Trust Registration in Bangladesh | A Comprehensive Guideline
At our firm, we offer expert guidance and legal solutions related to trust formation and administration, ensuring that your objectives are met in full compliance with Bangladeshi law. Below is an overview of the key elements of trusts, as governed by the Trusts Act, 1882 of Bangladesh, and how we can assist you in navigating these legal complexities.
What is a Trust?
A Trust is a legal arrangement wherein one or more individuals, known as Trustees, hold and manage property for the benefit of others, known as Beneficiaries. Trusts are created through a formal transfer of property from the Trust’s creator, or Author, to the Trustees, with specific obligations tied to the property’s ownership. Under Section 3 of the Trusts Act, 1882, a Trust is defined as an obligation annexed to the ownership of property, arising from confidence reposed in and accepted by the owner for the benefit of another. Our firm ensures that this process is executed smoothly and legally, protecting the interests of both Trustees and Beneficiaries.
Key Components of a Trust
In any Trust, several crucial terms must be understood:
• Author: The individual who creates the Trust and reposes confidence in the Trustees.
• Trustee: The person or entity entrusted with managing the Trust Property in accordance with the Trust Deed.
• Beneficiary: The individual or group for whose benefit the Trust is established.
• Trust Property: The assets held in trust.
• Instrument of Trust: The legal document outlining the Trust’s terms, responsibilities, and conditions.
Our firm meticulously drafts and structures each Trust, ensuring clarity on the roles and responsibilities of all parties involved, thus safeguarding the interests of both Authors and Beneficiaries.
According to Section 6 of the Act, a trust is established when the author of the trust expresses, with reasonable certainty through words or actions:
(a) an intention to create a trust,
(b) the purpose of the trust,
(c) the beneficiary, and
(d) the trust property.
Types of Trusts
Trusts can be categorized into two main types:
- Private Trusts: These are created for the benefit of specific individuals or a class of individuals. While they primarily serve private interests, they may incidentally benefit the public.
- Public or Charitable Trusts: These are established to benefit the public at large, serving broader societal objectives such as education or welfare.
Our expertise spans both private and public Trusts, offering tailored solutions to meet the specific goals of our clients, whether for personal, familial, or charitable purposes.
Purpose and Creation of a Trust
A Trust must have a lawful and well-defined purpose, such as providing for education, medical assistance, or charitable causes, among others. Unclear or unlawful objectives can invalidate a Trust. We assist our clients in defining their Trust’s objectives clearly and ensure that all legal formalities are properly adhered to, including the execution and registration of the Trust Deed. The Trust Deed serves as the legal foundation, outlining the Trust’s purpose, property, and the responsibilities of the Trustees. Additionally, we ensure that the Trust Property is transferred in compliance with relevant laws, thus completing the process.
Formation and Registration of a Trust:
Establishing a trust does not necessitate obtaining permission from any governmental or regulatory authority. The primary requirement is the registration of the trust deed with the appropriate sub-registrar’s office.
The process of registering a trust is contingent on the type of property involved. According to Section 5 of the Trust Act of 1882, the registration of a trust involving movable property is not mandatory. However, registration is required for a trust involving immovable property. Therefore, to register a trust deed, the following steps must be followed:
Step 1: Determine the Appropriate Authority for Trust Deed Registration
A trust deed, similar to a land document, must be registered at the local Sub-Registrar’s office. For immovable property, the trust deed must be registered at the Sub-Registrar’s office in the jurisdiction where the immovable property is located, as per Section 28 of the Registration Act, 1908. Conversely, a trust deed for movable property may be registered either where the trust’s activities will take place or where the trust’s registered office is situated.
