The Ultimate Guide to Trust Registration in Bangladesh
Navigate the complexities of Bangladeshi trust law with confidence. This guide provides a clear, step-by-step overview of forming, registering, and managing a trust in full legal compliance.
Understanding Trusts in Bangladesh
What is a Trust?
A Trust is a legal arrangement where an 'Author' transfers property to one or more 'Trustees' to manage for the benefit of others, known as 'Beneficiaries'. It's an obligation attached to property ownership, founded on confidence.
As defined under Section 3 of the Trusts Act, 1882, a trust is "an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner... for the benefit of another."
Key Components of a Trust
- Author: The creator of the trust.
- Trustee: The person entrusted to manage the trust property.
- Beneficiary: The individual or group for whose benefit the trust exists.
- Trust Property: The assets held in the trust.
- Instrument of Trust (Trust Deed): The legal document outlining the trust's terms.
The Step-by-Step Trust Registration Process
Step 1: Draft the Trust Deed & Define Purpose
A trust must have a lawful, clear purpose. The Trust Deed is the foundational legal document. It must specify with reasonable certainty the intention to create a trust, its purpose, the beneficiaries, and the property, as required by Section 6 of the Act.
Step 2: Determine Registration Authority & Fees
A trust deed is registered at the local Sub-Registrar’s office. Registration is mandatory for trusts involving immovable property. For movable property, it's optional but highly recommended.
Interactive Registration Fee Calculator
Step 3: Sign the Trust Deed
The author(s) and trustee(s) must sign the deed in the presence of the registering officer and two witnesses. Fingerprints are also affixed to the register book.
Step 4: Obtain Certified Copy and Operate
After submission, a receipt is issued. This receipt is used to collect the original registered Trust Deed later. With the registered deed, the trust can open a bank account and commence its activities. The process typically takes 7-10 working days but can vary.
Types of Trusts in Bangladesh
Private Trusts
Created for the benefit of specific, identifiable individuals or families. While serving private interests, they may offer incidental public benefits.
Public or Charitable Trusts
Established for the benefit of the public at large, focusing on objectives like poverty relief, education, medical aid, or other purposes of general public utility.
Comparison: Standard Trust vs. Charitable Trust (as Society)
| Feature | Standard Trust | Charitable Trust (Registered as a Society) |
|---|---|---|
| Governing Law | Trusts Act, 1882 | Societies Registration Act, 1860 & Trusts Act, 1882 |
| Legal Entity Status | Not a separate legal entity. Trustees are personally liable. | Becomes a separate legal entity upon registration. |
| Registering Body | Sub-Registrar's Office | Registrar of Joint Stock Companies and Firms (RJSC) |
| Minimum Members | At least one Author and one Trustee. | Minimum of 7 members/trustees required for RJSC registration. |
| Foreign Donations | Requires registration with NGO Affairs Bureau (NGOAB). | Requires RJSC registration first, then NGOAB approval. |
| Annual Returns | Not required. | Annual return must be submitted to RJSC. |
Specialized Trusts in Commerce and Welfare
Trusts in the Banking & Finance Industry
In Bangladesh, trusts are fundamental to various financial structures, ensuring security and proper management of assets. Common types include:
- Debenture Trust: Created to secure the interests of debenture holders. A Debenture Trustee is appointed to protect their rights and enforce the terms of the debenture.
- Security Trust: Used in syndicated loans or financing where multiple lenders are involved. A Security Trustee holds the collateral on behalf of all lenders, simplifying the process of creating and enforcing security.
- Securitization Trust: A special purpose vehicle used to hold a pool of assets (like loans or mortgages) that are then converted into marketable securities.
Employee Welfare Trust: Formation and Purpose
An Employee Welfare Trust is a private trust established by a company for the benefit of its employees. Its primary purpose is to manage funds and assets for various employee welfare schemes, such as medical aid, educational scholarships for children, housing support, or post-retirement benefits.
How to Create an Employee Welfare Trust:
- Board Resolution: The company's Board of Directors must pass a resolution approving the creation of the trust.
