Trusts are a familiar part of South African business. Many family businesses are owned through a family trust. Some operate directly through a trading trust. Others use a trust to hold property that is let to the operating company. Done well, these structures can protect assets, help with succession and keep a business in the family across generations.
Done badly, they create tax leakage, personal liability for trustees and arguments that the trust is a sham. The regulatory picture is also changing. Since 2023, trustees have had to keep and lodge beneficial ownership information with the Master of the High Court. In August 2026, the Department of Justice and Constitutional Development published a draft Regulation of Trusts Bill for public comment, which would replace the existing trust legislation and significantly increase reporting and trustee accountability.
This article looks at how trusts are used in business, the real benefits, the common pitfalls and what business owners should do now.
How trusts are used in business structures
The Trust Property Control Act 57 of 1988 regulates the administration of trusts. Under the common law, a trust is not a separate legal person in the way a company is. Trust assets are held by the trustees in their official capacity, and the trustees act for the trust. In practice, trusts appear in business in a few ways:
- Trust as shareholder. A family trust owns some or all of the shares in a private company that runs the business.
- Property-holding trust. A trust owns the business premises and lets them to the operating company.
- Trading trust. The trust itself trades, with the trustees running the business on behalf of the trust.
- Employee or empowerment trust. A trust holds shares for employees or other beneficiaries, often as part of an incentive or ownership transaction.
The benefits
Asset protection. Assets owned by a properly administered trust do not belong to the founder personally. If the founder is sequestrated or faces personal claims, those assets are generally not available to the founder’s creditors, unless the trust is a sham or the transfer can be set aside.
Estate planning. Growth in the value of shares or property held by the trust does not accrue in the founder’s estate. This can reduce estate duty and avoid the delays of winding up an estate before the business can be dealt with.
Continuity and succession. A trust does not die. Ownership can pass from one generation to the next under the trust deed, without the shares being split between heirs or sold to fund estate liabilities.
Flexibility. A discretionary trust allows trustees to decide which beneficiaries receive income or capital, and when, within the terms of the deed.
The pitfalls
Tax is not what it used to be
The tax advantages of trusts have narrowed over the years. Under the Income Tax Act 58 of 1962, income retained in a trust is taxed at a flat rate that is the same as the highest individual marginal rate, and trusts pay capital gains tax at a higher effective rate than individuals. The conduit principle in section 25B allows income and gains distributed to beneficiaries in the same tax year to be taxed in the beneficiaries’ hands instead, which can help, but it must be used correctly and recorded properly.
Section 7C targets low-interest or interest-free loans made to trusts by connected persons, which is how many trusts are funded. Interest forgone below the official rate is treated as an annual donation, which can attract donations tax. Founders who sold a business or property to a trust on loan account should check their position. SARS has also increased its focus on trust returns and third-party reporting by trusts.
Trustees must act properly, and together
Unless the trust deed provides otherwise, trustees must act jointly. A decision taken by one trustee alone, such as signing a lease or a loan agreement, may not bind the trust. Counterparties, banks and auditors increasingly ask for trustee resolutions signed by all trustees, and for proof that the trustees are authorised by the Master.
This matters for trading trusts in particular. Day-to-day business decisions need clear delegated authority in the trust deed, or the business can be paralysed.
The alter ego problem
The Supreme Court of Appeal has made it clear that a trust must be administered as a real trust, with a genuine separation between control and enjoyment of the trust assets. Where a founder treats a trust as an extension of themselves, for example by being the sole decision-maker, mixing personal and trust funds or ignoring the other trustees, a court may disregard the trust form. The assets may then be treated as the founder’s own, including in a divorce or in claims by creditors.
Having at least one independent trustee, keeping proper records and holding real trustee meetings all reduce this risk.
Personal exposure for trustees
Lenders frequently require trustees of trading or property-holding trusts to sign personal suretyships. Trustees who breach their fiduciary duties can also be personally liable to beneficiaries. Anyone agreeing to act as a trustee should understand what they are signing.
Beneficial ownership and the draft Regulation of Trusts Bill
Following amendments made by the General Laws (Anti-Money Laundering and Combating Terrorism Financing) Amendment Act 22 of 2022, trustees must establish and record the beneficial owners of the trust and lodge that information with the Master. Where a trust owns shares in a company, the company’s own beneficial ownership filing with the CIPC must look through the trust to the natural persons behind it.
The draft Regulation of Trusts Bill, 2026 goes further. It is still a draft and may change, but the proposals published for comment include:
- repealing and replacing the Trust Property Control Act;
- an annual return to the Master, with a prescribed fee;
- annual financial statements for most trusts, subject to an exemption threshold;
- tighter time limits for reporting changes in beneficial ownership;
- expanded powers for the Master to investigate and enforce compliance, including administrative fines payable by trustees personally; and
- rules that a sole trustee may not also be the sole beneficiary, and that clauses exempting trustees from liability would be invalid.
If enacted in a similar form, the cost and effort of running a trust will rise. Trusts that are poorly administered today will be exposed.
A practical checklist for business owners
- Confirm why the trust exists and whether the structure still serves that purpose.
- Read the trust deed. Check trustee powers, quorum, delegation and how trustees are replaced.
- Make sure the trustees on record with the Master match the trustees acting in practice.
- Appoint at least one independent trustee if there is none.
- Keep minutes and signed resolutions for every significant decision.
- Check that beneficial ownership information lodged with the Master and the CIPC is accurate and current.
- Review loan accounts in the trust and the section 7C position with your tax adviser.
- Separate trust bank accounts and records from personal and company ones.
- Check that the shareholders’ agreement, the company’s MOI and the trust deed work together.
- Monitor the Regulation of Trusts Bill and plan for higher compliance costs.
How O’Reilly Law can help
We advise business owners on whether a trust is the right vehicle for their business, and on how to hold shares, property and operating businesses through trusts. We review and amend trust deeds, prepare trustee resolutions, assist with beneficial ownership filings and align trusts with shareholders’ agreements and MOIs. Through O’Reilly Fiduciary, we also assist with trust administration and estate planning, working alongside your tax adviser.
Contact us to review your trust or business structure.
Related reading: Sole proprietor, partnership, company or trust? Choosing the right structure for your business · Holding company structures: benefits, risks and tax
This article is general information and not legal or tax advice. Correct as at November 2026.