Bare Trusts: Simple Nominee-Style Holding

What is a bare trust in Mauritius?

A bare trust is a trust stripped to its essentials. The trustee holds legal title to an asset, but has no real discretion and no active management duties beyond what the beneficiary directs. The beneficiary, who is entitled absolutely, can call for the asset at any time once able to give a valid instruction. Practitioners also call it an absolute trust, and when the purpose is simply to hold title on someone else's behalf, a nominee trust.

The Trusts Act 2001 does not set this out as a separate statutory category. "Bare trust" describes how a trust deed is drafted and operates, not a licence type or a special regime. That matters in practice: the general rules on trustees, records, confidentiality and registers still apply. To place the arrangement among other forms, read the types of trust available in Mauritius.

How the arrangement is structured

Three features define a bare trust:

• One beneficiary, or beneficiaries sharing fixed and immediate entitlements. Nobody else can be added, and the trustee cannot choose between them.
• No powers of selection or accumulation. The trustee does not decide who benefits, when, or how much.
• A duty to hand over on request. The trustee transfers the asset, or deals with it, as the beneficiary instructs.

The word "bare" refers to the thin set of duties. The trustee is a name on the title, not a decision-maker. That is why the structure is compared with nominee holding, where one person appears on a register while another is the true owner.

The bare trustee: role and limits

A bare trustee is still a trustee. The duties that go with the office do not disappear because the powers are narrow. In particular:

• The trustee must keep accounts and records, and an alphabetical record of the names and last known addresses of each beneficiary and settlor under section 38(3) of the Trusts Act 2001. Accounting records must be kept for at least 5 years after the operations concerned are completed.
• The trustee must act within the deed and follow the beneficiary's lawful instructions.
• The trustee cannot treat the assets as personal property or mix them with their own.

For the wider picture of trustee obligations, see the duties of a trustee toward the family.

Who can act as trustee

Under section 28 of the Trusts Act 2001 a trust may have up to 4 trustees, at least one of whom must be a qualified trustee at all times. The Act adds that a trust is not invalid or void merely because a trustee or qualified trustee is missing. Under section 2, a qualified trustee is a FSC-licensed corporate service provider (Management Licence) or another Mauritius-resident person authorised by the FSC to provide trustee services.

A family member can act alongside the qualified trustee. The structure of the trustee body is a matter for the deed and for advice on the particular situation.

Bare trust versus other ways of holding assets

A bare trust sits between simple ownership and a fuller family trust. The table below shows how it differs from nearby arrangements.

For the comparison with joint ownership in detail, see joint ownership or trust for a couple's assets. If the choice is between a trust and a gift, gift to children or trust sets out the trade-offs.

A bare trust also differs from structures that give the trustee real discretion. Those are covered separately, starting with the comparison of discretionary and fixed trusts. A bare trust leaves no room for that discretion.

Family uses of a bare trust

The structure suits situations where the point is to hold title, not to manage or protect over time.

Holding assets for a young beneficiary until they can act

A parent may want an asset registered in a trustee's name for a child who cannot yet sign valid instructions. The beneficiary's entitlement is already fixed; the trustee simply holds until the child reaches the age at which they can call for the asset. Where the parent also wants the trustee to control timing or conditions, a fuller design is needed, as described in the trust for minor children.

Holding property in a trustee's name

Where an immovable property is registered in the trustee's name for a family member, the bare form keeps the arrangement transparent. Whether and how a trust can own land in Mauritius depends on the type of trust and the property; see can a trust own property in Mauritius.

Nominee-style holding of shares or accounts

A family may want shares or an account placed in a nominee name for administrative reasons. This only works as a trust if the deed is clear that the nominee holds for the beneficiary. It does not remove the need to disclose who the real owner is. Under the Companies Act 2001, section 91(3A), a Mauritian company must at all times identify its beneficial owner and any nominee, and record them in a separate register with full name and residential address, national identity or passport number, nationality and the holding structure that identifies the ultimate beneficial owner.

A stepping stone

Some families begin with a bare trust, then move assets into a more flexible structure later. Moving assets again has consequences, so it needs advice. A family trust is the usual next step when control, timing or protection become priorities.

Limits of a bare trust

A bare trust is simple, and its simplicity is also its limit.

• No asset-protection design. Because the beneficiary is absolutely entitled, their interest is generally within reach of their own creditors and of claims such as divorce. Section 18 of the Trusts Act 2001 recognises protective or spendthrift trusts, where a beneficiary's interest can be terminated, restricted or suspended on insolvency or seizure, but that is a different drafting choice. See protective trusts and spendthrift trusts.
• No succession flexibility. The deed fixes who benefits. It does not help a settlor who wants to adapt to future births, marriages or needs.
• No control for the settlor. The settlor can in principle also be a trustee or beneficiary, but section 8 provides that the settlor cannot be the sole beneficiary of the trust they created. A bare trust meant to benefit only the person who set it up is not what the Act allows.
• Irrevocable by default. Under section 11 of the Trusts Act 2001, a trust is presumed irrevocable by the settlor unless the deed expressly provides for revocation. A settlor who wants to take assets back should check the deed on this point.

A deed that gives the settlor tight control while appearing to hold assets for another person invites scrutiny. Sham trusts explains when a court may set such an arrangement aside.

Transparency and records

A bare trust is not secret. Several obligations apply regardless of how narrow the trustee's powers are.

• Register of trusts. Section 26A of the Financial Services Act 2007 requires the FSC to keep a register of domestic trusts and foreign trusts that have at least one qualified trustee. It includes the name and characteristics of the trust, the deed and its amendments, the identity and addresses of beneficiaries, trustees, settlors, protectors and enforcers, the purpose, the governing law, the place of administration and service providers. The qualified trustee must supply the information in the form and time the FSC sets. See the register of trusts.
• Beneficial ownership. Under the FIAMLA 2002, the beneficial owner of a trust-type legal arrangement includes the settlor, the trustee, any protector, each beneficiary and any other natural person exercising ultimate effective control. A bare trust therefore shows the beneficiary clearly.
• Confidentiality. The trustee keeps trust information confidential. Under section 33 of the Trusts Act 2001, a court orders disclosure only on a request from an investigating authority, where the information is needed in good faith for an investigation or proceedings relating to financial crime. See whether Mauritius trusts are confidential.

Tax points to check

Tax treatment depends on who the settlor and beneficiary are, where they live, and what the assets are. Section 46(4) of the Income Tax Act treats any distribution to a trust beneficiary as a dividend in the hands of the beneficiary. Section 46(2) still refers to trusts whose settlor and beneficiaries are non-resident, or hold a Global Business Licence, but such a trust is taxed at the same 15% rate under Part IV. Whether a particular bare trust falls within those provisions is a question for an adviser. For the overview, see how trusts are taxed in Mauritius and tax on distributions to beneficiaries.

Practical checklist before using a bare trust

• State clearly in the deed that the trustee holds for the named beneficiary absolutely
• Confirm who the qualified trustee is and what the trustee may and may not do
• Check that the settlor is not the sole beneficiary
• Record the beneficiary's details so the trustee's registers can be kept
• Review the tax position for the settlor, trustee and beneficiary with an adviser
• Decide whether a more flexible structure would suit the family better