Chapter 9 - Registration and reporting requirements


Option 1 − Status quo

One option is to continue not to impose any registration or reporting requirements for trusts. This approach would not be out of line with other comparable jurisdictions, where there is a pattern of regulating trust advisors and professional trustees, which is discussed in chapter 10, while keeping trusts relatively anonymous and unregulated.


An advantage of the current situation is that there are minimal regulatory costs for those establishing trusts and acting as trustees, especially following the repeal of gift duty. Furthermore, the low level of regulation of trusts means that there is a perception that trusts are not encumbered by “red tape” or bureaucratic requirements. Trusts are currently dealt with in an environment that protects confidentiality, privacy and anonymity. These can be seen as strengths that encourage private and commercial arrangements through trusts.

It is not clear to what extent the perceived problems discussed earlier in this chapter are in fact having an impact. If these are not significant, there is less impetus for altering the status quo. As is discussed in chapter 10, there is now a series of statutes regulating the financial advice and service provision sector. It can be argued that these provide sufficient checks and information on the trusts that could be at risk of being used for criminal purposes, and for the protection of beneficiaries.


The weaknesses of the current system are that it does not address the perceived problems discussed earlier. There is arguably a lack of sufficient information about the use of trusts in New Zealand to accurately inform government policy in areas such as taxation and government assistance to those in need. There are only limited ways in which trustees can be held to account for carrying out their duties. The harm arising from trusts that are not being administered properly may not be negatively affecting the beneficiaries, but there may be harm to the Government or third party creditors. Without a registration and reporting system in place, the Government cannot impose record-keeping and other administrative requirements on trusts and there can be no independent gauge of whether a trust is being administered properly.

Option 2 − Register

A register of trusts would involve a mandatory requirement on either settlors or trustees to provide information to a government agency. This would need to be information sufficient to identify the trust and at least basic information about the parties and property involved. This would be a significant departure from the current position.

The type of information that is required to be registered would depend on the purpose of the register and to whom the information is going to be made available. It has been suggested to us that a register should at least record the name of the settlors, trustees and beneficiaries (both fixed and discretionary).482 It must be acknowledged that because of the structure of many New Zealand trusts there may be difficulty in defining who the settlors and beneficiaries are in some trusts. Trusts can set up wide classes of beneficiaries and there is a spectrum of interests that those who may stand to benefit from a trust may have. This is particularly the case in relation to Māori Land Trusts, which have on average 88 beneficial owners per title of Māori land and often many beneficiaries that are unaware of their interest. Sometimes the nominal settlor of a trust is unrelated to those responsible for giving assets to the trust. Persons other than the settlor may settle property on a trust. These factors could make it difficult for this information to be registered.

The registration function would need to be housed in a government agency, such as the Ministry of Economic Development, which administers the Companies Register. There may need to be a registrar of trusts. In order for the register to continue to have accurate information there would need to be on-going obligations on trustees to update the register when details change or to provide an annual return that verifies details.

There would need to be consequences for failing to register or for supplying incorrect information. Whether an enforcement mechanism, such as a civil penalty, would be sufficient, or whether loss of official recognition as a trust is an appropriate measure would need to be considered.

An approach involving a register of trusts could take one of several forms. It could be relatively closed and non-searchable. It could be a searchable, public register. It could be limited only to certain types of trusts, such as trading trusts.

Options for types of register

Closed register

If the option of a closed register was instigated, the information would only be available to be searched by limited parties for limited purposes. The agency responsible for the register could use it to ensure that trustees were meeting the requirement to make an annual return. Some statistics and general information about trusts could be made available to the Government for other purposes, which could be used to guide policy, but it is unlikely that this would include information on individual trusts. The main reason why a closed register would be chosen instead of a searchable register would be to maintain the privacy and confidentiality of trust arrangements.

This type of register could create some benefits in regard to keeping trustees accountable for their duties. They would be required to make some type of annual return which would mean they would have to turn their attention to the trust and their obligations at least once per year.

A closed register would achieve more limited goals than a more open register. It would not create as much transparency of the ownership and control of property, inform beneficiaries of their interest in a trust, or allow creditors to check whether they are contracting with a trustee. The costs of establishing a register for trusts would be considerable and need to be weighed against its potential benefits. As the Government would be the primary benefactor of such a register there is less of a reason to pass the costs on to those involved in trusts than there would be if the benefits accrued also to the public, beneficiaries and creditors.

Searchable public register

Another version of a register is one that is open for anyone to search and find out some details about individual trusts. In addition to general statistics on trusts to help guide policy development, government agencies could access information about individual trusts, which may help with assessing applications for government assistance. The public register would allow potential creditors to determine that they are entering commercial arrangements with a trustee on behalf of a trust. It would allow people to find out whether they are beneficiaries of a trust. This would be similar to the model that is used for the companies register or the registers for charities or incorporated societies.

