In 26 January 2022, the Non-Banking Financial Services Authority (“NBFSA”) issued Prakas No. 003 F.S.A.PrK on Rules for the Management, Establishment, and Functioning of Trusts (“Prakas 003”) to establish the rules, conditions, and procedures on the establishment of trusts, their registration, as well as the licensing and approvals granted to trustees.

The Prakas 003 defines trust activity, and specifies the rules to qualify as a trustee (both individual trustees and trustee companies), trustees’ obligations and responsibilities and the rules on the management of trustees and custodians in the securities sector.

1. Trustee registration
2. Legal entities

An applicant must submit registration to the NBFSA, which reply with a decision on the application within 60 days. Licenses are valid for an initial period of two years from the issuance date, with unlimited options to renew for three years at a time.

1.2. Individuals

Individuals can be (1) individual trustees, and (2) independent trustees.

An individual trustee is a trustee who operates as a trustee only when it is employed by a trustee company and who would not be able to function as a trustee independently. The validity of an individual trustee license/approval is for a period of two years, with unlimited options to renew for three years at a time.

An independent trustee is able to function as a trustee independently. The registration procedure, and validity and renewal period of the independent trustee license/approval is the same as for individual trustees.

1. Trust registration

Each trust can have more than one trustee. In case there are more than one trustee, the number of trustees must be an odd number.

The trustee must start the trust registration procedure with the NBFSA no later than three months after obtaining approval for the trust creation from the NBFSA. When the trust is registered, the trustor can begin to transfer funds into the trust account.

III. Trust termination

A trust can be terminated in the event of any of the following:

• The term of the trust has expired, as specified by the trust instrument.
• The trust objective has been fulfilled.
• By the unanimous decision of the trustor(s).
• By a court judgement.
• Another event as determined by the trust instrument.

In the event that the trust is terminated, the trustee must notify the NBFSA at least 30 days prior to the trust termination date and submit a clearance request to the NBFSA before the trust termination.

After the trust has been cleared and terminated, the trustee must:

• Transfer all remaining trust funds based on the conditions determined by the trust.
• If the trust does not clearly specify who is entitled to the proceeds of the trust, transfer all trust funds to any living beneficiaries apportioned equally.