Procedures for setting up a charitable trust in Hong Kong
A charitable organisation can be of the form of a charitable trust. A charitable tust is used for charitable purposes.
It is a form of property ownership in which control of the property and benefit to the property are separated, legal title and control are vested in trustees, and law of equity compels them to exercise this control for the benefit of the charitable cause. The trustee has a fiduciary duty to act in the best interests of the beneficiaries of the trust and must ensure that assets are properly protected. Like unincorporated associations, charitable trusts can contain provisions tailored to the specific needs of those involved and can be relatively private.
To overcome the problem of inability to identify trustees to outsiders, trusts can (but need not) be registered with the Companies Registry under the Registered Trustees Incorporation Ordinance (Chapter 306 of the Laws of Hong Kong). The Ordinance facilitates the incorporation of trustees appointed by certain bodies, associations and communities of individuals and allows trustees of charities to make provisions for purposes relating to the charity. Once registered, the trust will hold a certificate of incorporation granted by the Registrar of Companies and the trustees and their successors will become a body corporate and may sue and be sued in the name named on the certificate. The Registrar of Companies maintains a register which is open to public inspection for the purpose of ascertaining the names of individual trustees.
The laws governing fiduciary duties of trustees, including the statutory duties contained in the Registered Trustees Incorporation Ordinance, mean that all charitable trusts (whether registered or not) have a stricter standard of care. All trustees are responsible for their actions, receipts and any neglects and/or defaults, and must properly maintain the trust and the administration of the trust estate.
To establish a valid charitable trust, there must be a written instrument setting out the terms of the trust. Hong Kong's trust law system is based on common law and principles of equity, supplemented by local legislation.
It's worth noting that the Inland Revenue Department requires all objects of charitable trusts to be fully charitable, and generally prohibits anyone involved in the organization from receiving remuneration. The organization must also prohibit the distribution of any surplus or assets of the organization to its members.
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