What is a Corporate Trustee in the UK?

The concept of trusts is a confusing area of law. On top of that, there are also ‘corporate trustees’ and ‘trust corporations.’ This article will explain the legal definition of a trust corporation and consider some of the critical distinctions between a corporate trustee and trustees in general. It will also explore a trust corporation’s primary responsibilities and duties. 

Corporate Trustees: Legal Definition 

Corporate trustees, or ‘trust corporations,’ are a particular category of trustees that the law recognises. They have certain powers and responsibilities that trustees generally do not. 

By law, a trust corporation must be one of the following:

• a custodian trustee; 
• the Public Trustee;
• any incorporated body appointed by the court to act in a specific case;
• the Treasury Solicitor; 
• the Official Solicitor; 
• any person holding certain positions prescribed by the Lord Chancellor; and
• certain trustees in ecclesiastical trusts. 

In practice, the majority of corporate trustees are custodian trustees that either:

• conduct certain fiduciary activities on a commercial basis; or 
• act for a charity that is either a trust or an unincorporated association. 

Businesses Acting in a Fiduciary Capacity

These trust corporations are incorporated businesses (almost always companies) that seek to undertake the same activities as a trustee who is a natural person. However, an important distinction is that they usually have entitlements to charge a fee for their services. Conversely, trustees that are natural persons cannot always do the same. 

Common kinds of services these kinds of corporate trustees provide include:

• acting as trustee for family trusts; 
• serving as the Personal Representative for a deceased person’s estate; and
• exercising a power of attorney on behalf of another. 

Additionally, any company incorporated in the UK or (at least for now) an EU member state can obtain the status of a trust corporation if either:

• it has issued share capital of at least £250,000 (of which £100,000 has been paid up); or 
• it is registered without limited liability. 

Fiduciary Duties and Company Directors

As you may know, if you are a company director, you owe specific duties to your company, like avoiding conflicts of interest. The law considers these responsibilities a special kind of ‘fiduciary duty.’ Ultimately, it refers to a unique relationship owed by one person to another. 

Just like a director owes a duty to their company, so does a trustee owe a duty to their beneficiary. Beneficiaries are individuals who stand to benefit from the trust’s property. 

As a result, company directors can owe two sets of fiduciary duties:

• one to their company; and
• one to the trust’s beneficiaries to which their company is appointed as trustee. 

The legal position of company directors acting for trust corporations is not entirely clear. Nonetheless, the law can hold company directors personally liable if the company breaches its duties as a trustee. 

Therefore, you should advise yourself of this risk if you are a director of a custodian trustee company. 

Corporations Acting for Charities 

Trust corporations acting on behalf of charities are subject to a substantial amount of special law. It is a complex area of law, so it is best practice to seek the advice of a lawyer. 

Legally, a charity is an organisation established for charitable purposes alone or which the High Court has certain powers over. 

In practice, it is usually clear when dealing with a charity. Primarily, they are not concerned with making a profit and usually act on behalf of some charitable cause. 

For instance, the following organisations are examples of charities:

• British Heart Foundation; 
• Marie Curie; 
• WWF; and 
• RSPCA. 

Many charities exist either as unincorporated associations or common trusts. This means they do not have separate legal personhood. Most importantly, they cannot own property or enter into contracts in their names. Therefore, it is helpful to have an incorporated body hold property and enter into contracts on the charity’s behalf.  

Trustees in General vs Corporate Trustees 

There are several instances where corporate trustees are allowed to act in such a way that non-corporate trustees cannot. 

The two most relevant ones are:

• limitations on remuneration; and 
• the ability to deal with land in a certain way. 

Where the trustee is a corporate trustee, the law makes an exception. 

Remuneration 

In general, a trust corporation can be the sole trustee over the trust and, subject to the trust instrument, can collect service fees from the trust in exchange for administering its affairs. The trust instrument is a document setting out the terms of the trust.

Notably, this differs from the usual rule that a trustee can only charge a fee for their service if there is more than one appointed trustee and they are acting in a professional capacity. 

Trusts of Land 

The general rule is that where there is a single trustee over a piece of land, they cannot sell the land without taking specific steps to ensure the interests of the beneficiaries are represented. 

However, if the land is held on trust by a trust corporation, they are free to sell the land without undertaking the formalities that bind other trustees of land. 

Key Takeaways 

The law surrounding equity and trusts is some of the most complex law. As a result, it can be hard to wrap your head around how corporate trustees operate and how they are different from other trustees. However, the general principle is that they are incorporated bodies, such as a company, that the law permits to hold property on trust for the benefit of others. They also provide certain services, such as being the personal trustee for a deceased person’s estate. 

If you need help understanding how trust corporations operate, our experienced corporate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.

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