When the Family Trust Owns the Business
Why South Africa’s proposed trust reforms matter to business owners
By Yolandi Erasmus | Managing Director | Y. Erasmus & Associates Inc.
For many South African entrepreneurs, a family trust sits quietly in the background of the business. It may own shares in the operating company, hold property or form part of an estate plan created years ago. The business grows, the family changes and new companies, loan accounts and guarantees are added. The trust deed and its administration may receive far less attention.
The Regulation of Trusts Bill, 2026 should prompt a fresh look at that arrangement. It was published for public comment in Government Gazette 55166 on 7 August 2026, with comments due by 11 September 2026. At the time of writing, it remains draft legislation. If enacted substantially in its published form, it would replace the Trust Property Control Act 57 of 1988 on a date proclaimed by the President.
The final wording may change, but the direction is clear: trust administration is becoming a more visible part of business governance.
A trust is part of the business governance system
A trust is not a company and, as a general rule, it does not have separate legal personality. It acts through its authorised trustees and within the trust instrument. If it owns shares in a business, trustee decisions may affect shareholder voting, director appointments, distributions, funding and succession. Treating the trust only as an estate-planning document misses its commercial role.
The Supreme Court of Appeal has long emphasised a genuine separation between control of trust property and enjoyment of its benefits. It has also confirmed that trustees must act collectively unless the trust instrument provides an authorised decision-making mechanism. Those principles matter when a founder remains the practical decision-maker at every level.
What the Bill actually proposes
Beneficial-ownership compliance is not new. The current Act already requires trustees to establish, record and lodge prescribed information with the Master’s Office and keep it current. The Bill would refine that regime. Its definition expressly includes a beneficiary who is identifiable even if not named in the trust instrument, and changes to the beneficial-ownership record and prescribed information would have to be updated and lodged within 10 days.
Every trust would have to file an annual return. Trustees would generally have to prepare annual financial statements, subject to an exemption where aggregate inflows and outflows fall below thresholds still to be set by the Minister, unless the trust instrument requires them. The statements would be provided to the Master on written request. Record-retention duties would cover trust instruments, resolutions, contracts, accounting records and proof relating to trust property.
The Master’s supervisory tools would include requests for accounts and documents, investigations, compliance notices, administrative fines and specified removal powers. An administrative fine would be payable personally by the trustee and could not be recovered from trust property. Certain specified offences could attract a fine of up to R10 million, imprisonment for up to five years, or both. These maximum penalties would not apply automatically to every administrative omission.
The independent-trustee provision needs careful reading. It is not framed as a universal statutory requirement for every family trust. The Master may appoint an independent trustee where separation of control and enjoyment is considered necessary and three conditions are all present: all trustees are beneficiaries, all trustees are related to one another, and the trust carries on business or trading activities with third parties that create obligations to them. The word and matters.
The real weakness often sits between the documents
The trust deed is rarely the only document that determines whether the structure works. It may say one thing, the company’s memorandum of incorporation or shareholders’ agreement may assume another, and the founder’s will may reflect an ownership position that has changed. Loan accounts may tell a different economic story. Trustees may have changed while letters of authority and records have not kept pace.
A useful review should answer three questions:
- Do the ownership records, governing documents and actual decision-making arrangements still match?
- If the founder died or became incapacitated tomorrow, who could lawfully exercise the trust’s voting rights and make time-sensitive business decisions?
- Do the trust, company, will, loan accounts, sureties, tax planning and available estate liquidity tell one coherent story?
Those questions cannot be answered by reading the trust deed in isolation.
Asset protection depends on conduct
Trust property is separated by law from a trustee’s personal estate, except to the extent that the trustee is entitled to it as a beneficiary. That should not be confused with a blanket guarantee against creditors, tax consequences or family claims. Assets must be validly transferred to the trust and administered as trust property.
Trustees should be properly authorised, observe the deed, take valid decisions, keep trust property and accounts distinct, and record supportable transactions. If a founder treats the trust account as a personal wallet or other trustees merely approve decisions after the fact, the structure becomes harder to defend. Poor administration does not automatically make trust assets personal property, but it creates fertile ground for invalid transactions, disputes and scrutiny.
Succession is a Monday morning question
Succession planning is often discussed as a future transfer of wealth. The more urgent issue is continuity of authority. Who may instruct the bank, vote the trust’s shares, appoint directors or sign a critical contract if the founder is unavailable on Monday morning? Do the remaining trustees meet the deed’s minimum number and quorum requirements? Can a successor be appointed without delay? Do the will, shareholder arrangements and insurance planning support the same outcome?
A well-designed structure can allow the next generation to receive economic benefit without automatically inheriting operational control. It can also introduce independent judgment without displacing legitimate family interests. That balance should be designed while the founder can still explain it.
The review business owners should undertake now
Map the complete structure: trusts, companies, shareholdings, properties, loan accounts, sureties, wills, insurance, shareholder agreements, trustees and directors. Test how authority and value move through it. Check the deed against the letters of authority, trustee resolutions, beneficial-ownership records, financial statements, tax filings and registration of key assets. Then test death and incapacity as operational events, not only estate-planning events.
Informality does not scale well. A structure that worked when the business was small may become fragile as value, debt, employees and family expectations increase.
The question to ask now
The proposed reforms do not make trusts undesirable. They make good governance more valuable and poor administration harder to justify. The better question is what the trust is meant to achieve for the family and the business, and whether its ownership, control, records and succession arrangements still support that purpose.
The strongest structures do more than hold assets. They allow the business and the people who depend on it to continue when the founder is no longer making every decision.
*This article reflects the legislative position as at 18 September 2026 and is based on the Regulation of Trusts Bill, 2026 as published for public comment on 7 August 2026. As at that date, the Bill remained proposed legislation and had not become law. Its provisions may be amended before enactment. This article is provided for general information and does not constitute legal, tax or financial advice.*
Key references
– Regulation of Trusts Bill 2026 published in Government Gazette 55166 on 7 August 2026
– Trust Property Control Act 57 of 1988 as amended
– Land and Agricultural Bank of South Africa v Parker 2005 (2) SA 77 (SCA)
