Opening a trust in China means observing a series of rules and regulations mentioned by the Trust Law of the People’s Republic of China. The trust business is a solid financial sector in China and of high importance considering the huge amount of money generated. One of our company formation specialists in China can give in-depth support and assistance for those wanting to establish a trust in China. In addition, our agents can help foreigners open a WFOE (Wholly Foreign-Owned Enterprise) in China.
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What is a trust and how many types are available in China?
A trust is the type of agreement made by two or more settlers who agree on transferring a part of their assets to trustees, such as stocks, bonds, properties or loans. The following type of trusts are available in China:
- Property management trusts can be used for the administration of non-financial assets.
- Single unit trusts can be developed by trust companies that respect the customers’ requests.
- Commercial trusts are the type of financial tools mostly used by companies involved in the real estate sector or engineering.
- Civil trusts are related to the family properties given to trustees.
Charitable trusts are also available in China but are mostly overseen by governmental agencies in the country. If you are interested in opening a trust in China, feel free to talk to one of our company formation agents in China.
How do I set up a trust in China?
First of all, a trust can be registered if there is a legitimate trust purpose for doing so, as stated by the Trust Law in China. A trust contract or a will is needed for opening a trust, and such documents must comprise complete information about the names of the settlors, the trust purpose, the name of the beneficiaries of the trust, the type of assets involved and the ways in which these can be received. Also, a trust agreement can have information about the management of trust properties, the method through which a trustee is appointed and also details about the remuneration of the trustees involved. Because the trust doesn’t have a legal personality, there is no need to agree on a particular name. Also, trusts in China are not taxed as legal entities available in this country.
When is a trust annulled?
If the scope of beneficiaries is not properly described, if the settlor establishes the trust on illicit assets and if the trust properties are bot discoverable, the trust can be annulled. Trusts can be established by entrepreneurs wanting to protect their businesses but without having the intention of avoiding paying the company debts, if any. In such a case, the trust has lots of chances to be refused or revoked. Do not hesitate to solicit the assistance and the support of our company incorporation agents in China if you want to set up a trust in China. Also, you can ask for help in opening a WFOE in China.
The rights of the trust settlor
The settlor of a trust in China has a series of rights and among these, the ones referring to the right of being informed about the management of the trusts (expenses, incomes, development). Moreover, the way of managing the trust assets can be modified by the settlor if unpredictable problems appear at a certain point. Also, if gross negligence is observed on behalf of the trustee, the settlor has the right to dispose of him/her or can ask for the court of law in China to make the dismissal.
The rights of the trustee
According to the Trust Law of the People’s Republic of China, the trustee needs to be paid for such services, as agreed in the trust contract. A trustee must act in the best interest of the settlor and beneficiary of the trust and properly manage it. Trustees are obliged to keep separate managements and accounts and to avoid combining personal assets to the ones for which they are in charge. Also, the trustee must act in high confidence and not reveal information about the trusts they manage. As for the termination of the trust, this can happen if the beneficiaries accept the dissolution or want to change the beneficiary at a certain point.
In matters of business, China is still preferred by foreign investors, in a large amount. You might find interesting the following information and facts about investments and the economy in China:
- China is the second-largest FDI recipient after USA, as seen by the “2019 World Investment Report from UNCTAD“;
- there were more than 60,000 enterprises opened in China in 2018;
- approximately USD 140,000 represented the FDI inward flow in 2018 in China;
- about 1.3 billion potential clients in China are part of the largest internal market in the world.
If you are interested in opening a trust in China, feel free to contact our company formation representatives in China.