- Drafting the Trust Deed: A detailed Trust Deed is prepared, outlining the trust's objectives, the powers and duties of the trustees (often senior company officials), the beneficiaries (employees and their families), and rules for managing the funds.
- Appointment of Trustees: The company appoints initial trustees to manage the trust.
- Registration: The Trust Deed is registered with the appropriate Sub-Registrar's office, following the standard procedure for a private trust.
- Funding: The company contributes the initial funds (corpus) to the trust, and may make regular contributions thereafter.
Key Legal Framework & Compliance
Trustee Duties & Liability
Trustees are legally obligated to manage trust property with the care of an ordinarily prudent person. They are personally liable for any breach of trust, which can lead to civil suits for damages.
Foreign Donations
To receive or use foreign donations, a trust must secure approval from the NGO Affairs Bureau (NGOAB) under the Foreign Donations (Voluntary Activities) Regulations Act, 2016.
Accountability
Trustees must maintain clear and accurate accounts of the trust property. Beneficiaries have the legal right to inspect these accounts.
Annual Returns for Societies
If a trust is registered as a society, it must file an annual return with the RJSC to maintain regulatory compliance.
Dissolution of a Trust
A trust is extinguished when its purpose is fulfilled, becomes unlawful, or impossible to achieve. A society can be dissolved by a vote of three-fifths of its members.
Tax Policy
The tax obligations for a non-profit organization can be complex. It is advisable to seek professional guidance on the specific tax policies applicable to your trust's activities.
Frequently Asked Questions (FAQs)
What is the minimum number of trustees required to form a trust in Bangladesh?
There is no specific minimum number of trustees mandated by the Trusts Act, 1882. A trust can be formed with a single trustee. However, for practical and governance reasons, it is common to have at least two or three trustees.
Is it mandatory to register every trust?
According to Section 5 of the Trust Act, 1882, registration is mandatory for a trust involving immovable property (land, buildings). For trusts involving only movable property (cash, shares), registration is optional but highly recommended for legal validity and operational ease (e.g., opening bank accounts).
How much does trust registration cost in Bangladesh?
The cost involves government fees for stamp duty and registration. Both are calculated as 2% of the trust property's value. For example, a trust valued at BDT 1,000,000 would incur BDT 20,000 in stamp duty and BDT 20,000 in registration fees. You can use our fee calculator above for an estimate.
How long does the entire registration process take?
Once all documents are prepared and filed with the Sub-Registrar's Office, the registration process itself typically takes about 7 to 10 working days. However, this timeline can vary based on the specifics of the case and the workload of the concerned office.
Can a foreigner be a trustee or author of a trust in Bangladesh?
Yes, a foreigner can be an author or a trustee of a trust in Bangladesh, provided they comply with all relevant laws, including visa regulations and any restrictions on property ownership that may apply to foreign nationals.
How Our Firm Can Assist You
At LegalSeba LLP, we offer expert guidance and comprehensive legal solutions for all aspects of trust formation and administration. We ensure your objectives are met efficiently and in full compliance with Bangladeshi law, navigating legal complexities on your behalf.
Trust Deed Drafting
Our experts meticulously draft and structure your Trust Deed, ensuring clarity on roles, responsibilities, and purpose to safeguard all parties' interests.
Registration & Compliance
We handle the entire registration process with the Sub-Registrar or RJSC, ensuring all legal formalities and documentation are perfectly in order.
Regulatory Approvals
We assist in securing necessary approvals, including Name Clearance from RJSC and registration with the NGO Affairs Bureau for foreign donations.
Strategic Advisory
We provide strategic advice on choosing the right type of trust and navigate challenges related to trustee liability and compliance requirements.
Ongoing Support
Our firm provides continuous support to trustees, helping them meet their fiduciary duties and manage the trust effectively throughout its lifecycle.
Dissolution Services
When a trust's purpose is fulfilled, we provide legal oversight for its proper dissolution in compliance with all legal requirements.
Ready to Form Your Trust?
Let our legal experts guide you through every step of the process. Contact us today for a consultation to discuss your specific needs and objectives.
