Malaysia's Trust Law is 77 Years Old. It Shows.

Ask most Malaysian practitioners what the perpetuity period is, and you will be told 80 years.

It is not 80 years. There is no eighty-year period in Malaysian law, and there never has been.

The 80 years comes from the English Perpetuities and Accumulations Act 1964. Section 3 of our Civil Law Act 1956 receives English common law and equity as it stood on 7 April 1956 for Peninsular Malaysia; and common law, equity, and statutes of general application as at 1 December 1951 for Sabah and 12 December 1949 for Sarawak. The 80 years of the 1964 Act came after section 3 of the Civil Law Act 1956. It was too late.

So an eighty-year perpetuity clause in a Malaysian-law settlement is not a safe harbour. What actually applies is the unmodified common law rule. Lives in being plus twenty-one years. No statutory alternative period. No saving provisions.

Section 6 of the same Act excludes English law relating to the tenure, conveyance, assurance of, or succession to immovable property, and it has been suggested that this keeps the rule against perpetuities out of Malaysian land law altogether. Even if that is right, it does not help. It would not mean that trusts of Malaysian land may endure indefinitely, but that we do not know what governs their duration. Uncertainty is a worse problem than a short period, not a better one.

This is not the only gap

Our Trustee Act 1949 is a transplant of the English Trustee Act 1925. England replaced that Act in 2000. We did not.

What we have is the 1925 toolkit, and it was drafted for a world in which a trustee kept share certificates in a safe. Section 28 permits trustees to employ an agent to transact business. Section 24 permits them to insure. Section 26 permits the deposit of documents with a bank for safe custody. Section 30 permits a trustee to delegate by power of attorney while abroad. That is close to the whole of it.

What is absent:

No general statutory duty of care. What exists is the requirement in Sections 5 and 6 to obtain proper advice before making one of the wider investments — a 1949 advice provision bolted onto a fixed list. The governing standard remains the Victorian prudent businessman.

No general power of investment — only a schedule of authorised investments.

No power to delegate discretions. Section 30 covers absence abroad and nothing else; it is not a basis for a standing discretionary mandate.

No nominee or custodian provisions in the modern sense. Section 26 lets a trustee deposit documents. It says nothing about vesting assets in a nominee or appointing a custodian, so there is no clean statutory basis for the discretionary investment mandate and the custody arrangement that every institutional trustee actually uses.

No general charging provision for professional trustees outside the trust companies regime.

No discipline over trustee exemption clauses.

No firewall against foreign forced heirship claims.

No reserved powers provision.

Malaysian trust practice works only because we draft around the statute. A statute that competent drafting must routinely override is not doing its job.

Everyone else moved

Singapore reformed in 2004: a statutory duty of care, powers to appoint agents, nominees, and custodians, and a perpetuity period extended to 100 years. Note what that is not. Singapore did not abolish the rule.

England legislated in 2009, introducing a single fixed period of 125 years. Hong Kong in 2013, abolishing the rule against perpetuities outright and rewriting trustee powers and duties in a single package. Cayman disapplied the rule for ordinary trusts in August 2024, joining Jersey, Guernsey, and Bermuda.

Peninsular Malaysia has enacted nothing of substance in general trust law since 1949. There has been institutional legislation — the Trustees (Incorporation) Act 1952, the Public Trust Corporation Act 1995 — but nothing touching the powers, duties, or duration of private trusts. What amendment there has been to the law governing trustees is AML and CFT compliance work: obligations imposed on trustees, not powers or protections given to them. Necessary, but it is regulation, not trust law reform.

Where the work actually goes

When Malaysian families want structures we cannot offer, they do not just go to Singapore. They go to the British Virgin Islands and to Cayman.

And they are not going purely for duration. BVI ordinary trusts are not perpetual — the maximum is 360 years for trusts settled after May 2013, with wait-and-see. Unlimited duration arrives only where the structure is cast as a purpose trust. Cayman’s STAR regime was never simply ‘the perpetual trust’ either; it is a non-charitable purpose trust regime that happens to be perpetual, with a mandatory enforcer, restricted beneficiary information rights, and a designated trustee.

What is being bought is a package: perpetual duration, non-charitable purpose trusts, an enforcer, reserved powers, and private trust companies (PTCs) that need not be separately licensed. Orphan vehicles holding PTC shares. Bankruptcy-remote SPVs. Family business continuity structures.

But we have Labuan

Labuan does have a modern trust law. The Labuan Trusts Act 1996, as amended in 2010, offers non-charitable purpose trusts with a mandatory enforcer, reserved settlor powers, trusts of unlimited duration, and the Labuan Special Trust — a close relative of the BVI’s VISTA. The Labuan Foundations Act 2010 sits alongside it (although everyone knows I am not a big fan of the Stiftung). On paper, Labuan already delivers most of the limbs set out below.

