Corporate Finance Law: Principles and Policy by Gullifer Louise & Payne Jennifer

Author:Gullifer, Louise & Payne, Jennifer [Gullifer, Louise]
Language: eng
Format: azw3
Publisher: Bloomsbury Publishing
Published: 2015-10-21T16:00:00+00:00

8.3.5.5 Public Policy: Legislative Constraints?

When the Law Commission considered the question of whether there should be statutory control of trustee exclusion clauses, it initially proposed that professional trustees should not be able to exclude liability for negligence.410 There was considerable adverse reaction to this from those who used trusts in a commercial context, who argued that restricting the ability of trustees to have extensive protection from liability would mean that trust corporations would refuse to act as trustees, so that the use of the trust structure would die out in favour of fiscal agency, and the benefits of using the trust would therefore be lost. Furthermore, where there was a trust, the trustees would be reluctant to exercise their discretion without consulting the beneficiaries, which would make the operation of the trust much more inefficient.411 These arguments persuaded the Law Commission that statutory control was not desirable, and in its final report it recommended merely a rule of practice that paid trustees should take reasonable steps to ensure that settlers are aware of exemption clauses included in trust deeds.412 Such a rule is likely to have little impact in relation to bond issues, where the terms of the trust deed are already made known to both the settlor and the beneficiaries.413 In any event, the Law Commission proposed that the rule would not apply where the trustee was already subject to statutory regulation of exemption clauses,414 although the statutory regulation of debenture trust deeds, of course, only extends to a limited type of clause.415

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