Labuan’s Special Trust

Trust is one of the succession vehicles available in common law country and has always been
considered as one of the best succession vehicles that can be used for the purpose of holding assets.

However, many high network individuals or family find a conventional trust is not an attractive
vehicle to hold such assets as the rights of the assets has to be transferred under the name of the
trustee.

As a result, they will not have any powers or rights to dedicate on how the assets should be
managed or invested. The trust may be considered as a sham if the settlor has any power or rights to
manage the assets that have been transferred to the trust.

The new and amended Labuan Trusts Act (LTA) 1996, have introduced a new trust product called
Labuan Special Trust. The Labuan Special Trust is suitable for individuals or families who are planning
to establish or set up a trust, for the purpose of holding assets without losing any power or rights on
the management of the assets.

The Labuan Special Trust is very similar to ‘VISTA’ Trust, which originated from British Virgin Island.

Key features

Labuan Special Trust is uniquely designed for the ownership of shares in private companies with
minimum intervention from the trustee.

The Labuan Special Trust offers great flexibility as the trust can be tailored to meet the particular
needs and objectives of the settlor. Under Labuan Special Trust, an individual or a family can use the
trust to hold shares in a Labuan company that may own assets such as cash, real estate, business
and other valuable assets.

The trustee of the trust will only hold the shares of the Labuan company, but will have no
responsibility or power to manage the assets of the company. The directors of the company will be
responsible to manage the assets.

Below are the key features which make a Labuan Special Trust unique:-

Can be used to hold shares in a Labuan Holding Company, which own assets

The settlor of the trust can involved in the management of the Labuan company, by be
appointed as the company’s director

The fiduciary role for the management and investment of the assets will be handled by the
company directors

The shares of the Labuan company will be held by the trustee on “trust to retain” only. There
will be no intervention by the trustee on the management of the company

The trustee is not liable for any losses occurred from any investment activities of the company,
as the directors of the company are responsible for the management and investment activities
of the company

The settlor of the trust may reserved powers to dispose the shares of the company without
intervention of the trustee

The Labuan Special Trust can also be established under Islamic syariah principles under Labuan
Islamic Financial Services and Securities Act 1990, a special feature that not available in other
jurisdiction.
Advantages and benefits

Below are the summarise of advantages and benefits for using a Labuan Special Trust:
Clear separation of duty – There is a clear separation of duty between the trustee who hold the
shares of the company on behalf of the trust, and the directors whom are responsible for the
management and investment of the company’s assets.

Generate more wealth – The settlor has the power and rights to manage the investment portfolio,
diversify the company businesses and investments, and venture into a high-risk business or
investments which in return will generate more profits and income.

Enhance the company’s growth – The directors of the company have the ability to plan a long-term
planning of the company and this can enhance the prospect of the company’s growth in a long term,
due to non interference from the trustee.

Asset protection elements – Protection against foreign law claims or unenforceable claims are
provided under LTA 1996, for Labuan Special Trust.

Special Purpose Vehicle – Labuan Special Trust can be used and structured as a special purpose
vehicle entity.

Confidentiality and secrecy – Labuan IBFC has numerous stringent provisions about confidentiality
and secrecy, ensuring the trustee to keep any records of the trust secret.

Conclusion

With stringent confidentiality and secrecy provisions, competitive tax regime and a newly revamped
legislation, Labuan IBFC is a great choice for those seeking highly efficient tax planning and wealth
management solutions.

Labuan Special Trust is one of the great trust product offered in Labuan, and has unique key features
that have been so appealing to high net worth individuals and families.

Some of these unique features are not available in other jurisdictions.

For more information about Labuan Special Trust in Labuan IBFC, you can log on
to www.labuanfsa.gov.my and www.labuanibfc.my.

Sazali Suzin is a Trust Officer and Chartered Accountant at Labuan Borneo Trustees Limited. He has
deep knowledge about Labuan International Business Financial Centre (IBFC) structures and finance.