A slight problem: Section 7(2) of the Labuan Trusts Act provides that the trust property shall not include Malaysian property without the prior approval of the Authority. The assets in question here — shares in Johor operating companies, Malaysian real estate holding vehicles, family businesses in the Iskandar corridor — are precisely the assets a Labuan trust cannot take without permission. And where they are taken, Section 7(5) sends the income back into the Income Tax Act 1967 rather than the Labuan regime.

Labuan is proof that Malaysia knows how to draft this legislation. It is not a substitute for having done so onshore.

What reform should look like

Limb One. Modernise the Trustee Act 1949, along the lines of Hong Kong’s 2013 reform: a statutory duty of care, a general power of investment, power to delegate discretions and to appoint nominees and custodians, modernised insurance and remuneration provisions, and perhaps a bar on exempting paid trustees from liability for fraud, wilful misconduct, or gross negligence (although, as an owner of a trust company, I should like to see trustees fully exempted from liability except for fraud and wilful default). This limb tightens trustee accountability at the same time as it widens trustee powers.

Limb Two. Disapply the rule against perpetuities for private trusts, on the Cayman 2024 model rather than by outright abolition. The rule remains the default; a settlor may expressly disapply it in the trust instrument; and trustees, settlors, and enforcers of existing trusts may apply to the High Court for the same relief, the court granting it only where satisfied that to do so is not to the detriment of the beneficiaries. This is a lighter legislative ask than abolition, it leaves the existing law standing for anyone who wants it, and it produces the identical commercial result.

Limb Three. Enact a non-charitable purpose trust regime. A mandatory enforcer with standing to enforce and a duty to do so; a designated trustee, being a licensed trust company or a qualified practitioner; the trust valid notwithstanding the absence of a beneficiary; and provision for the court to appoint a replacement enforcer where the office falls vacant. This is the limb that carries the orphan vehicles, the bankruptcy-remote SPVs, and the family business continuity structures.

Limb Four. A firewall provision, and a statutory list of reserved settlor powers. The firewall operates against foreign law and only against foreign law: a Malaysian-law trust is not to be set aside, and a settlor’s disposition not to be avoided, by reason of a foreign law conferring rights on any person by reason of a personal relationship to the settlor.

Limb Five. Exempt private trust companies from trust company licensing where the company acts as trustee only of trusts for a single family and does not solicit business from the public. This is a Trust Companies Act 1949 amendment, not a Trustee Act one, and it is the constraint that currently sends the whole structure offshore. Limbs one to four are of limited use without it: the family that wants control of the trusteeship has nowhere onshore to put it.

Limb Six. Sever the reception dates in Section 3 of the Civil Law Act so far as trust law is concerned — otherwise the reform freezes the moment it is enacted and we repeat this exercise in another generation.

The land objection, answered

The strongest argument against perpetual trusts onshore is that they would tie up Malaysian land indefinitely, against the grain of the National Land Code and the Torrens system.

The offshore jurisdictions reached the same place by policy. A Cayman STAR trust may not hold Cayman land, though it may hold an interest in a company that does; the Perpetuities (Amendment) Act 2024 carries the same exclusion forward, disapplying the rule for ordinary trusts except those holding land or interests in land in the Islands. The Cayman drafting is instructive on where the line falls: income from land and the proceeds of sale of land are outside the exclusion, and a trust may hold an interest in an entity that owns land for business purposes.

We should adopt the identical carve-out, and we should be candid about why. It is not a matter of principle. A company can already own Malaysian land indefinitely, and a trust holding the shares in that company achieves the same duration by another route. The carve-out is a political concession that costs the reform nothing — which is precisely what makes it worth making.

The reform then becomes one about corporate and financial assets, which is exactly the sector Forest City and the Johor–Singapore Special Economic Zone are courting.

Why now

We are offering family office incentives in Forest City and building a special economic zone with Singapore, on top of a trust law that cannot support the structures those incentives are designed to attract. Applicants will take the concession and settle their trusts elsewhere. We will have paid for the wealth and exported the work.

This should be advanced as economic policy, not as law reform. Trust law reform presented as law reform sits in committee papers for decades. Presented as enabling infrastructure for a flagship economic zone, it has a deadline and a constituency.

That means a named sponsor. The Ministry of Finance owns the Forest City Special Financial Zone incentives and should own this; the Ministry of Economy owns the Johor–Singapore SEZ and should co-sponsor; drafting runs through the Attorney General’s Chambers; and the Invest Malaysia Facilitation Centre Johor is where the resulting regime is sold. Without a ministry that has already put its name to the incentives, there is no one for whom the gap is a problem.

77 years is long enough.