Bahrain is the first country in the area to issue a special law to govern financial trust “trust law”. The law was promulgated in 2006 and last amendment took place in 2016. This sophisticated special law, is primarily intended to help in wealth management. Many people, have wealth from diversified sources including cash, stocks, bullion, real estate and the like.., but they don’t know how to utilize and manage such wealth. By lapse of time and other economic tsunami or epidemics, this wealth may deplete or vanish. The “Trust law”, gives such people and others golden opportunity to keep, maintain and develop or increase their wealth.
The owner of the wealth, based on the Trust law, appoints certain qualified specialized person to cater for his wealth and or enrich it for certain purposes or identified beneficiaries. The subject-matter “trust” shall be created by virtue of a “Trust Instrument”. This instrument is a very important legal document to transfer ownership of the “Trust Property” from the initiator of the trust “Settler” to the “Trustee”. This “Trustee” is authorized to exercise the powers and duties specified in the “Trust Instrument” to achieve the purpose of the trust and the interests of the “Beneficiary”. Trustees are licensed and supervised by the Central Bank of Bahrain. As a rule, handling third party money or assets, requires an eye and mind from regulators.
Legally, a Trust shall be valid only if it is created by virtue of a notarized trust instrument. A trust shall be void, unless the trust instrument creating the trust states the settler’s intention to create the trust, name address particulars of the trustee, identification of beneficiaries or the purpose of the trust, name particulars of Trust Enforcer (if any), identification of trust property at the time of the creation of the trust, duration of the trust, the name of the trust (if any). Moreover, the trust shall not be valid if, its creation was induced by duress, fraud, undue influence or misrepresentation, it is immoral or contrary to law or public policy, it has no beneficiary unless as mentioned in the law, its terms are uncertain, it is not registered as provided in law…, etc.
The “Trust Instrument”, gives the real life to the trust and constitutes the cornerstone of the relation between the settler, trustee and beneficiaries. Details follow.
Dr. AbdelGadir Warsama
LEGAL COUNSEL
Email: awarsama@warsamalc.com
