Existence of offshore trust
(1) A trust is an offshore trust where—
(a) the settlor is a qualified person at the time the trust is created;
(b) the trust property does not include any immovable property situated in Malaysia, unless otherwise allowed by the relevant authorities and laws for the time being in force;
(c) subject to subsections (2) and (3), all the beneficiaries under the trust are qualified persons at the time the trust is created or at the time any one or more of them otherwise become entitled to be beneficiaries under the trust; and
(d) at least one of the trustees is a trust company.
(2) A trust shall be an offshore trust notwithstanding that a person who is not a qualified person benefits together with any other persons as members of a class of persons who are beneficiaries under a trust for charitable purpose.
(3) A trust shall remain as an offshore trust notwithstanding that one or more of the beneficiaries who are qualified persons at the time the trust is created subsequently become resident in Malaysia at the time they otherwise become entitled to be beneficiaries.
(4) For the purpose of this section, the expression “at the time the trust is created”, in relation to a trust created by a will, means the time at which the will takes effect.
Creation of offshore trust
(1) An offshore trust shall not be valid unless it is created by a will or other instrument in writing, including a unilateral declaration of trust, but a unit trust shall be created only by a will or other instrument in writing.
(2) A unilateral declaration of trust is a declaration in writing by a trust company stating—
(a) that it is the trustee of an offshore trust;
(b) the name of the trust;
(c) the terms of the trust; and
(d) the names or information enabling the identification of all the beneficiaries.
(3) A unilateral declaration of trust need not contain the name of the settlor, but in such case the declaration shall contain a statement by the trust company that the settlor is a qualified person on the date of the making of the declaration.
Validity of offshore trust
(1) An offshore trust, validly created in accordance with or as provided by this Act, whether in Labuan or abroad, shall be recognized and be enforceable in accordance with its terms, by the courts in Malaysia situated at Labuan or at such other place as may be designated by the Chief Justice of the Federal Court notwithstanding the provisions of any other law.
(2) An offshore trust shall be invalid and unenforceable in Labuan where—
(a) it requires, purports or encourages the doing of any act which is an offence under the laws of Malaysia or which, if carried out in Malaysia, would be such an offence: Provided that if the act takes place in any country other than Malaysia, it must also be punishable as a criminal offence under the laws of the other country or a jurisdiction within the other country in which it takes place;
(b) it has income accruing to, or derived by it, which originates from an operation, transaction or other activity which is or would be such an offence as referred to in paragraph
(a);
(c) it comprises property the receipt, ownership or control of which is or would be such an offence as referred to in paragraph (a); or
(d) the Court declares that the object for which it was created has failed or that the terms of the trust are such that its performance is not possible.
(3) Where an offshore trust is created for two or more purposes of which some are lawful and others are unlawful—
(a) the whole trust is invalid if the unlawful purposes cannot be properly separated; or
(b) where the unlawful purposes can be properly separated, the Court may make a finding that the trust is valid with respect to the lawful purpose or purposes which do not affect the validity of trust to the extent and under the conditions as may be determined by it.
(4) Where the trustee of an offshore trust is of the opinion that the trust is or may be, in whole or in part, invalid, he shall seek directives from the Court as to the validity of the trust and as to any matter concerning the trust property and his obligations in relation to the trust.
(5) A settlor or beneficiary of an offshore trust may also request for directives from the Court as to matters referred to in subsection (4).
Unenforceability of foreign claim or judgement
(1) Where an offshore trust is validly created in accordance with or as provided by this Act, the Court shall not vary it or set it aside or recognize the validity of any claim against the trust property pursuant to the law of another jurisdiction or the order of a court of another jurisdiction in respect of—
(a) the personal and proprietary consequences of marriage or the termination of marriage;
(b) succession rights, whether testate or intestate, including the fixed shares of spouses or relatives;
(c) any claims or orders of court with regard to matters referred to in paragraph (a) or (b) in reference to the personal laws of the settlor or the beneficiaries; or
(d) the claims of creditors in an insolvency subject to the provisions of section 11.
(2) For the avoidance of doubt, it is hereby declared that in the event of any inconsistency between the proper law of a trust and the personal laws of the settlor or the beneficiaries, the former shall prevail.
Fraudulent offshore trust or disposition
(1) Where it is proved beyond reasonable doubt, the onus of which is on the claiming creditor, that an offshore trust created or registered in Labuan, or property disposed of to such an offshore trust—
(a) was so created or registered or disposed of by or on behalf of the settlor with principal intent to defraud that creditor of the settlor; and
(b) did, at the time such creation or registration or disposition took place, render the settlor, insolvent or without property by which that creditor’s claim, if successful, could have been satisfied,
then such creation, registration or disposition shall not be void or voidable and the offshore trust shall be liable to satisfy the creditor’s claim out of the property which but for the creation, registration or disposition would have been available to satisfy the creditor’s claim and such liability shall only be to the extent of the interest that the settlor had in the property prior to the creation, registration or disposition, and any accumulation to the property, if any, subsequent thereto.
