Amendments to Trust Legislation in Kenya and UAE

Previously, the TPSA provided for incorporation of trustees and maintaining a register of trusts to be under the mandate of the Principal Registrar appointed under the Registration of Documents Act, Cap 285. The Cabinet Secretary responsible for matters relating to land oversaw the making of regulations under the TPSA.  Pursuant to the recent amendments all the above tasks will now be carried out by the Registrar appointed under the Companies Act, 2015. The application forms and fees payable for incorporation of trustees have also been revised. It would appear that as the Registrar of Companies is responsible for incorporation of companies, the responsibility of incorporation of trustees as a corporate body under the TPSA has also now been included under his mandate.

The timeline for granting approval or rejection of an application for incorporation is 60 days from the date of receipt of the application. Once incorporated, the corporate body has power to sue and be sued in its name, enter into contracts and hold and acquire land.

In Kenya, trusts may be unincorporated or incorporated. Trusts may be set up for a variety of reasons including for charitable purposes, non-charitable purposes, family succession planning, business succession planning or for a specific purpose.

UAE: Establishing Trusts and Foundations in the Dubai International Financial Centre 
Similar to other Middle East countries, UAE did not previously recognise trusts established under common or English law. To recognise such trusts, Dubai International Financial Centre (DIFC) was introduced as a special and free economic zone in Dubai to act as a financial hub for companies trading in the Middle East. DIFC has ever since developed its own commercial and corporate laws based on common law principles (English Law) and the said laws have been enforced by DIFC courts. Such laws include the enactment of trust laws based on English or common law, which allows trusts to be created in DIFC to provide for the vesting of beneficial ownership rights in land or shares to a beneficiary. In March 2024, the DIFC trust laws were amended and the amendments affirmed the supremacy of DIFC laws against foreign judgments.

The amendments have introduced special ‘’firewall provisions’’ which prevent the enforceability of foreign judgments that contravene DIFC trust laws. To this extent, the supremacy of the DIFC courts has been solidified and no party would be able to rely on a foreign judgment that contravenes DIFC laws. The amendments require trustees and foundation officers to refrain from undertaking any actions in relation to a the trust or foundation, where the basis of such actions is a foreign judgment which contravenes DIFC laws. The amendments have also introduced protective measures to prevent creditors from reclaiming property that has been transferred to a trust or foundation established in DIFC. To establish the liability of the trust or foundation, creditors are now required to provide evidence of the settlor or founder’s intent to defraud and without such proof, the trust or foundation is only liable up to the extent of the settlor or founder’s previous interest.

Remarkably, the DIFC trust law amendments allow for the conversion of DIFC foundations into companies, enhancing operational flexibility and aligning regulatory provisions with evolving market dynamics. Previously, while conversion from a DIFC company to a foundation was feasible, the reverse process was not facilitated.

The amendments underscore DIFC’s commitment to bolstering its legal infrastructure, reinforcing investor confidence, and preserving the integrity of its jurisdictional framework in an ever-evolving global financial landscape and engaging a lawyer on advice for the same is crucial.

Should you have any questions on this legal alert, please do not hesitate to contact Mona Doshi, Devvrat Periwal or Kajal Patel.

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Contributor
Dhara Pandya – Associate