Buying from a trust

Many businesses are conducted by trusts. In these cases, the purchaser’s solicitor must ensure that the business is purchased from the trustee, free from any rights of the beneficiaries of the trust.

A purchaser which acts reasonably in purchasing a business from the trustee will be able to obtain good title, free from any equities, under the doctrine of being a bona fide purchaser for value without notice. Acting reasonably in purchasing the business requires the following:

• • An enquiry as to whether the vendor is acting as a trustee. A contractual warranty that there is no trust should give a purchaser sufficient protection.
• • If the purchaser becomes aware of the existence of a trust, the trust deed should be checked, to confirm that the vendor is acting within the powers under the deed.
• • The Personal Property Security Register. The purchaser will generally take title to the business free from any security interests of which it is not aware, which are not registered on the Personal Property Security Register.

If there is no reason to suspect that the sale would breach the rights of any beneficiary, the purchaser should not be required to take its enquiries any further.

See Buying from a trust.