Business TRUST

In Hong Kong, a business trust is a legal structure that allows businesses to operate in a trust-based framework, combining characteristics of both companies and trusts. While not as common as other forms of entities, business trusts are recognized and regulated primarily under the Trustee Ordinance (Cap. 29) and related financial and securities laws. It typically involves:

• A trustee who holds and manages the trust assets (the business).
• Unitholders who invest in the trust and receive income from the trust's operations.
• The trust can operate businesses, unlike conventional trusts which mainly hold passive assets.

Common Use Cases In Hong Kong

• REITs (Real Estate Investment Trusts) – a subtype of business trust, highly regulated by the SFC.
• Infrastructure or utility asset management – stable cash-generating businesses.
• Group restructuring or listing vehicles – especially for Hong Kong-listed business trusts like HKT Trust and HKT Limited.

Advantages

• High income distribution ratios.
• Flexibility in capital structure and operations.
• Potential tax efficiencies.

Disadvantages

• Governance risks due to separation of ownership and management.
• Less familiar to some investors than traditional corporations.
• Limited legal precedent compared to companies.

A business trust in this context would hold and operate a trading agent business (e.g., acting on behalf of clients to buy/sell goods, digital assets, or services), with profits distributed to unitholders. It would be managed by a trustee, who carries out the business per the trust deed and distributes profits accordingly.

Suitable Use Cases

• Digital asset agency trading.
• Commodity brokerage.
• Cross-border trade facilitation.
• Procurement agency with pooled investor capital.
• Web3 trading platforms structured for income pass-through.

Advantages

• Efficient Profit Distribution – Income can be distributed to unitholders without corporate dividend taxes.
• Flexible Ownership Structure – No need for shareholding; units can be customized for different investors.
• Estate/Asset Protection – Trust structure may provide some protection from claims.
• Clear Governance – Separation of beneficial interest (unitholders) from operational control (trustee/manager).

Risks and Limitations

• Not a Legal Entity – The trust itself cannot sue or be sued; actions are taken in the trustee’s name.
• Less Familiar to Investors – Compared to limited companies, business trusts are less common for this business type.
• Regulatory Scrutiny – If managing client assets or engaging in financial instruments, may fall under SFC licensing.
• Complex Tax and Legal Structuring – May require tailored structuring and legal/tax advice, especially for cross-border or Web3 activity.