Trust Registration in Pakistan
Trust Registration in Pakistan
According to the Trusts Act, 1882, a trust is established. There are three requirements that must be met in this type of trust: a creator, a trustee, and a beneficiary. Unless the objectives are clearly stated, a private trust would fail for uncertainty. Trusts established for the benefit of society, or at least a certain segment of society, are called public charitable trusts. The Trust Act of 1882 applies to public and charitable trusts. Public charitable trusts are governed by the same conditions as private trusts. If the objectives are not clear, however, unlike private trusts, these trusts would be sustained for as long as there is a charity intention.
Pakistan Trust Act 2020
In 2020, the National Assembly of Pakistan amended the Trust Act 1882. The amendment gives every province full autonomy regarding trust registration and other trust-related deeds. They are:
Conditions of a Trust
To establish public trust, the following criteria are essential:
- Trust property must exist, whether in cash or capital assets (land or buildings).
- Charity or social benefit must be the objective of the trust
Therefore, in order to be valid, a trust must satisfy these conditions or ‘certainties.’ However, this is not the case for public charitable trusts. In charitable trusts, as in private trusts, certainty as to the intention to declare a binding trust and the certainty as to the assets to be bound by the trust are strictly required. While a private trust would fail for lack of clarity if the beneficiaries are not clearly specified, a public charitable trust could be sustained even if the beneficiaries are not specified, provided the trust has a general intention of charity.
It is possible to create a trust for any lawful purpose, which may be revoked at any time. Private acts of public charity are covered by the Trust Act, which gives the creators of the trust great flexibility in how they operate. All areas of Pakistan are covered by the Trust Act and any group can benefit from it.
Advantages of a Trust
A trust registered under the Trusts Act has the following advantages:
- A high level of control over the administration and management of the NGO
- Very little to no interference from the outside;
- A simple registration procedure;
- Irrevocability; and
- Eligibility for income tax exemption.
Trust is also not subject to meeting or account maintenance requirements.
Elements of the Trust:
There are the following elements of the trust under The Trust Act 1882:
- Author of the trust:
The “author of the trust” is the one who reposes or declares the trust:
An individual who accepts the confidence is called a “trustee”:
The person who benefits from the confidence is called the “beneficiary”:
- Trust Property or Trust Money
“Trust-property” or “trust-money” is the subject matter of the trust
- Beneficial Interest
The beneficiary’s “beneficial interest” is his legal claim against the trustee as owner of the trust-property
- Instrument of the Trust
An instrument declaring a trust is referred to as an “instrument of trust”:
Creation of The Trusts
Any lawful purpose may be used to create trust. The purpose of the trust has to be lawful unless it is
- Forbidden by law,
- Of such a nature that, if permitted, it would defeat the provisions of any law,
- Involves or implies injury to the person or property of another,
- The Court regards it as immoral or opposed to public policy.
Trusts with unlawful purposes are void.
It is considered void when a trust is created for two purposes, one of which is lawful, the other unlawful, and the two cannot be separated.
Trust of immovable property
A trust relating to movable property cannot be valid unless it is declared by a non-testamentary instrument in writing signed by the author or trustee and registered, or by a will.
Trust of movable property
A trust over movable property is only valid if declared as aforesaid, or if the property is transferred to the trustee.
The author of a trust creates a trust if, by any words or acts, he or she indicates with reasonable certainty:
(a) an intention on his part to create thereby a trust,
(b) the purpose of the trust,
(c) the beneficiary, and
(d) the trust-property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust-property to the trustee.
Who can create trusts?
A trust may be created
(a) By every person competent to contract, and
(b) With the permission of a principal Civil Court of original jurisdiction, by or on behalf of a minor;
Subject of trust
The Subject-matter of a trust must be property transferable to the beneficiary.
Who may be the beneficiary?
Beneficiaries may be anyone who is capable of holding property.
Who may be a trustee?
Trustees maybe anyone who is able to hold property. However, if the trust involves discretion, the trustee must be competent to contract to execute it. Trusts are not obligated to be accepted.
Trustee to execute the trust
The trustee is bound by the purposes of the trust and by the directions given by the author at the time of its creation, except as modified by the consent of all the beneficiaries. For the purposes of this section, where the beneficiary is incompetent to contract, his consent may be granted by a principal Civil Court of original jurisdiction. Note that nothing in this section requires a trustee to obey any direction when to do so would be impracticable, illegal, or manifestly harmful to beneficiaries.
Declaration of Trust
The author can also create a trust in which they will hold the property as trustees, but not as owners, thus eliminating the need for a property transfer. In such a situation, the declaration of trust must be by the owner, and he alone should be the trustee. Such a declaration would, however, need to be registered under the Registration Act.
Types of Trust
Trusts can be of two types:
A private trust benefits an individual or group of individuals, their descendants, or any legal person who is capable of holding property. Public trust is one whose purpose is to benefit the public or any section of the public.
Process of Creation of Trust in Pakistan
There are two ways to create a trust for immovable property. The first case involved a testamentary instrument; the second was non-testamentary. A trust relating to an immovable property cannot be created orally; it must be created through a duly registered document. A trust of movable property can be created either with a document or by delivering the property to the trustee with any necessary oral instructions. By giving directions in writing, it would constitute a trust by a non-testamentary document that may or may not be registered.
Dissolution under the Trusts Act:
Trusts are extinguished if:
- The purpose for which it was created has been achieved;
- This becomes unlawful;
- When the goal cannot be achieved; or
- The trust is revoked
DOCUMENTS REQUIRED FOR TRUST REGISTRATION
Following are the required documents for the registration of a trust.
- MEMORANDUM OF ASSOCIATION: Contains Name of the Trust, Address of the Trust’s main office, Objectives of the Trust, and Authors of the Trust Schedule
- TRUST DEED (on 2000/ Rupees Stamp Paper
- Attested copies of CNICs or Passport
- PROOF OF THE REGISTERED OFFICE ADDRESS
- N.O.C / RENTAL AGREEMENT
- AFFIDAVIT ON SCHEDULE-III (NO LEGAL PROCEEDING/ NO CRIMINAL RECORD)
- Bank Challan of Rs.10,500/- (rupees Ten Thousand Five Hundred only).
- Any other documents as Assistant Director or Director may require.
- Picture of Trustee or Author along with Sign and Thumb Impression must be fixed in the current deed and green paper shall be used for the registration of the deed.
- Authority Letter of a Person ( who is responsible for the registration matter of Trust)
- Pro forma for Trust
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