Research On Legal Issues Of Equity Trust

Trust originated from Britain while it was extensively applied in commercial fields in the United States. Because of its flexible setting form, safeguard of property and tax preference, trust is widely used in common law countries as well as civil law countries. Equity trust, whose trust property is equity is with function of investing, management and financing. There are plenty of equity trust practices in China nowadays with its mainly using in employee stock ownership plan, corporate governance, investment and financing. However, given legislative deficiency as well as rare research findings on equity trust, there are high risks for both trustors and trustees. Equity trust needs prompt normalized.The main deference between trust and proxy is whether transferring the legal title of entrusted property. To trust, the legal title of the property belongs to trustees to incent their initiative and creative. In regarding of the guidance of the behaviors of the trustees, at the very beginning, when the civil trust grew up in Britain, it was governed by the equity laws. When the trust was introduced to US, portfolio investment theory made the obligations of trustees be more objective and quantifiable. Because of different legal system compared with common law countries and lack of supervision to portfolio investment, legislators in China have such concerns that trustees may abuse their rights when they own such controlling power. So in China Trust Law, trustors own much more rights and powers than trustees so that trustors play the leading role in the trust relationship.This paper contains four chapters. Chapter one introduces the history and characteristics of trust and commercial trust. Chapter two discusses the content of equity trust including sorts, applications and advantages. Chapter three, from the point of view of the relationship among parties of trust, discussing the special risks faced by the parties of trust in China and the reasons of which by analyzing real practice and cases. The last chapter discusses the problems faced by the equity trust system in China and how to solve these problems. The conclusion of this paper is that a uniform Trustee Law should be enacted in China, which contains the trustee’s obligations and uniform regulating system, in addition of that, specified and objective principle of portfolio investment should be set up and perfect the institution of information’s disclosure is also in need, so that normative equity trust system will be established.