Study On The Legal Regulating Of The Beneficiaries Protection In Corporate Equity Trusts

The trust system has gradually established a dual ownership system in which the trustee owns the legal title while the beneficiary equitable title.Among them,the beneficiary’s interest is the purpose of trust establishment and the ultimate point of trust rights and obligations,so the beneficiary is the core.However,after the trust system was introduced into China,there was a central shift,and China’s trust law designed the system around the rights and obligations of the settler.With the trust system developing,such design is increasingly deviated from the trust purpose of beneficiary protection.The issue of beneficiary protection has been particularly intensified in equity trusts.Equity trusts are used in a wide range of areas and have many functions such as family wealth inheritance,personal investment and financial management,corporate financing,and the participation of minority shareholders in corporate governance.However,equity trusts are at the intersection of trust law and corporate law,they are also more special and complex than ordinary trusts.In the equity trust,it involves not only the internal relationship of three parties in the trust law,but also the external relationship in the company law,and multiple subjects and interests coexist.The beneficiary,as the core,is at the same time,inferior to the news and passive to rights.In this passive situation,the structure of the separation of ownership,operation and income rights of equity trust not only intensifies the desire of the settler to control the equity,but also makes the trustee face the conflict between the interests of the company and the beneficiaries.The internal contradiction is intense.While in company area,the beneficiaries cannot claim the right to relief through the identity of the hidden shareholders;There is also a lack of risk prevention mechanism.In a comprehensive view,the current protection of beneficiaries of equity trust mainly has four problems: lack of legal regulation of setter control,unclear standard of trustee’s fiduciary duty,lack of effective external supervision of equity trust,and imperfect public registration system of equity trust.Therefore,it is necessary to examine from comparative law and China’s practice for the construction of specific proposals.The first chapter presents the problem of beneficiary protection of equity trusts and analyzes the four major outstanding problems.In terms of trust structure,there is the risk of legality of equity trusts due to the excessive control of the settler;Among the parties to the trust,there is the unclear standard of the trustee’s obligation;Also,there is a lack of effective supervision of the third side;In terms of the supporting system,the registration and publicity system of the equity trust needs to be improved.The second chapter addresses the problem of the failure of the equity trust structure caused by the great control of the settler,which leads to the reversion of the beneficiary rights to extinction,and puts forward proposals for regulating the control of the settlers in our laws.In equity trusts,the settler prefers to retain control over the operations of the company and greater direction over the settler,which is supported by our legislation,but not in judicial practice.There is a contradiction between legislation and justice but each has its own regulatory logic.In the world,there are two models: the law supports the expanding rights of the settler and the law relatively restricts the rights of the settler.Combining the reasons behind the settler’s control and legal regulation,it is proposed that the settler’s control should be relatively limited in our legislation.In judicial practice,the effectiveness of the equity trust structure should be analyzed according to different scenarios of equity trust application,combined with the two judgment elements of “trust property independence” and “financial system risk”,in order to protect the rights and interests of beneficiaries with the good operation of the equity structure.Chapter three defines the standard of trustee’s fiduciary duty at the legal level,so as to alleviate the conflict between the dual status of trustee and the unclear standard of trustee’s duty.The general fiduciary duty of our trust law is not fit for the conflict of interest between the trustee’s status and the shareholder’s status,which brings difficulties for the trustee to protect the interests of the beneficiaries.In comparative law,both case law countries and law-making countries distinguish between the duty of fiduciary duty and the duty of care.Therefore,it is recommended to establish the fiduciary duty with the duty of fidelity and the duty of care as the core,and establish the subdivision standard of the two duties in the equity trust.Chapter four proposes to establish a unified supervisor system to protect the beneficiaries in response to the multiple scenarios where the beneficiaries of equity trusts cannot supervise.In trust law,supervisor only exist in public interest trusts,while in equity trusts are widely used but not established.It is common in countries worldwide to establish a trust supervisor for the benefit of settlers and beneficiaries,respectively.The establishment of a unified supervisor system in our legislation can be used to guide the trust parties to establish prior risk prevention and safeguard the interests of beneficiaries.Chapter five is to improve the equity trust registration system and externalize the beneficiaries’ right to remedy for hidden shareholders by public registration of equity trusts.Many laws and regulations in China confirm the necessity of registering equity interests and registering changes in equity interests,but there is no specific and systematic registration system for equity trusts,and even controversies among related theories,so that there is no public notice system for the conduct of equity trusts,and beneficiaries are unable to assert their right to in-time remedy externally when they face infringement by trustees.After comparing the different registration models adopted by different countries.It is proposed to establish a dual registration system of formally unified and substantively decentralized institutions as well as trust contents,from which the beneficiaries’ right to the remedy can be externalized.