Conyers Dill & Pearman partner Alec Anderson gave a talk to the Society of Trustees and Estate Planners (STEP) on the subject of Private Trust Companies.

Mr. Anderson explained that a private trust company was a limited liability company which acted as a trustee for either a single trust or a limited class or group of trusts.

He said it could be a useful extra layer for several reasons, the first being that the settlor and beneficiaries were shareholders in the private trust company (PTC) and retained a certain degree of control and involvement in how the assets were managed.

The majority of Mr. Anderson's talk focused on how in terms of potential liability an individual might prefer to be appointed director of a PTC than a personal trustee. "Where an individual has the choice of acting as a professional trustee personally or as a director of a PTC, he is best advised to choose the latter position."

Mr. Anderson commented that the role of trustee could be strewn with difficulties, including liability as personal trustee if investments went wrong.

"It's almost impossible to be a perfect trustee," he said. And he warned that it was fairly easy for a trustee to be accused of negligence if there were trust losses. "The legal term negligent is easy to allege and relatively easy to prove."

On the other hand, the director of private trust company owes a duty to the company, not the beneficiaries. A director of a PTC would be expected to ensure that the PTC conducted its business as a competent trustee and acted in the best interests of the trustees.

Mr. Anderson said a director of a PTC could land in hot water, however, if he held himself out as solely responsible for a decision relating to the trust company without saying he was acting as a director.

"He could be regarded as acting as a trustee."

Although conceivable, this principle is not yet established law, but its possibility has been alluded to in court decisions, said Mr. Anderson. Consequently directors should pay close attention to the procedures dictated in the byelaws of the PTC.

Although there were ways for beneficiaries to sue directors of PTCs "In most cases its more difficult for a director to be found liable for a breach of fiduciary duty".

He added that directors were often indemnified by the PTC and may also be able to acquire insurance.

In general, he concluded that the benefits of a PTC outweighed the risks of indirect liability.