The Trust Act, 1979 defines a trust as "Affiliation with an
asset, whereby the Trustee must hold or act there upon in
favor of a beneficiary or for another purpose". A trust is in
fact a contract used for management of assets other than
by the owner thereof, in favor of any other person or for
any purpose whatsoever.
A trust consists of three parties:
- Trustor: Owner of the assets, transferring their assets into a trust in favor of
- Trustee: A person appointed by the trustor, tasked with management,
safeguarding and development of the transferred assets in favor of the
- Beneficiary: The person or entity in favor of which the trust is created.
A trust is typically a flexible tool that allows for providing for different needs in
both the private sector and the business sector, which may be required by
client will, by law or for a business need.
As part of the services provided by our office, we provide trust services to
private and public companies, institutional investors, foreign and local
residents in the following areas:
- Trust services for employee remuneration plans (RSU, ESOP etc.)
- Trust services for stock / stock option award plans for employees pursuant
to Section 102 of the Income Tax Ordinance.
- Trust services in conjunction with M&A transactions.
- Funds management in trust in designated accounts.
- Trustee for shares.
- General trust services.
Employee remuneration plans
Employee Stock Option Plans (ESOP) are a commonplace benefit. There are also other employee benefit Plans, including Restricted Stock Units (RSU) and Employee Stock Purchase Plans (ESPP).
An option is the right to purchase a share in future at a pre-determined price, so that should the share price exceed the price per share set forth in the plan, the option is in the money, generating profit for the holder thereof.
Restricted Share Units (RSU) are shares awarded by the company to the employee, which are subject to a vesting period before becoming negotiable, allowing the employee to decide whether to hold or trade these shares.
An Employee Stock Purchase Plan (ESPP) is a plan where the company allows the employee to contribute a certain percentage of their salary, designated for purchase of company shares on behalf of the employee at a certain discount, in conformity with the Company's ESPP policy.
Pursuant to Section 102 of the Income Tax Ordinance, the employee is subject to taxation of these revenues. This Section allows the company to select between tracks with or without a Trustee: In the Trust Track, subject to fulfillment of the conditions stipulated by law, a tax benefit is given whereby the employee is subject to capital gains tax at 25%, rather than at the individual income tax rate, which may reach 50%.
Our office provides assistance, advice and guidance from the initial stages, involving filing of documents, applications and obtaining approvals for the plan, through to tax calculations upon transfer of funds to employees, to the company and to the Tax Authority upon option exercise by the employee.
Trust services in conjunction with merger and acquisition (M&A) transactions
In conjunction with M&A transactions, a Trustee is required to ensure successful completion of the transaction. Such transactions may involve a requirement, stipulated by the buyer, to have a Paying Agent tasked, inter alia, with ensuring ownership of the business subject of the transaction, receiving and transferring funds in conformity with the transaction etc.
Our office provides, inter alia, the following services: Opening a trust account for payments received, dividing the funds received in the trust account on behalf of each shareholder and holder of options in the transaction, tax calculation etc.
Funds management in trust in designated accounts
A trustee is sometimes needed to manage funds intended for a specific purpose, through a designated account. Thus, for example, a philanthropist may wish to donate their money to NGOs and to public benefit entities, seeking to ensure that the funds are indeed used for the purpose to which they had made their donation – and may, to this end, use trust services in designated accounts.
The services we provide in this area include: appointment as trustee and management of trust funds in designated accounts, authenticating the identity of funds recipients, management of funds investments upon funds transfer, verification of the actual use made of transferred funds etc.