Trust and trust activities

Advice - Litigation – Lawyer-Trustees

Sekri Zerrouk Valentin has extensive experience in trusts, having handled such matters ever since trusts were first recognized under French law. The firm has represented a wide range of settlors with respect to both “management trusts” (fiducie-gestion) and “security trusts” (fiducie-sûreté).

Sekri Valentin Zerrouk has structured estate trusts, security trusts, and administrative trusts involving both individuals and legal entities. These include private companies, associations, and consortiums, and the transactions can involve complex corporate restructurings.

In trust matters involving contracts, commercial law, secured financing and insolvency, tax law, employment law, town planning, and administrative law, Sekri Valentin Zerrouk mobilizes all of its resources under the leadership of Jean-Marie Valentin.

Sekri Valentin Zerrouk offers extensive legal knowledge, close working relationships with market participants, and links to partners such as depositary banks, cash flow managers, and auditors. It can therefore offer lawyer-trustee services, as permitted under French law.

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The Concept of Trusts

Established by the Act of February 19, 2007, but initially with a very restricted scope of application, the French form of a trusts, has after its introduction undergone a series of legislative amendments that have improved its attractiveness with the goal of competing with its Anglo-Saxon equivalent. After the Act of August 4, 2008 expanded the scope of application of the trust, in particular with regard to the qualifications of the settlor and trustee, and facilitated certain transfer operations such as those relating to claims and credits, the government ordinance dated December 18, 2008, guaranteed the stability of the trust in financial reorganizations, while the order dated January 30, 2009, and the Act of May 12, 2009, clarified the legislation applicable to the trust when it is set up as a form of surety.

Trust seems to have attained legislative maturity and stability in France. The opportunities that the various reforms and changes have brought about, have expanded and enhanced the trusts regime to a point where they have become a valuable legal tool that can be used to provide numerous solutions in various transactions such as acquisitions, mergers and financing.

The first characteristic of the “trust à la française”, after these successive waves of legislative amendments which have significantly changed the rules governing trusts, is its great flexibility. The general framework defined by Article 2011 of the French Civil Code widens the scope of application to trusts because it is stated that a trust is a transaction by which one or more settlors can transfer assets, rights or sureties (or a group of assets, rights or sureties), present or future, to one or more trustees who, while keeping them separate from their own assets, act toward a determined objective for the benefit of one or more beneficiaries.

Under a trust arrangement, ownership of certain assets or rights is transferred to the trustee – which can be either a financial institution, an investment company, an insurance company or a lawyer – in the interest of a beneficiary, to whom ownership of these assets or rights will ultimately be transferred, whereby the beneficiary can be a third party, the trustee itself or the settlor, depending on the terms of the arrangement. One of the most notable innovations of the trust arrangement, besides the assignment of temporary ownership for a specific purpose and the transfer of ownership for the benefit of a third party, is to set up, for the entire term of the trust, a fiduciary trust which keeps the transferred assets or rights separate from the trustee’s personal assets and the settlor’s personal assets. The trust thereby erects a real firewall and guarantees complete security of the property held in trust.

The framework within which the trust can be utilized is very broad, whilst only gift trusts are prohibited, the trust can be used for a variety of purposes by the wealthy and be adapted to numerous situations, both with regard to the administration of an estate, surety for acquisition transactions as well as financing transactions and equity investments. In this regard, the trust can be roughly divided into two major categories, either as a surety trust or an administrative trust. In fact, the trust is most frequently established to transfer ownership of assets to guarantee a debt (the surety trust) or to confer on a “qualified” third party the management of assets and rights (the management trust) on behalf of the settlor, or even of a third-party beneficiary. In our legal landscape, trust arrangements must therefore be developed around one of these two categories.

Trust Lawyer

Pursuant to the Act of August 4, 2008 that authorised lawyers to act as trustees (fiduciaires), this practice has been growing by leaps and bounds. As a result of their skills, independence and the ethical rules that govern their profession, lawyer can offer all the guarantees required by the office of trustee which consists essentially of exercising the prerogatives of a legal owner over assets and rights agreed upon in the interest of a third party.

The lawyer, whose main service include drawing up the deed of trust and proposing innovative solutions in the drafting of the deed, is undoubtedly in the best position to ensure the proper execution in the framework of the execution of trust arrangements.

Whether in the context of a surety trust or an escrow trust assignment, or even an administrative trust, the lawyer has all the skills required to carry out the function of trustee that is imparted to him. In this regard the lawyer’s legal expertise and his or her personal relationship with the settlor (or the beneficiary) and the ethics of the legal profession are extremely useful, because the lawyer’s task is by its nature that of a representative or agent. These capabilities make it possible to optimize the execution of various trust arrangements. For example, the lawyer can set up, administer, manage and cancel sureties on behalf of creditors, manage and administer securities or other assets, hold assets in the capacity of an escrow trustee in the context of acquisitions, shareholder agreements or unilateral promises of purchase or sale, or administer estates on behalf of legally incapacitated parties or some minors.

In some of these tasks, the trust lawyer may have recourse to other types of expertise. Such is the case, when the trust requires expert financial or professional management of certain assets. For example, the trust lawyer may be assisted in assignments by financial institutions or insurance companies for the management of sums of money, securities or investments or the collection of payments in the context of the dissolution of the trust. The trust lawyer must therefore be able to count on the support of professionals who are recognized experts in their fields.

The trust lawyer can also perform an audit and oversight function in the day-to-day execution of the tasks performed under his authority, all the while protecting the interests of the settlor and/or the beneficiary (which the lawyer can also carry out in the capacity of a third-party guardian), if the lawyer takes responsibility for the trust activity being overseen.

The lawyer’s natural role places the latter at the center of the trust activity, of which the lawyer is the essential element of the equation.

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