Your Trust, the Consumer Protection Act & the National Credit Act

Category: Trusts

10 October 2016  |  by Chamonie Buys

A Trust is a separate legal entity, but it is not a legal persona or a juristic person per se.

When trading in a Trust or when applying for a loan from a financial institution, though, you should be mindful of the provisions of the Consumer Protection Act and the National Credit Act.

The Consumer Protection Act includes a Trust in its definition of a “juristic person” for purposes of the application of the Act. As such, the Consumer Protection Act will not apply to a transaction in terms of which the Trust’s asset value or annual turnover equals or exceeds the threshold value determined by the Minister, which is currently R3 million.

The National Credit Act also includes a Trust in its definition of a “juristic person”, again for purposes of the application of the Act, if there are three or more individual trustees or the trustee itself is a juristic person.  As such, the National Credit Act does not apply to a credit agreement between parties dealing at arm’s length if there are three or more trustees appointed to the Trust and the Trust’s asset value or annual turnover, together with the combined asset value or annual turnover of all related juristic persons, at the time the agreement is made, equals or exceeds the threshold value determined by the Minister, which is currently R1 million.

Several financial institutions insist on three or more trustees to be appointed to a Trust when application is made by the trustees for a loan on the Trust’s behalf.  The reasoning behind this requirement is simple.  When three or more trustees are appointed to the Trust, the Trust qualifies as a juristic person in terms of the National Credit Act.  A juristic person falls outside the application (and protection) of the National Credit Act if its asset value equals or exceeds R1 million.

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