The Application Of Private Family Trust Company In China And The Design Of Legal System

Family trusts have less than a decade of development in China.Currently,the main participants in the family trust market in China include trust companies,private banks in commercial banks,insurance companies,law firms,and asset management companies.Subject to trust licenses,all family trusts in China use trust companies as their trustees,while other market entities can only cooperate with trust companies to carry out family trust business based on customer resources and professional advantages.In contrast,the family trust market in the United States has a long history.The trustees of family trusts are highly diversified and have complete functions.They include financial institutions such as banks and trust companies,as well as individuals and specialized private family trust companies.Private family trust companies are established by high-net-worth families and act as corporate trustees of family trusts.The trustors of family trusts are usually high-net-worth individuals.At this stage,the number of high-net-worth households in our country has grown significantly.The high-net-worth households' personalized demand for trust property management has challenged the single trustee structure of family trusts in China.Compared with ordinary investors,high-net-worth people have unique investment objectives and higher risk tolerance.However,subject to regulatory agencies and prudential obligations,it is difficult for traditional trust companies to make radical investments in trust property.Compared with ordinary trust companies,private family trust companies are owned by the grantor's family,only provide services to members of the grantor's family,and are regulated by a loose regulatory scheme.Therefore,it has been widely used by high-net-worth families in the United States since its emergence in the late 19 th and early 20 th centuries.In the context of developing family trusts in China,this paper attempts to explore the application of the American private family trust company system in China in order to strengthen the trustee team and to enrich the business model of family trusts in China.The first chapter starts from the analysis of trustees of family trusts,and expounds the advantages of private family trust companies compared to other types of trustees.This paper believes that private family trust companies can avoid the opportunity cost of financial institution trustees,as well as the potential personal liability and unsustainability of individual trustees,combining the structural advantages of financial institution trustees with the discretionary advantages of individual trustees.The second chapter analyzes the feasibility of the application of private family trust companies in China from the perspectives of both reality and law.First,this paper introduces the development status of private family trust companies in the United States.Based on this,it analyzes the functions of private family trust companies and demonstrates the importance of developing private family trust companies in China.Then this paper analyzes the actual needs of the family trustors in China and the current business model of family trusts,demonstrating the necessity of developing private family trust companies in China.Then this paper analyzes the applicable space and obstacles faced by private family trust companies under the framework of China's current laws and regulations,demonstrating the feasibility of its application in China.This paper argues that private family trust companies can serve as the link of wealthy families to inherit family wealth and family spirit,and can also increase the flexibility of family trust management.Although the concept of private family trust company does not exist in China's current legal framework,the "Trust Law" and the administrative regulations of China Banking and Insurance Regulatory Commission do provide some legal basis for the application and regulation of private family trust companies in China.With regard to the problems which private family trust companies in China are facing,such as unclear subject status and lack of regulatory scheme,the prosperity of U.S.private family trust companies and each state's regulatory legislation can provide China with valuable experience.The third chapter comprehensively examines the private family trust company system in the United States.This paper analyzes the U.S.experience from five aspects: market access,type of business association,internal governance structure,regulatory scheme,operating norms,and risk management.The U.S.private family trust companies usually use corporation and limited liability company as the type of business association,and the board of directors and special committees such as distribution,investment,and amendment committees as the governance structure.Federal law regulating private family trust companies are mainly the Investment Advisers Act of 1940 and the Dodd-Frank Act of 2010,while state-level supervision of private family trust companies is usually implemented by state-level financial regulators,covering market access,operating norms,and risk management.In terms of market access,some states implement license management which only allows the establishment of licensed family trust companies,some states implement a complete exemption which allows the establishment of unlicensed family trust companies,and also some states implement classified supervision which allows the establishment of both licensed and unlicensed family trust companies.On the issue of operating norms,the standard that applies to private family trust companies in investment has evolved from the prudent man rule to the prudent investor rule.Other aspects of the operating rules of American private family trust companies mainly include business scope,record keeping obligations and reporting obligations.In terms of risk management,private family trust companies usually apply the same rules as ordinary public trust companies.The fourth chapter conceives China's private family trust company system from two aspects: subject scheme and regulatory scheme.As to the subject scheme,this paper think that private family trust companies in China should be positioned as special trust companies,using the Chinese form of limited liability company as the type of business association,and using the board of directors with special committees as the governance structure.As to the regulatory scheme,first,according to the principle of combining institutional supervision and functional supervision,private family trust companies in China should be supervised mainly by China Banking and Insurance Regulatory Commission and supplemented by other regulatory authorities.Second,based on the limited clients of private family trust companies and the higher risk tolerance of high-net-worth families,it is appropriate to establish a moderately loose regulatory principle.Specifically,on the issue of market access,private family trust companies can be classified into licensed and unlicensed.The trustor family can choose whether to apply for a license.Licensed family trust companies should be granted exemptions or privileges,while unlicensed family trust companies should be subject to size limit.In terms of operating norms,it should be made clear that private family trust companies can only serve as the trustee of family trusts,and are prohibited from soliciting trust business from the public or engaging in commercial banking.As to the issue of risk management,reference may be made to the general risk management rules applicable to ordinary trust companies.Meanwhile,China Banking and Insurance Regulatory Commission may set up a receivership and liquidation captive fund for licensed private family trust companies.