The Isle of Man Trusts (Amendment) Act 2015 (the "Act") brings into force the following three principles: 1. Abolition of the "Two Trustees Rule"; 2. Abolition of the Perpetuity Period going forward; and 3. Certain matters to be determined by governing law under the Trusts Act 1995.
Abolition of the "Two Trustees Rule"
Prior to the new Act, there was a requirement for an Isle of Man trust (in certain circumstances) to have either a trust corporation (this was defined in the legislation and the corporation needed to meet prescribed criteria including a specific class of licence from the Isle of Man Financial Supervision Commission) or two individuals acting as trustee(s).
This old rule originated from the Settled Land Act 1892 and was seen as prohibiting the effective administration of trusts.
The abolition of the two individuals requirement acknowledges that there is a well regulated professional trust industry in the Isle of Man and that one trustee especially in the case of a corporate trustee is sufficient to carry out the role effectively.
Abolition of the Perpetuity Period going forward
Traditionally, a trustee has been unable to hold settled land in a trust indefinitely. The Act removes the requirement that a beneficiaries interest in a trust must vest with a specific time frame.
A Settlor can, if they wish, still include a defined period within the trust deed.
Matters determined by governing law under the Trusts Act 1995
The Act introduces firewall legislation which widens the exclusion of foreign legal provisions when determining the validity of a trust governed by the laws of the Island or the capacity of the persons connected with it. The Act also excludes the recognition or enforcement of foreign court judgments in so far as these would be inconsistent with the Trusts Act 1995, unless the High Court orders that the judgments are to be recognised.
These provisions further ensure that trusts settled subject to a governing law of the Isle of Man will be protected in appropriate circumstances. In practice, Isle of Man trustees unlikely to recognise an order of a foreign Court without application having first been made to the Isle of Man Court.
It is envisaged that the above changes will assist Isle of Man trust professionals in the administration and transfer of Isle of Man trusts.
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