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Overview of Trust in Astana International Financial Centre (AIFC)

Dilbara Kozhamkulova
Legal Consultant, Deloitte Legal

The AIFC, since its launch in 2018, positioning itself as a global centre for business and finance in Kazakhstan and Central Asia, has been expanding its legal framework to offer new organisational legal forms for doing business in Kazakhstan in addition to already existing forms as public/private companies and partnerships. As such, local companies and investors have welcomed the AIFC’s involvement in the local business community as it provides access to corporate forms that hereto had not been available in Kazakhstan, but are usual in common law countries.

One such form that the AIFC introduced recently is the Trust, and in this article, we will be looking at the main terms and conditions for operating a Trust in the AIFC. In international practice trusts are commonly used, inter alia, for management of family assets and assets protection, therefore this instrument can be interesting for both companies and individuals who may have such need. 

Importantly, even though AIFC regulations are based on English law, they are not English law, and as such, English and Welsh statute law applicable to Trusts does not actually apply in the AIFC, except to the extent, it is replicated in the Regulations. For this reason, we outline the main characteristics surrounding Trusts in the AIFC.

Legal structure

A Trust is not recognised as a legal entity, rather an arrangement, or as the AIFC regulations state, “a right enforceable solely in equity, to the beneficial enjoyment of property to which another person holds legal title and includes an AIFC Trust and a Foreign Trust”. A Foreign Trust is one governed by law other than AIFC law, including any Trust within the meaning of the Hague Convention.

Creation objectives

A Trust may be created for both charity (public benefit) and non-charity purposes, with the latter including “holding or investing in shares in a company or juridical person or any other assets constituting “Trust Property”, subject to compliance with AIFC laws.

Generally speaking, the basic requirement for setting up a Trust is the settlor’s ability and intention to create the Trust and define a beneficiary. At the same time, under AIFC law, a Trust will not be deemed invalid if a beneficiary has not been identified and the terms of the Trust provide for the appointment of an Enforcer, whose duties include obliging Trustees to perform their duties in relation to its non-charity purposes and to prosecute to enforce the terms of the Trust.

AIFC rules also provide for Protective and Discretion Trusts. In Protective Trusts, beneficiary interest on income is subject to restrictions in how it is used, for example when a beneficiary is recognised as bankrupt.

In Discretion Trusts, Trustees decide on when and how to distribute beneficiary income or property. Likewise, as distributions are at the Trustee’s discretion, beneficiary creditors cannot force distributions.

Management

Trusts are managed by Trustees, which should be legal entities, and Enforcers (if necessary). AIFC Trust services are a licensed activity.
AIFC rules determine Trust management functions and duties; and also govern the appointment/dismissal of management, and any related restrictions.
Ultimate Beneficial Owners

Trust Ultimate Beneficial Owners (UBO) should be disclosed to the AIFC registration authorities. Any such disclosure should include the UBO’s personal details, and the date on which the person became or ceased to be a UBO.

The AIFC may disclose UBO details only at the request of the AIFC financial regulator, the Kazakhstan National Bank and/or other law enforcement authorities. A more detailed AIFC act on data exchange and protection is available.

Property

Trust property is owned and managed by Trustees in the interests of beneficiaries as defined by the terms of the Trusts. Beneficiary interests constitute movable assets and may be sold/transferred subject to Trust terms and conditions.

Trustees should act diligently and in good faith when accepting a trusteeship; they are not entitled to compensation for their services unless the beneficiary consents to pay it or it is directly specified in Trust terms or a court order.

Trustees should distribute all Trust assets among beneficiaries equally if a Trust is terminated unless specific proportions are specified.

To conclude, we see that the main characteristics of AIFC Trusts are similar to those for UK trusts. In case of any disputes, they can be settled by the AIFC court or AIFC international arbitration in accordance with the UK law. With that, the Trust concept can now be used and developed in Kazakhstan.
 

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