This type of register would result in reduced privacy, confidentiality and anonymity for settlors, trustees and beneficiaries. This arguably removes one of the key reasons why trusts are used. Those who are particularly concerned to keep their arrangements private may seek to establish trusts offshore rather than in New Zealand. It could result in the use of nominal settlors and other practices to ensure information remains private. As with the closed register there would be significant costs in establishing and maintaining the register. The cost to the Government could be offset by charging a fee to be able to search the register.

Register for trading trusts only

A register for trading trusts is one option for addressing the issue of the trustee status of a company not being disclosed to a creditor. This type of register is directed at those trusts that can be seen as more risky, that is those that engage in commercial arrangements with others, rather than applying to all trusts. A searchable register of trading trusts could allow potential creditors to find out if the company they are dealing with is a trust and whether property is held for beneficiaries in the company’s capacity as trustee. This would allow a creditor to take greater precautions to protect its position. However, the register would only be effective at this if the creditor searched the register. It would afford no assistance to a creditor who accepts the contracting company at face value without conducting any further investigations. Arguably it should be the creditor’s responsibility to inquire into the background of companies with which they contract.

Because the ambit of a register of trading trusts would be narrower than a general register of trusts, the loss of privacy and anonymity would be less widespread compared to a general register. However, for trading trusts there would be a significant change with trust information becoming publicly available. Registration for trading trusts would achieve fewer purposes than a wider register.

Chapter 7 discusses other options for addressing the concern regarding the disclosure of a company’s trustee status to creditors, which may be more appropriate ways of addressing issues arising with trading trusts.483

Reporting requirements

It is also worth considering what the reporting requirements should be. These could be in the form of an annual return that trustees are required to submit to the appropriate government agency.

KPMG has made several suggestions about the type of reporting requirements for trusts that could be included in legislation:484

  • financial statements – lodging annual financial returns with a trusts registrar, and adoption of accounting standards that disclose transactions, distributions, assets and liabilities, either as a sealed disclosure or open for public viewing;
  • tax return – including balance sheet information for trusts which derive no taxable income;
  • declaration to an appropriate government agency of distributions made by the trust;
  • declaration of assets – an annual declarations of gifts made to trusts and property held by the trust.

Role and powers of a registrar

Any system of registration would need an administrative body to receive information about trusts and to manage a register. It is likely that a trusts registrar would be appointed to have the responsibility for maintaining the register. The effectiveness of a register depends on how actively a registrar manages the information. Legislation would need to set out the extent to which the registrar could take action when a trustee was not meeting their registration and reporting requirements. Part 20 of the Companies Act 1993, which establishes the Registrar of Companies, could be a useful model for a registrar in the trusts context. The Registrar of Companies has the functions of registering documents and maintaining a register, and may inspect the documentation provided and request further documentation.


Analysis of register option


The benefits of a register and reporting requirements would depend on what is required and what will be done with the information. Trusts are a significant part of the legal and economic landscape in New Zealand. The trusts industry of those providing trustee services and advice is important to the New Zealand economy. New Zealanders appear to be more attached to trusts than people in comparable countries. As the number of trusts grows, there has been increased litigation and interaction with other areas of government policy. Unlike other legal and economic structures, such as companies or land titles, there is very limited regulation of trusts.

As discussed above, a register could make information about individual trusts available to government agencies, beneficiaries and potential creditors (if it is an open register). This would create greater transparency regarding the financial and legal position of individuals and companies, and could allow beneficiaries to identify the trusts in which they have an interest.485 A register of trusts would open the door for greater regulation of the administrative requirements imposed on trustees and measures to be taken if these are not met, although this would require a body to be responsible for the monitoring and enforcement of trustee obligations.

A register of trusts provides a mechanism for charging a fee or levy on trusts, which would introduce a way of requiring the trusts industry to bear the costs of structures that could be put in place to assist all persons with trusts, such as a trusts ombudsman or tribunal. A trusts register would formalise the process of creating a trust. This would provide the ability to educate those involved in what their roles are at the time that the trust is established.486 This is particularly important for lay trustees. It may also mean in some cases that trusts are entered into more cautiously and with full understanding of their effect.

A further argument for the registration of trusts is that trusts are commonly used in a way that is similar to companies. Companies are subject to considerable regulation and public reporting requirements. Company directors are on public record and are accountable to shareholders. It can be argued that similar standards should apply to trusts.487 Donovan Waters QC notes that the call for public registration of trusts in the way that companies are registered is likely to become more strident as non-common law jurisdictions consider the introduction of domestic trusts.488 He states:489

In common law jurisdictions, as one can see in investor magazines and newspaper business columns, the perception grows that the trust and the corporation are very much look-alike modes of property management. Why should rules for the protection of third parties dealing with directors be in existence for corporations, but not for those dealing with trusts? …[Those from civil law jurisdictions] are taken aback by the presence of such extensive remedies, while at the same time no mandatory public registration is imposed. There is no registration under the common law property model that will protect either the third party stranger doing business with a trustee, or the creditors whether of the trustee himself or of the wrongful recipient of trust property.

Requiring trustees to submit annual returns containing information that reflects how a trust is being administered may increase the likelihood that trusts will be managed correctly. It would provide the opportunity for trustees to be kept accountable for some of their duties as trustees by means other than the beneficiaries taking a court action against them. Much of the information that would likely be included in a reporting requirement should be collected and recorded by trustees anyway, as part of their duties as trustees.