Step 2: Determine the Fees for Registration
The fees for registering a trust deed are outlined in the Gazette under No.- S. R. O. No. 254-Law/2014, issued in accordance with Section 78 of the Registration Act, 1908 by the Law and Justice Division of the Ministry of Law, Justice, and Parliamentary Affairs. According to Article A (1) of the Gazette, if the value of the trust does not exceed BDT 5,000, a 2% ad valorem fee is applied, with a minimum charge of BDT 100. For trusts valued over BDT 5,000, a fee of 2% of the trust’s value is charged as the registration fee. Schedule I of the Stamp Act of 1899 specifies the stamp duty applicable to trust deeds. According to serial no. 64 of Schedule I, the stamp duty for a trust deed is 2% of the consideration.
Step 3: Sign the Trust Deed
The trust deed must be signed by the author/creator and the trustee in the presence of the registering officer. Additionally, the authors of the trust must sign and affix their fingerprints to the register book before the registering officer. Two witnesses must also sign the last page of the trust deed in front of the registering officer.
Step 4: Submit an Application for a Certified Copy
To obtain a certified copy of the registered trust deed, the author/creator of the trust must complete and sign a prescribed form, which is then submitted to the Sub-Registrar’s office.
After completing all the necessary steps and submitting the document to the registration officer, Section 52(1)(b) of the Registration Act, 1908 requires the registering officer to issue a receipt to the person presenting the document. All the relevenat officials should be present before the sub-registry office on the day of declaring the trust.
Step 5: Operating as a Trust in Bangladesh
Upon the submission of the compiled trust documents, the official at the registering office will issue a receipt and a duplicate of the trust deed. This receipt must be presented to the appropriate Sub-Registrar’s office to obtain the original registered trust deed.
With these documents, the trust officials will be authorized to open a bank account in the name of the trust at any designated bank in Bangladesh and conduct the regular activities of the trust.
Generally, the registration process takes approximately 7-10 working days once everything is prepared for filing with the Land Registry Office. However, this period may vary depending on specific circumstances.
Step 6: Registering under The Societies Registration Act, 1860:
A trust which has a charitable object may be registered under the Societies Registration Act, 1860. An application can be made to the Registrar of Joint Stock Companies and Firms (RJSC) with the draft Articles and Memorandum of Association to obtain registration as a Society. A minimum of 7 (seven) person is required as members or trustees for registration under the Societies Registration Act, 1860. If a trust is registered under the Societies Registration Act, 1860 it creates a legal entity.
To apply with the NGO Affairs Bureau (NGOAB) or Micro Credit Regulatory Authority, the Trust must be charitable and must be registered with RJSC Bangladesh under The Societies Registration Act, 1860.
This process involves the following:
Step 01: Issuance of name clearance from RJSC.
Step 02: Application to RJSC along with the deed of trust and Clearance letter for registration, with all the other required documents.
Step 03: Payment of government fees
Step 04: Security Check by the Law enforcement agency, i.e. Special Branch of Police and National Security Intelligence etc.
Step 05: Inspection, Monitoring and Review of the NGO by the concerned authorities. (if required)
Step 06: If satisfied then issuance of registration by the authority.
This process may take 1-2 months depending on the complexity of the matter.
Extinction of a Trust
A Trust is terminated when its purpose has been fulfilled, becomes unlawful, or is otherwise impossible to achieve, such as when the Beneficiaries no longer exist. We provide legal oversight throughout the life of the Trust and assist in its proper dissolution when necessary, ensuring compliance with all legal requirements.
Advantages of Establishing a Trust
A Trust offers several advantages, including flexibility in management and governance, and the ability to establish charitable or social objectives without cumbersome regulatory requirements. Trusts also allow for effective asset management and protection, ensuring that assets are used for their intended purposes.
Challenges and Legal Considerations
While Trusts offer flexibility, they come with certain limitations. Trustees are personally liable for any breach of trust, and profits from Trusts cannot be distributed as dividends to board members. Additionally, to receive foreign donations, Trusts must be registered with the NGO Affairs Bureau. Our firm provides strategic advice and comprehensive legal services to navigate these challenges, ensuring that all regulatory and compliance requirements are met.
