Study On Cy-pres Doctrine Of Charitable Trust In China

In Chinese legal system,the prerequisite to apply cy-pres doctrine is that a charitable trust is terminated,which limits the application of this rule.The cy-pres doctrine in China seems to attach importance to private property rights,but in fact a settlor’s right to freely appoint the owner of remaining trust property exists in name only,embodying in the improper presumption of "no owner of the trust property" and the restriction from the requirement of "absolute charity".The application of cy-pres doctrine requires approval from Ministry of Civil Affairs of PRC(hereinafter referred to as the MCA),which not only contradicts the fact that setting up a charitable trust only requires records,but also is unnecessary.Also,a trustee has no right to apply cy-pres doctrine,which not only contradicts the fiduciary duty he/she bears,but also is not reasonable when comparing with the application of cy-pres doctrine in charitable organizations.Drawing lessons from the reforms of relaxing the cy-pres doctrine in the U.K and the U.S and based on the clarification of conditions to the termination of a charitable trust,the application range of cy-pres doctrine in China should be expanded to cover situations where the trust purpose cannot be realized due to obvious inefficiency or uneconomical and situations where the trust subsequently is invalid because the trust purpose becomes illegal or damages the public interest,or because a creditor of the settlor exercises the right of revocation.A settlor’s freewill appointment of the owner of remaining trust property does not necessarily conflict with the requirement of "absolute charity",because they are compatible when the private interest and the public interest are distinguished and different tax rules are designed for each other.Therefore,the settlor should be allowed to freely appoint the owner of remaining trust property.To achieve the balance between personal autonomy and social public interest,the settlor’s appointment for private interest can exclude the application of cy-pres doctrine only when a charitable trust is terminated due to the situations written in trust documents and the fact that the trust purpose has been realized.The trustee should have the right to apply the cy-pres doctrine when needed.Meanwhile,mechanisms for regulating the trustee’s exercise of this right should be established,such as a reporting mechanism,an information disclosure mechanism and the duty of explanation and consultation for settlor.The MCA shall appoint a new trustee and approve the application of the cy-pres doctrine when a charitable trust is terminated and the trustee is absent.The MCA should also apply the cy-pres doctrine to the fines paid by the trustee for failing to disclose the information of a charitable trust,and use them for similar charitable purposes to promote the charity.In addition,law should clearly authorize the court to apply the cy-pres doctrine,which will not only help solve the disputes over the ownership of the remaining charitable funds raised by the public,but also correct the abuse of rights(power)by the trustee,the MCA and the person receiving the remaining trust property.