The revised Trust Business Law, which came into effect on
December 30 2004, expands the types of business eligible to
engage in trust business and the types of assets eligible to be
held in trust. However, it also imposes more regulations on
trustees and trust businesses.
New trust companies
Historically, only trust banks conducted trust business.
Under the revised Trust Business Law, the government's position
is to grant trust business licences to other types of companies
as well. For example, a company specializing in digital content
management recently acquired a licence to be a fully fledged
trust company. Moreover, under the revised law there is now
also a restricted type of trust company, which either acts only
on the instructions of a settlor or merely maintains, uses or
improves trust assets (without changing the character of those
assets), and it must register with the appropriate authorities.
One leasing company has already so registered.
Intellectual property trusts
Under the revised law, trustees of commercial trusts can now
hold in trust numerous types of assets and rights, including
IP. Some trustees have created trusts for patents and for
copyrights to movies and animated television programmes.
Typically under these IP trusts, the original holders of the
intellectual property raise funds by selling beneficiary
interests in the IP trusts to investors.
New restrictions on trustees
The revised law contains new regulations that apply to the
operation of trustees and certain other persons with a
connection to the trust. First, if a trustee consigns to a
third party part of its trust operations, such as the
collection of entrusted receivables or the custody and
management of entrusted assets, then: (a) the consignment must
be specified in the trust agreement; (b) the consignee must be
capable of appropriately performing its duties; and (c) the
consignment agreement must contain certain prescribed
conditions required by law. The consignee must generally assume
the duty of loyalty and other responsibilities of the
Second, the revised law imposes strict conflict-of-interest
rules on trustees. Transactions between a trustee and a group
company of the trustee or transactions between trust accounts
of the same trustee are considered conflicting-interest
transactions. These conflicting transactions are permitted only
if the trust agreement contains a general description of the
transaction and the transaction would not cause any damage to
the trust assets.
Because the revised law was enacted and implemented in a
short time and the Financial Services Agency generally strictly
interprets the law, trust banks have had to modify their trust
agreements and operations quickly to comply with the revised