(2) For the purpose of subsection (1), in determining whether an offshore trust created or registered or a disposition has rendered the settlor insolvent or without property by which a creditor’s claim, if successful, may be satisfied, regard shall be had to the fair market value of the settlor’s property (not being property of or relating to the trust), at the time immediately after such creation, registration or disposition, and in the event that the fair market value of such property exceeded the value of the creditor’s claim, at that time, after the creation, registration or disposition, then the offshore trust so created or registered or the disposition shall for the purposes of this Act be deemed not to have been so created or registered, or the property disposed of, with principal intent to defraud the creditor.
(3) An offshore trust created or registered in Labuan and a disposition of property to such trust shall not be fraudulent as against a creditor of a settlor—
(a) if its creation or registration, or the disposition, takes place after the expiration of two years from the date that creditor’s cause of action accrued; or
(b) if its creation or registration, or the disposition, takes place before the expiration of two years from the date that creditor’s cause of action accrued and that creditor fails to commence such action before the expiration of one year from the date of such creation or registration, or disposition.
(4) An offshore trust created or registered in Labuan and a disposition of property to such trust shall not be fraudulent as against a creditor of a settlor if the creation or registration, or the disposition of property, took place before that creditor’s cause of action against the settlor accrued or had arisen.
(5) A settlor shall not have imputed to him an intent to defraud a creditor solely by reason that the settlor—
(a) has created or registered an offshore trust or has disposed of property to such trust within two years from the date of that creditor’s cause of action accruing; or
(b) is a beneficiary.
(6) Where an offshore trust is liable to satisfy a creditor’s claim in the manner provided for in subsection (1) but is unable to do so by reason of the fact that the property has been disposed of, other than to a bona fide purchaser for value, then any such disposition shall be void.
(7) For the purposes of this section, the date of the cause of action accruing shall be—
(a) the date of that act or omission which shall be relied upon to either partly or wholly establish the cause of action; and if there is more than one act or the omission is a continuing one, the date of the first act or the date on which the omission first occurred, as the case may be; and
(b) in the case of an action upon a judgement, the date of that act or omission, or where there is more than one act or the omission is a continuing one, the date of the first act or the date on which the omission first occurred, as the case may be, which gave rise to the judgement itself.
(8) In this section, the term “creditor” includes any person who alleges a cause of action.
Registration of offshore trust
(1) Every offshore trust validly created in accordance with or as provided by this Act, whether in Labuan or abroad, may be registered with the Authority.
(2) The trustee of an offshore trust shall be responsible for registering the offshore trust and any subsequent changes in connection therewith under this Act, if the offshore trust is registered pursuant to subsection (1).
(3) The registration of an offshore trust shall be effected by filing with the Authority the following:
(a) a statement containing—
(i) the name of the offshore trust;
(ii) the date of its creation;
(iii) the name and address of the trust company acting as trustee;
(iv) the address of the registered office of the offshore trust;
(v) the proper law of the offshore trust; and
(b) a declaration by the trust company acting as trustee of the offshore trust that the trust satisfies the conditions of this Act in order that it be an offshore trust.
(4) The Authority may, on being satisfied that all the requirements of this Act for the existence of an offshore trust have been complied with and upon payment of the prescribed fee, register the trust and issue a certificate of registration accordingly.
(5) Any subsequent change in the particulars of the registered offshore trust as referred to in subsection (3) shall be notified to and be registered with the Authority in the prescribed form within one month of the change and shall not have effect until it is so registered.
(6) The trustee of the registered offshore trust shall notify the Authority of the termination of the trust in the prescribed form within one month of the termination.
(7) The trustee of the registered offshore trust shall notify the Authority in the prescribed form as to whether the trust is still in existence and whether he is still the trustee thereof not later than one month after every anniversary of the registration of the trust in Labuan.
(8) Any trustee who fails to comply with the requirements of this section shall be guilty of an offence.
Penalty: Ten thousand ringgit.
(9) For the purpose of subsection (8), if there are two or more trustees, the requirements of this section shall be deemed to have been complied with by all the trustees so long as one of them has complied with them.
Registration of trust instrument
The trustee of a registered offshore trust may furnish the Authority with a copy of the trust instrument or any amendment thereto which has been certified by the trustee and the Authority shall register and file that copy as a true copy.
Name and registered office of offshore trust
(1) Every trust instrument shall include the name by which the offshore trust is to be known and registered and such name shall remain unchanged until the termination of the trust unless the Authority, having regard to the circumstances of the case, thinks it fit to authorize a change in the name.
