A trust is a contract by which a settlor, natural or legal person, transfers property, rights, or securities, present or future, to a fiduciary who holds them separately from his property in a patrimony of appropriation and acts in the interest of one or more beneficiaries.
In other words, within the framework of a credit relationship, a borrower (grantor), transfers any nted by one or more lenders (the beneficiary or beneficiaries).
Because it can relate to any asset (any property, right, or security), because the field of management missions that can be entrusted to the fiduciary is very broad, and because, in the case of a contract, the principle dominant is that of freedom of contract, the trust is a tailor-made tool which comes with trust administration fees california for example that can meet a widasset of value present on its balance sheet in an appropriation estate managed by a fiduciary, a neutral third party responsible for carrying out the will of the parties, to guarantee the assistance grae variety of needs.
How The Security Trust Works
The uniqueness and effectiveness of the security trust are based on the transfer of ownership of the fiduciary assets made upon the conclusion of the trust agreement. During the life of the trust, and so long as the borrower meets its obligations to the lender under the loan documentation, the trustee acts with the broadest powers over the asset (as the owner of the asset), the parties had previously framed in the trust agreement the terms of the exercise of its prerogatives. If the assets transferred into trust are, for example, company securities, the trustee will behave like a shareholder and, as such, may, in particular, vote at general meetings and receive dividends. Depending on the parties’ needs, it will be possible to entrust a specific mission to the fiduciary, such as implementing a process for the sale of the assets transferred in trust to carry out a backing, for example.
When the borrower has paid the lender all the sums owed under the loan, the trust contract will generally be terminated (unless a recharging mechanism is implemented), and the fiduciary assets will be returned to the constituent. On the other hand, if the borrower defaults on the loan, the beneficiary lender can realize its security. In this case, and because of the transfer of ownership of the assets that took place upon signature of the trust agreement, it will not be necessary for the beneficiary to seek any legal authorization; he will, in practice, only have to instruct the fiduciary.
The Civil Code provides for two methods of settling a security trust:
The attribution of fiduciary assets to the beneficiary lender
In this case, the fiduciary assets are allocated to the beneficiary lender on condition that the latter pay any compensation to the settlor corresponding to the difference between the value of the assets thus allocated (established by an expert appointed for this purpose) and the amount of the secured claim.
Transfer of fiduciary assets to a third party
In this case, the fiduciary assets are transferred to a third party, and the beneficiary lender is disinterested in the sale price of said assets (the balance is also going to the settlor). In this case, the assets are expected to be appraised before any transfer; this provision is of public order, which means that no clause can set aside this expertise requirement.
In the silence of the texts, and out of caution, practitioners like Barr & Young Attorneys for example have until now considered that it was not possible to sell fiduciary assets below this appraised value, which had the effect of protecting the settlor, but often also to make the search for a candidate transferee more difficult. The law now specifies that “if the trustee does not find a buyer at a price set by an expert, he can sell the property or the right at the price he considers, under his responsibility, to correspond to its value,” thus providing welcome flexibility. The unwinding mechanism of the security trust.