Above + Beyond

Neha Sachde –  Senior Associate ([email protected])


Formation of trusts is an effective way of succession planning, as it helps with distribution of any form of property, moveable or immoveable, tangible, or intangible, without affecting the continuity of the business. It thus, facilitates smooth transition of the deceased succession and thereby helps in avoiding the nitty-gritty of the court procedures. This Article describes how a valid financial trust could be formed and what should be included in the Trust Deed, in accordance with Bahrain Law No. 23/2006 regarding the Regulation of Financial Trusts.


Formation Requirements 

In order to form a valid Trust, it must mandatorily include the following. If any of the below is not included it shall hold the Trust void:

  • It must be done in writing by way of a Trust Instrument.
  • The said Trust Instrument must be authenticated by a competent official authority.
  • It should have certainty of intention that the Settler/ Owner of the Trust Property intends to vest the asset/ property to the trustees for management for the benefit of another.
  • The Trust Instrument should specify the details of the Settler itself and the details of the Trustee. There could be a single Trustee appointed or multiple trustees, where the Trust Instrument should specify whether the trustees should act singly or jointly failing which, they must act collectively, unless an action does not require an exchange of views.
  • It should have certainty of subject matter under the Trust; that the Settlers intends to bequeath the named Trust Property detailing the trust funds/ assets and their address respectively so it could further include any products, revenue, profits or growth generated by the Trust Property.
  • It should have certainty of object i.e., the beneficiaries that the Settler intends the Trust for should benefit from the formation of the Trust.
  • The said Trust Instrument should also include items like intention or purpose of the trust, powers and duties of trustees and duration of trust not more than One Hundred years from the date of its creation.


Evidently, the Trust Instrument must define the whole trust in its true sense and cover each aspect of the Trust Property and the Trustees’ rights and duties.

In addition to the above, the following may also be included to have all aspects covered in the Trust Deed:

  • The name of which the Trust shall be known.
  • Rules on how to deal with the Trust Property.
  • The rights of the Beneficiary and the share allocated to each beneficiary in case of multiple
  • Appointment of the Trust Protector to supervise the performance of the Trust Instrument and perform any other duties in the Trust Instrument.
  • Termination of the Trust – either at the expiry of the term, or upon meeting the purpose of the Trust. The Trust will be deemed terminated if the purpose of Trust becomes impossible or unlawful. Trust may also be terminated amicably if the Settler, the Trustee, and the Beneficiary agree to terminate the Trust in a written authenticated Agreement or if the Trust Instrument provides for terminating the Trust before the expiry of its term.
  • Consequences of termination – Upon termination of the Trust, the Trust Property is transferred to the Settler, unless the Settler provides for other provisions in the Trust Instrument.
  • Remuneration and Resignation – The Trust Instrument can include the remuneration to be provided to the Trustee. The Trust Instrument can include conditions, rules and procedures for Trustee to resign failing which the, the Trustee may request the Dispute Settlement Committee to issue an order (to the Trust) to accept the resignation of the Trustee.
  • Disqualification of Trustee – The Trust Instrument may also include reasons for disqualification of trustee and what should happen after such disqualification. A Trustee is automatically disqualified upon his death, loss of his legal competence, removal from trusteeship, liquidation, rescinding his license or declaring his bankruptcy. If the Trust Instrument does not cover the same, the Trust should then be transferred to the other Trustees in case of multiple Trustees. In such case, the Governor of the Agency entrusts the temporary management of the Trust to one or more licensees until such time as a new Trustee is appointed to succeed his predecessor. The Settler can also mention the time within which the new trustee should be appointed, failing which a new Trustee should be appointed within six months of the date the Trustee was disqualified.


Filing of Documents

The Trustee should register the financial Trust with the Competent Directorate of the Bahrain Monetary Agency (the “Agency”) for registration, which details of the Trust will then reflect in the ‘Register of Financial Trusts’ and the Trustee shall be issued with a ‘Certificate of Registration’. The Trust shall be valid only after obtaining the said Certificate of Registration. The documents to be submitted to apply for the said registration are as follows:

  • An application form required by the Agency for the purposes of registration of the financial Trust.
  • Copy of Trust Instrument and all data, information, and documents, required by the Agency.
  • Identities of the Settler, the Trustee, the Protector of the Trust – if any, and the Beneficiaries mentioned in the Trust Instrument.


Changes to the Trust  

It is mandatory for the Trustee and the Protector of the Trust to inform the Agency of any modification of the data, and information recorded in the Register of Financial Trusts. Any concerned party may report the same to the Agency.

Concluding Remarks

The formation of financial Trust is a smooth methodology for vesting properties, funds, etc to the intended beneficiaries. The trustees are trustworthy persons appointed by the Settler. The whole foundation for the working of the trust inclusive of the asset, funds, management, rules, trustees, etc. are provided in the Trust Instrument. Formation of Trusts is the best way to ensure that intention of the Settler is not disrupted.




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