in accordance with the provisions of the law and the terms of the trust. Any power, out of this, will be deemed ultra vires. Generally, the entrusted “Trustee” is vested with the legal power to act and implement the trust within the professional boundaries. However, irrespective of the legal powers of the “Trustee” we would like to mention that the Trust Law reserves certain rights and powers to the “Settler”.

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As per the law, a trust shall not be invalid or void if the “Settler” himself is at the same time being a “Beneficiary”, “Enforcer” or “Protector”. Or if the “Settler” reserves to himself the right to exercise certain powers including, the appointment of new “Trustee” or adding or removing any “Trustee”, “Protector”, “Enforcer” or “Beneficiaries”. We believe, this could emerge at any time and for any reason(s) deemed fit by the “Settler”. Moreover, apart from above, the “Settler” may restrict the powers of the “Trustee(s)” and require they shall only be exercisable after obtaining his consent including directions to the “Trustee(s)” regarding the management, pledging or sale of the “Trust Property”. This is, also, including the right to distribute, appoint, use or advance the “Trust Property” or its income.

The “Settler” may reserve the right to act as in instances, regarding the appointment or removal of, directors or officers in corporations owned by the Trust. To appoint or remove any investment manager or investment adviser or any other person acting in such capacity in relation to the affairs of the “Trust” or any “Trust Property”. Moreover, to revoke the Trust or vary or amend the terms of the trust or powers arising wholly or partly pursuant to such terms, release any of the “Protector” powers, amend, vary, add or delete any particular Charitable or Non-Charitable purpose or purposes of the “Trust”.

As we can easily notice, the Trust Law, gives the “Settler” wide range of powers. This could be understandable, provided that the “Settler” is exercising such discretion with the genuine intent to observe the real intent of the formation of the “Trust”. This should be the spirit and interpretation behind such reserved powers.

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