The origin of Trust Companies– a South African beginning
Trust Companies, together with law and accountancy practices, fulfill a meaningful role in providing fiduciary services to all, but few may know that Trust Companies originated in the Cape about 180 years ago.
David Knott, an expert in estates and wills at Private Client Trust, a division of Private Client Holdings, explains that after the Cape was settled by the Dutch in 1652 there was a relatively high death rate amongst the settlers due to things such as treacherous sea journeys between Europe and the East, skirmishes with the indigenous people who objected to their pastoral lands being invaded, attacks from wild animals and tougher living conditions.
“It soon became evident that someone needed to look after the affairs of the children of the deceased settlers - those minors inheriting from deceased parents or where heirs were unknown or absent from the Cape. The Board of Orphan Masters (Orphan Chamber) was therefore established in about 1673 to fulfill this need and operated under Dutch law.”
“When the Cape fell to the British the laws tended to follow English practice as opposed to Dutch,” advises Knott. “The Dutch marital regime was that of in community of property with all control vesting in the husband while the wife’s power was limited to that of a minor. English law was the opposite, with each spouse retaining their separate property and full contractual power. The new government therefore saw little reason for the existence of the Orphan Chamber and King William IV proclaimed on 4th March, 1832 that the Orphan Chamber be abolished.”
The very first trust company Obviously minors, prodigals and absent beneficiaries did not disappear with the demise of the Orphan Chamber and so it came to pass that on 22 April, 1834 during the tenure of Lord Charles Somerset as Governor, that the first trust company in the world came about.
“Named The South African Association for the Administration and Settlement of Estates, their functions almost mirrored that of the old Orphan Chamber and the company drafted wills, administered estates and looked after trusts for those unable to attend to their own affairs,” says Knott.
The spread of trusts across the globe Gradually the concept of a corporate entity attending to fiduciary matters spread across the Cape Colony before migrating to Australia, New Zealand, Canada and the United States.
According to Knott, such was the need for this service that trust companies and boards of executors mushroomed and in 1933 it was decided that a collective body should be established to look after their common interests and so the Association of Trust Companies was formed.
By the 30th anniversary of the Association there were some 50 member companies scattered across South Africa. However, with rationalization and economies of scale, by the time the Association celebrated its 50th birthday, membership had shrunk drastically and continued to do so until it was decided that the Association should open membership to suitably qualified individuals rather than be restricted to companies only. The Association was accordingly reconstituted as The Fiduciary Institute of South Africa in June, 2008.
“Today the Fiduciary Institute is stronger than before, and has close to 800 members who manage client funds in the region of R300 Billion. A fiduciary practitioner registered with the Fiduciary Institute is governed by its code of conduct, ethics and continuing education,” concludes Knott.