n South African Law Journal - The legal nature of the trust for debenture-holders in South African law : an efficacy-based approach




This article considers the preferable legal nature of a trust for debenture-holders in South African law as measured against the benefits that transactions parties hope to gain from the arrangement. There are four possibilities, namely that the arrangement could take the form of an agency, a bewind trust, a trust in the strict sense or a trust for debenture stockholders. The trust in the strict sense is proposed as the most ideal of these constructions. The claims of the underlying debentures are transferred to the trustee and the security is granted directly in the trustee's favour. This will be possible also for real security rights, as the underlying claims and the security will vest in the same person. The trustee will be in a strong bargaining position and will be able to enforce the claims and the security without necessarily canvassing support from the debenture-holders first. This implies that the trustee will be able to act swiftly when the security is in jeopardy. The provisions of the Trust Property Control Act 57 of 1988 apply, as does its benefits. Accordingly, the trust property will be separated from the personal property of the trustee.


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