Reporting requirements would increase the transparency of trusts in New Zealand. It could provide a mechanism for knowing how much wealth is held in trusts and in what forms. If the reported information were made available to other government agencies, it would allow them more information with which to assess applications for government assistance.


Requiring trusts to be registered would be a fundamental change to the regulation of trusts in New Zealand. Registration would make trusts a less private arrangement. How much so depends on whether the register is publicly searchable. Much of the value of trusts rest on the private nature of the arrangement it offers and the flexibility to create and vary trust relationships. A trust register would mean that the existence and some of the details of trust arrangements would be notifiable and possibly publicly available. Trusts in New Zealand are diverse in structure. Many are complex and depart markedly from the traditional format of settlor, trustee and beneficiary with a vested interest. Discretionary trusts are the norm and, in consequence, it can be difficult or impossible to state who the beneficiaries are or what their beneficial interest is. It can also be difficult to define who the settlor is in some trusts. A requirement to register the names of settlors, trustees and beneficiaries may sit uneasily with the discretionary, flexible nature of trusts in New Zealand. There may be practical problems with the requirement to provide particular details of those involved in a discretionary trust.

Registration would create an additional regulatory requirement for trusts, something that can be seen as impeding business and commercial practice. Registration would inevitably create increased compliance costs for those with trusts. It is likely that a registration fee would be necessary. If an annual return is required, it is likely that professional trustees, lawyers or accountants, whose fees must be paid, will be involved in preparing these. The repeal of gift duty was motivated by a desire to reduce compliance costs which outweigh the revenue collected.490 The point has been made to us that it is important that further measures for trusts do not replicate the compliance costs that were found to be unsatisfactory and unnecessary in relation to gift duty.491 The initial registration of the hundreds of thousands of existing trusts is likely to be a complex and costly process and may not be worthwhile. It may be exceedingly difficult or even impossible to enforce a registration requirement on existing trusts because there is no complete record of trusts currently.

Imposing reporting requirements on trusts would further increase compliance costs. It may require the involvement of a professional trustee, lawyer or accountant where this otherwise would not have been considered necessary. The satisfactory fulfilment of trustees’ duties to manage a trust and keep full records may mean that little additional work is required to satisfy the reporting requirements or it could create additional trustee obligations to what already exist in the law of trusts. This may be unnecessary if it is considered that there is not a problem with how trusts are being managed.

Reporting requirements for all trusts would be treating large and small trusts alike. The size of trusts can vary considerably with many simply holding a family home and nothing more on behalf of “mum and dad” settlor-trustees, and others managing multi-million dollars’ worth of assets and investments. It may not be appropriate for all trusts to have the same reporting requirements. Many trusts are not income earning. Should these be required to submit the same types of returns as those that are?

Regulation through service providers

Another option for regulating the trusts industry is to impose regulatory requirements on trust service providers, those who advise people about establishing trusts and those who act as professional trustees. Rather than seeking information about individual trusts, this option would oblige trust service providers to educate those entering trust relationships properly, to keep accurate records and gather information, and to provide a high standard of service. This option is discussed in greater detail in the chapter 10.


A record-keeping provision

An option for addressing concerns about accountability and the management of trusts, without resorting to a register or requirements to submit information to a registrar, is to include in trusts legislation a provision setting out the basic record-keeping requirements for trustees. This would be intended to restate rather than amend the law, and would not be designed to increase trustees’ obligations. It would clarify, particularly for lay trustees, what information needs to be held. The information would not need to be submitted to a registrar and the trust would not need to be registered.

It is suggested that this provision could require trustees to keep copies of:

  • the trust deed;
  • any variations made;
  • minutes of decisions made by trustees;
  • contracts entered into; and
  • accounts.

While it may be considered obvious to some that such information should be held, there is concern that not all trustees are aware of these obligations. A provision like that suggested would make this clear and would help to ensure that thorough records are held for all trusts, which in turn may make it easier for beneficiaries to receive this information492 and hold trustees to account.

Submission of Ministry of Social Development, above n 453.

See paras [7.6]−[7.15].

Submission of KPMG on Some Issues with the Use of Trusts in New Zealand: Review of the Law of Trusts – Second Issues Paper (submission dated 7 April 2011).

Submission of Martin Riley, above n 454.

Submission of Cash Flow Doctors on Some Issues with the Use of Trusts in New Zealand: Review of the Law of Trusts – Second Issues Paper (submission dated 10 January 2011).

Submission of Martin Riley, above n 454.

D Waters “The Future of the Trust – Part II” (2007) 14 JITCP 1 at 10.

Ibid, at 10−11.

Inland Revenue Regulatory Impact Statement, above n 463, at 1.

Submission of KPMG, above n 484, at 10−11.

The duty of trustees to provide beneficiaries with information regarding a trust was discussed in Law Commission The Duties, Office and Powers of a Trustee, above n 455, at ch 2.