Corporate trustees have a legal duty to act in the best interests of the beneficiaries of the trusts they administer. What this fiduciary duty encompasses and how to meet it is straightforward for many aspects of trust administration. However, when it comes to debt – especially amounts over £1 million – fulfilling this duty becomes considerably more complex.
On paper, meeting a fiduciary duty in relation to debt associated with a trust is simple: get the best rates available, and ensure the finance is structured efficiently and in line with all legal and regulatory requirements.
But how does that work in practice, and what if your ability to get the best financial package is limited? Perhaps you have a limited lender network, or because you don’t know where to go to get the best deal, or how to show you have the best deal when you get multiple offers. Or maybe the trust situation is complex, and you can’t get any comparable offers that will allow you to showcase you have met your fiduciary duty by sourcing multiple deals.
If you consider that 1% on a £1m loan equates to £10,000, and that most facilities roll every five years, by simply getting a better rate you can save the trust thousands of pounds. Now consider the same scenario but assume the loan is £5m or even £10m. It’s clear just how easily trustees can be exposed to losing the value in the trust fund, through action, inaction or both.
So, what can you do to meet your fiduciary duty in relation to debt? And how can Enness help?
How Enness Helps Corporate Trustees Meet Their Fiduciary Duties
If you are a corporate trustee obtaining debt on behalf of a trust, we will help you to:
Secure the best rates and terms
Lenders often have strict criteria that must be met, especially when it comes to lending to corporate entities and trusts. All banks have a sweet spot on their preferred type(s) of lending, and it can vary quite significantly.
Enness will help you ensure any loan or refinancing application linked to a trust you administer is presented in a way that will allow the lenders we approach to offer the best deal possible. This is especially useful for high-value applications and borrowers with more unusual and complex circumstances. To put forward applications in the best possible light, we might request additional documents from you in relation to the borrower, or professionally present further context, information or oversight that will support the borrower’s case for a loan, adapting what we present to each lender, to effectively optimise each offer you receive on behalf of the trust.
We’ll source multiple offers from different lenders and provide cost simulations and comparisons of each. We’ll also negotiate the finance package and ensure the debt meets all your requirements.
We initially approach lenders, including international private banks, and alternative and niche lenders to get indicative terms. We will explain these to you and advise on the best package. We’ll also highlight what you – and the beneficiaries and grantors, where relevant – need to consider, and flag any risks you need to be aware of in the broader scope of borrowing.
Support you to document the steps you have taken to meet your fiduciary duty
Enness will document our approaches to each lender so you can evidence that you have taken the necessary steps to get the best financing deal. This will include
- Who we approach and why
- How any offers fit the borrower’s requirements and how the loan’s structure will protect the trust’s existing assets
- The financial implications of each package (including facilities, repayment schedules, covenants and exit fees)
Work out what the best lending product is, and what assets to use as collateral
There may be more than one route to accessing capital by using different assets as security, and certain products may offer a better rate or more favourable terms. This makes it essential to consider and explore all financing products and options, particularly in unusual circumstances or where the borrower needs a very high-value loan. Enness can assess the trust’s assets and support you to work out which collateral it is best to raise capital against, which lending products will be most advantageous to the borrower and advise you on this.
Corporate trustees must also ensure any loan is set up in a way that is as efficient as possible from a fiscal, risk and succession perspective, especially when the trust is part of a more complex structure. Enness will work with you and other parties such as fiscal experts to ensure you can deliver this to the borrower and document the same.
Negotiate
Enness negotiates every loan on a case-by-case basis, ensuring the finance package is tailored to the borrower, the trust structure and any other relevant entities. This means you don’t have to opt for off-the-shelf lending products, and, using Enness, showcase the steps taken to meet your fiduciary duty as far as is possible with regards to negotiation and sourcing the best deal.
We Can Help Corporate Trustees Meet Their Fiduciary Duties Even If You:
- Have a limited lender network, or need to compare alternative financing options from the trust’s usual banking providers
- Are struggling to find finance for your clients if they have unusual financing requests
- Have a client that wants to raise debt against unusual collateral (e.g., cryptocurrencies, luxury assets, pre-IPO stock, or private companies, etc.)
- Need advice on how to raise the cheapest finance from a trust’s existing asset – for example, whether it’s cheaper to opt for a securities-backed loan to raise finance for a property purchase, versus a standard mortgage product
- Are finding your lending transaction time-intensive and are potentially struggling to recover all chargeable time, especially if you need to contact multiple banks for several indicative quotes (we know that this part in particular can be quite labour intensive)
- Are finding it challenging to source finance in connection with beneficiaries who are PEPs, high-profile, VVIPs or have unusual or delicate backgrounds
- Need to find finance for a trust quickly or have a deadline you need to meet
What Types of Debt Can Enness Arrange?
Enness arrange high-value loans for high-net-worth individuals, families and their entities. Your client’s nationality or country of residence does not affect our ability to broker finance, and we regularly broker finance for individuals with what lenders typically consider non-standard income (for example, not from a salary, and including from trusts or business ventures or in multiple currencies).
There is also no limit on the amount of debt we can broker, and we have experience arranging very significant finance packages, including those of more than $100 million. We arrange:
- Mortgages
- Real estate finance
- Securities finance
- Corporate finance
- Bridging finance
- Luxury asset finance
- Private debt
- Crypto finance
This guide is for information and illustrative purposes only and nothing contain within should be construed as advice or a recommendation.
Islay Robinson, a founder of Enness, is widely regarded as one of the UK's leading mortgage brokers. He has been instrumental in delivering some of the most complex and high value mortgages in the UK.
