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The Role of Trust in Italy between Opportunities and Restrictions
The Trust is a legal instrument of Anglo-Saxon origin, created to protect assets and fundamental rights when they are earmarked for a specific purpose or are reserved for one or more beneficiaries.
The original owner, called Settlor, transfers the ownership of all its assets or part of them to an Administrator, called Trustee, who manages these assets with the full rights and powers of an owner, on behalf of either one (or more beneficiaries) or a specific purpose.
The Trustee will manage assets according to the basic instrument of Trust and according to the document drown up from the Settlor called “Letter of wishes” and is responsible for any breaches that can cause a waste of assets to the Trust or for any wilful misconduct.
The Protector is another figure whose powers are to check up on the Trustee and if necessary to dismiss the Trustee itself.
The Trust is established from a Public Officer and must be registered as an authentic instrument; it has only one limit: not being contrary to the public order of the country where it has to be recognized.
The Settlor choses the governing Law of the Trust and must recognize the institute of Trust and if the Settlor has not given any indications about it, the applicable Law will be the one that has closer links with it; almost all Common Law Countries recognize this institute.
The Trust isn’t expressly recognized in the Italian system of law, anyway by ratifying the Convention of Aja of 1985, entered into force in 1992, the Trust called “interni” have been recognized implicitly.
So when we speak about the “Inside Trust” in Italy, we refer to an Italian legal entity of which the assets are in Italy but still governed by a foreign Law chosen by the Settlor.
Assuming that in Italy the laws that are concerning the Trust are always foreign, a deep synergy between the Law of a foreign state, the imperative rules and the public order of a State where the Trust is recognized (Italy) is obviously produced.
Despite the Trust is a developing institute and of flexible application, in Italy it is still approached with suspicion and applied only to banks, great companies, big professional firms and big asset owners.
Surely, it is not used for its potential benefits; one for all, the most important of “earmarking assets”, namely the assets are a separate heritage from the heritage of Settlor and from the heritage of Trustee. It follows that the trust’s assets are untouchable by creditors of both, the Settlor or Trustee.
Trusts can be used to meet a variety of needs:
- In the Family:
- as safeguarding the integrity and destination of assets;
- as safeguarding the vulnerable components of family;
- as arrangement during crises of family
- Trust in inheritance
- Charitable Trust (used in England) where the assets are devolved to a charity institution at a certain date
- Trust having the aim of liquidating the business assets. According to Convention of Aja article 15, subparagraph e), the creditors must be protected in case of insolvency; this is an imperative rule of safeguarding public interests and so a Trust established with this scope can be used (but is little used) as well as for business restructuring.
Recently in Italy, the Trust has met many barriers such as the one of D.L. n. 83/2015 (c.d. Decreto Giustizia per la Crescita) which introduced the new article 2929 bis of Italian Civil Code titled “Expropriation of goods subjects of links of unavailability and divestments free of charge”.
According to this law, the creditor can invalidate the Trust (or other links of unavailability) during the first year after its registration and foreclose goods in Trust even without having obtained the clawback of Act of constitution of the Trust itself.
In this way it is assumed the bad faith of the Settlor anyway. The only condition to avoid this risk is, that the Trust is established after the rising of the credit and that the foreclosure is registered within one year from the registration of the Trust.
In conclusion, it can be said that now in Italy after one year from the registration in the land registries, the goods conferred in a Trust (and in the other links of unavailability) cannot be effectively subject to the executive process held by the settlor’s creditors.
It is true that the article 2929 bis of ICC is designed to remove the so-called “Sham Trust”, but indeed it has created other obstacles of using the Trust in Italy.