(i) Nature of Beneficiaries: The trust may be structured to benefit specific, named individuals (fixed beneficiaries) or may be discretionary, whereby the trustee is vested with the authority to select the beneficiaries at their discretion.
Beneficiaries are the ultimate recipients of the Trust’s benefits. They must be clearly identified in the Trust Deed to ensure that their rights are protected. A Trust that fails to specify its Beneficiaries can be deemed invalid. We ensure that the Trust’s structure clearly defines and secures the rights of Beneficiaries, allowing them to benefit fully from the Trust.
(ii) Role and Responsibilities of the Trustee: The trustee holds the legal title to the trust property and is obligated to manage it with the same level of diligence and prudence as an ordinarily prudent individual would manage their own property. The trustee bears personal liability for any breach of trust and is mandated to keep transparent and accurate accounts of the trust property.
Trustees are legally obligated to manage Trust Property in accordance with the Author’s directions or, in certain circumstances, with the consent of the Beneficiaries. Their duties include safeguarding the Trust assets, ensuring proper management, and exercising reasonable care as if the property were their own. Our firm provides ongoing support to Trustees, ensuring they meet their obligations while protecting themselves from potential legal liabilities, especially concerning fiduciary duties and property management.
(iii) Trustee Remuneration: A trustee is entitled to remuneration only if such compensation is explicitly stipulated in the trust deed.
(iv) Nature of Trust Property: The assets constituting the trust property can be either immovable (real estate) or movable (personal property).
(v) Foreign Donations: To receive or utilize foreign donations, the trust must secure approval from the NGO Affairs Bureau (NGOAB) under Foreign Donations (Voluntary Activities) Regulations Act, 2016 (FDRA), a process known as Foreign Donation Registration (FD Registration).
(vi) Accountability and Transparency: Trustees are required to maintain clear and detailed accounts of the trust property. Beneficiaries have the right to request and obtain access to these accounts.
(vii) Liability for Breach of Trust: Where the trustee commits a breach of trust, he is liable to make good the loss which the trust-property or the beneficiary has thereby sustained, unless the beneficiary has by fraud induced the trustee to commit the breach, or the beneficiary, being competent to contract, has himself, without coercion or undue influence having been brought to bear on him, concurred in the breach, or subsequently acquiesced therein, with full knowledge of the facts of the case and of his right as against the trustee. Where a trustee commits a breach of trust, a civil suit can be instituted against him claiming damages subject to the provisions of the Limitation Act, 1908.
How LegalSeba Can Help with Trust Registration in Bangladesh
At LegalSeba, we are prepared to guide you through the creation, administration, and dissolution of Trusts, ensuring that your interests are fully protected and that your Trust serves its intended purpose efficiently. We offer bespoke legal solutions tailored to your specific needs, making sure that every aspect of your Trust is in full compliance with the relevant laws and regulations.
Our services include:
Expert Consultation: We assess your business requirements and guide you through the eligibility criteria set by the several regulated bodies associated with the trust registration process.
Document Preparation: Our team assists in collecting and preparing all necessary documentation to ensure compliance with the concerned regulations.
Application Management: We handle the entire application process, from submission to approval, ensuring all steps are meticulously followed.
Continuous Follow-up: We maintain regular communication with the regulatory bodies to track your application status and address any queries or additional requirements promptly.
Inspection Preparation: We help you prepare for any regulatory inspections to ensure your infrastructure and operations meet all regulatory standards.
Lobbying with Authorities: We facilitate effective communication with government authorities to smoothen the registration process.
By choosing LegalSeba, you can navigate the complex regulatory environment with confidence, allowing you to focus on expanding your trust operations.
Conclusion
Securing a trust registration and operation in Bangladesh involves multiple steps and stringent regulatory compliance. LegalSeba is committed to guiding you through each phase, ensuring a seamless and successful application process.
Contact Us
For personalized assistance and more information on trust registration, book a consultation with our experts by visiting LegalSeba.com/book-now or contact us at:
Phone/WhatsApp: +8801753718223
Email: support@legalseba.com