(2) The registered office of an offshore trust shall be the registered office of the trust company which has been appointed as trustee of the trust and shall be the address for service of any documents upon the trust.
Register and restriction on disclosure
(1) The Authority may keep and maintain a register of all offshore trusts registered under subsection 12(4) and shall enter therein any change in particulars that has been duly notified to the Authority and any other matters as the Authority deems appropriate.
(2) At the request of a trustee of a trust, and on adequate proof being given to the satisfaction of the Authority, the Authority may issue a certificate stating, based on the information available to the Authority, that on the date of the certificate—
(a) the applicant was a trustee of the trust; or
(b) a copy of the trust instrument as reproduced and certified has been registered with the Authority pursuant to section 13.
(3) Subject to the terms of the trust and to any order of the Court to the contrary, all documents filed with or kept by the Authority in relation to offshore trusts shall not be open to the public for inspection, and the Authority shall not disclose to any person any such documents or any information which may have come to its knowledge in the performance of its duties under this Act.
Duration of offshore trust
An offshore trust shall, unless otherwise stated in and subject to the terms of the trust, continue to exist for a period not exceeding one hundred years; but it may be terminated at any time in accordance with the provisions of this Act.
Variation and revocation of offshore trust
(1) An offshore trust may expressly provide—
(a) that its terms are capable of variation; or
(b) that the trust itself or a power exercisable under the trust is revocable, either in whole or in part.
(2) Where an offshore trust provides that the terms of the trust may be varied, such power to vary shall be without prejudice to the power vested in the Court by this Act for the variation of the terms of the trust.
(3) No variation of the terms of an offshore trust or revocation of an offshore trust or a power exercisable under an offshore trust shall prejudice anything lawfully done by a trustee in relation to an offshore trust prior to his receiving notice of such variation or revocation.
(4) Subject to the terms of the trust, where an offshore trust is revoked, either in whole or in part, the trustee shall hold the trust property affected by the revocation for the settlor absolutely or, if the settlor is dead, for the settlor’s personal representative or estate.
Failure or lapse of interest
(1) Subject to the terms of an offshore trust and to any order of the Court, the trust property or interest under the trust shall be held by the trustee in trust for the settlor absolutely or, if the settlor is dead, for the settlor’s personal representative or estate where—
(a) the interest in question lapses;
(b) the trust property is vested in a person otherwise than for his sole benefit but the trusts upon which he is to hold the property are not declared or communicated to him;
(c) there is no beneficiary and there is no person who can become a beneficiary in accordance with the terms of the trust; or
(d) the trust terminates otherwise than in pursuance of section 19.
(2) Where the trust property or interest under the trust is held by a trustee for a charitable purpose which has ceased to exist or is no longer applicable, that property or interest shall be held for such charitable purpose as the Court may declare to be consistent with the original intention of the settlor or as the Court may otherwise determine.
(3) An application to the Court under this section may be made by any trustee or beneficiary, as the case may be.
(4) In this section, “settlor” means the particular person who provided the trust property or the interest under the trust referred to in subsection (1).
Termination of offshore trust
(1) Without prejudice to the powers of the Court under subsection (4) and notwithstanding the terms of the trust, where all the beneficiaries of an offshore trust are in existence and have
been ascertained and none of them is a minor or a person under any legal disability, they may require the trustee to terminate the trust and distribute the trust property among them.
(2) On the termination of the trust, the trustee shall distribute the trust property to the persons entitled thereto within a reasonable time and in accordance with the terms of the trust.
(3) The trustee may retain sufficient assets to make reasonable provision for liabilities, whether existing, future, contingent or otherwise, before distributing the trust property under subsection (2).
(4) The Court may, on the termination of a trust or at any time thereafter, upon an application made by the trustee or any beneficiary—
(a) require the trustee to distribute the trust property;
(b) direct the trustee not to distribute the trust property; or
(c) make such other order as it thinks fit.
Redomiciliation of foreign trust in Labuan
Subject to the provisions of this Act, a trust established or created in accordance with the laws of any country other than Malaysia, or of any jurisdiction within such a country, may, if it is so authorized by the laws of that country or jurisdiction, or the terms of the trust and its proper law, be enforceable, recognized or registered in Labuan as if it had been created under this Act.
Migration of offshore trust from Labuan
(1) Subject to the provisions of this Act and the terms of the trust and its proper law, an offshore trust validly created or recognized under this Act may be transferred to and become a trust under the laws of another country or of a jurisdiction within such a country.
(2) An offshore trust which has been previously transferred to Labuan under the provisions of section 20 may be transferred to and become a trust under the laws of another country or of a jurisdiction within such country in accordance with this section.
Source: Laws of Malaysia, Attorney General's Chambers of Malaysia (lom.agc.gov.my). Not a copy of the Gazette printed by the Government Printer (Interpretation Acts 1948 and 1967, s 61).
