VISTA Trust Summary

BACKGROUND: THE PROBLEM WHICH THE VIRGIN ISLANDS SPECIAL TRUSTS ACT ADDRESSES

The "prudent man of business" rule

The trust has always been regarded as one of the best "succession vehicles," but its use to cater for the
succession of shares in companies has historically been impeded by a rule of English trust law (the "prudent
man of business rule") which is designed to help preserve the value of trust investments. This rule has
traditionally made the trust an unattractive vehicle to hold assets which settlors intend trustees to retain.
Another aspect of the rule effectively requires trustees to monitor and intervene in the affairs of underlying
companies (as the English decisions Re: Lucking's Will Trusts and Bartlett v Barclays Bank Trust Co Ltd made
clear); this also creates difficulties both from the settlor's standpoint and from that of the trustees.

The prudent man of business rule imposes on trustees the obligation to monitor the conduct of the directors
and to intervene where necessary (eg to prevent the company entering in to an unduly speculative
venture). It also places on them the requirement to exploit the shareholding to maximum financial
advantage which may involve, eg, accepting a financially attractive takeover bid for the company
irrespective of the wishes of the settlor and an obligation to look for opportunities of spreading the financial
risk by diversification, which may involve a sale of the company or its underlying assets. These obligations
conflict with the wishes of the typical owner of a family business and have hitherto raised significant
difficulties for trustees holding shares in such a business.

This creates problems for the settlor and trustee alike

There is an inherent conflict between the prudence required of trustees.......

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