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\n LegalVision’s Startup Manual is essential reading material for any startup founder looking to launch and grow a successful startup.<\/p>\n <\/div>\n \n\nDownload Now<\/a> <\/section>\n <\/div>\n\n\n\n\n A security trust is a trust where a trustee holds on trust for the lenders the security interest in the borrower\u2019s property. For instance, lenders will appoint a security trustee in a secured syndicated loan which is where a borrowing company has received a single loan from several different bank lenders. The security trustee holds the security interest on trust for the lender. This means: <\/span><\/p>\n\n\n\n You use a trust structure because otherwise, each lender would have to obtain an individual security interest in the business\u2019 assets, which is impractical. <\/span><\/p>\n\n\n\n The trust deed may state that the security agent must wait for instruction from the lenders before acting if the borrower defaults under the loan terms. However, the lenders may want to change the terms of the trust deed so that the security trustee can exercise its discretion in enforcing the security interest against the borrower. This would constitute a trust variation.<\/span><\/p>\n\n\n\n Additionally, you might have started a business decades ago, which has grown into a highly successful enterprise. While you could liquidate the company and divide up the proceeds amongst your family, this does not make good commercial sense as the firm would provide a source of income for your family for years.<\/span><\/p>\n\n\n\n Instead, you might include wording in your will, stating that the shares in the business are to be held in trust for the benefit of your immediate family. Likewise, one particular term could be that your daughter receives the income from the company (dividends) for life. <\/span><\/p>\n\n\n\n Notably, the trust will come into existence after your passing. If your daughter wishes to vary the trust so that she is entitled to own and sell the shares outright, she must lawfully vary the trust.<\/span><\/p>\n\n\n\n In all trusts, regardless of their purpose, you can only vary the terms as set out in the trust instrument or implied by law in two circumstances:<\/span><\/p>\n\n\n\n Additionally, specific laws apply to particular kinds of trust that provide additional ways to vary the trust.<\/span><\/p>\n\n\n\n All the beneficiaries of the trust can unanimously consent to vary the terms of a trust, but only where:<\/span><\/p>\n\n\n\n In a commercial context, meeting these conditions is rarely a problem. For the first example, provided all lenders agree to give the security trustee discretion to exercise the security interest on their behalf, the trust can be varied accordingly. <\/span><\/p>\n\n\n\n In the second example, it is less clear. If the trust document lists each individual beneficiary, they are all named, and they all consent, then you can vary the trust document. However, if one of the beneficiaries is under 18, the trust document cannot be varied, regardless of whether every beneficiary consents. <\/span><\/p>\n\n\n\n Finally, you may not meet the second condition if the trust document does not specify each beneficiary individually. For instance, if the trust document says, \u201cAll my shares, to be held in trust for each of my living children in equal portions for life, and then to their children, rather born now or later\u2026\u201d \u2014 there are beneficiaries that are yet to be born. In this case, the trust cannot be varied because particular beneficiaries have not come into existence. <\/span><\/p>\n\n\n\n The law distinguishes between the terms of the trust and the trust\u2019s administration. The trust deed sets out the terms of the trust, including:<\/span><\/p>\n\n\n\n Terms do not include general powers of discretion the law gives <\/span>trustees<\/span><\/a>, such as how to manage the trust property from time to time. These are considered discretionary powers.<\/span><\/p>\n\n\n\n The beneficiaries’ ability only applies to variations on the terms of the trust, so beneficiaries cannot compel the trustees to administer the trust in a particular way. However, if the trustee does not administer the trust in a specific way, the beneficiaries can compel the trustee to resign. They can then appoint a new trustee more amenable to their wishes. <\/span><\/p>\n\n\n\n In limited circumstances, <\/span>the court can vary the terms<\/span><\/a> of the trust, including:<\/span><\/p>\n\n\n\n The court can also vary the terms of the trust on behalf of a beneficiary that is either: <\/span><\/p>\n\n\n\n However, this circumstance is unlikely to be relevant in a commercial context. <\/span><\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\nSecurity Trusts<\/span><\/h3>\n\n\n\n
Example of Why the Trust May Be Varied<\/span><\/h3>\n\n\n\n
Family Trusts Over Business Shares <\/span><\/h3>\n\n\n\n
Varying a Trust <\/span><\/h2>\n\n\n\n
By Consent of the Beneficiaries <\/span><\/h3>\n\n\n\n
Limitations <\/span><\/h3>\n\n\n\n
By Power of the Court <\/span><\/h3>\n\n\n\n
Trusts are a complicated area of law and can take many different forms. This article examines two different commercial trusts, namely: <\/span><\/p>\n\n\n\n