Abstract
The trust figure has undergone interesting developments in South African law during the last century. Due to its flexibility and multi-functionality it has developed as the legal institution of choice for many holistic business structures: from estate-planning and risk-protection, to financial-instrument entity. Particular financial innovations, such as securitization, required regulators to come up with fresh solutions within existing legal and regulatory systems. The traditional role of the inter vivos trust as a family wealth-transfer device became rather trivial as the importance of the financial and corporate roles of trusts increased. Trusts are not only prevalent in securitization and other investment roles, but also fulfil an increasingly important role in organizational law, which includes a variety of business-legal fields. The evolutionary process of the trust as collective investment-scheme vehicle to that of a legal entity in structured-finance programmes,such as a special purpose instrument, matured without any resistance in South Africa. It is submitted that, in the trust-development process, South Africa should not necessarily find its inspiration solely in developed nations, but should rather position itself in its real context of a developing Southern African democracy, with the potential of becoming an important financial innovator in a world of economic turmoil.It is submitted that a sound legal and regulatory framework for the application of trusts in the financial sphere is crucial. International best practice requires a definite and effective regulatory environment for economic expediency. It is submitted that a hybrid system, as found in South Africa, is better suited to adapt to the challenges of an ever-changing legal and economic reality. It is submitted that legislative interventions should be limited to the bare minimum and a holistic approach should be adopted, including the ratification of The HagueConvention on Trusts and some focused soft-law interventions.
Highlights
The trust figure has established itself as an indispensable part of the South African legal landscape
Scholars largely focused on the trust as a gratuitous figure, it is clear that trusts in the South African context were used as business entities from the very beginning
The development of the trust figure in South Africa was influenced by English as well as Roman-Dutch law – resulting in a distinctly South African law of trusts.[3]
Summary
The trust figure has undergone interesting developments in South African law during the last century. Due to its flexibility and multi-functionality it has developed as the legal institution of choice for many holistic business structures: from estate-planning and risk-protection, to financial-instrument entity. Particular financial innovations, such as securitization, required regulators to come up with fresh solutions within existing legal and regulatory systems. In the trust-development process, South Africa should not necessarily find its inspiration solely in developed nations, but should rather position itself in its real context of a developing Southern African democracy, with the potential of becoming an important financial innovator in a world of economic turmoil. It is submitted that legislative interventions should be limited to the bare minimum and a holistic approach should be adopted, including the ratification of The Hague Convention on Trusts and some focused soft-law interventions
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