In 2014, the Czech Republic adopted Act No. 89/2012 Coll., the Civil Code (hereinafter the "Civil Code"), which fully replaced the previously applicable Act No. 40/1964 Coll., the Civil Code, which to this day remains the legal regulation governing private-law relations in the territory of the Slovak Republic. The new Civil Code of the Czech Republic of 2012, effective from 1 January 2014, also introduced into the Czech legal order a relatively new institution called the trust fund (in the Anglo-Saxon conception, the trust). This trust fund may be created as a private trust fund (serving the benefit of a particular person) or as a public-benefit trust fund.
The essence of the trust fund is the possibility of separating a certain part of the assets of the trust fund's founder, which will be entrusted to a trustee for a particular purpose. A trust fund is essentially a special type of administration of another person's property, and as such it does not have legal personality.
Creation of the trust fund and the assets held in the trust fund
A trust fund is created by setting aside a certain part of the assets of the trust fund's founder and entrusting the assets thus set aside to a trustee for a particular purpose, either on the basis of a contract or in the event of death (mortis causa). The founder of a trust fund may be either a natural person or a legal person, and a plurality of such persons is not excluded either. The trustee of the trust fund appointed by the founder is then obliged to administer these assets.
A peculiarity of the assets thus set aside and held in the trust fund is the fact that they are owned by no one (i.e. neither by the founder, the trustee, nor the person to whom performance is to be made from the trust fund – the beneficiary). In this connection, a possible link can be traced to the ancient Roman term denoting a thing that belongs to no one, namely the concept of res nullius. At first glance it may seem that, on a grammatical interpretation of the relevant provision of the Czech Civil Code, the assets held in the trust fund will indeed be assets that meet the conceptual characteristics of the term res nullius. It should, however, be pointed out that this is not the case and that it was not even the legislator's intention for the assets held in the trust fund to be a "thing of no one".
The legal construct of the trust fund and of the set-aside assets held in it cannot be regarded as res nullius, because these assets were set aside into the trust fund for a particular purpose. Thus, even though they are not owned by any of the three persons involved in the trust fund (the founder, the trustee or the person to whom performance is to be made from the trust fund), these are assets that represent a separate and independent ownership of the set-aside assets tied to a specific, predetermined purpose. In addition to the above argument, it is also evident that if ownership of the assets in the trust fund were res nullius, this would contradict the logic of the institution of the trust fund as such.
In the case of a trust fund, one can speak rather of so-called autonomous ownership (i.e. ownership without an owner). The proprietary, or ownership, rights to the assets held in the trust fund are, however, entrusted to the trustee, or better said held (though not owned) by the trustee. The rights to the assets are thus held by a person who is not the owner of the assets.
The trustee of the trust fund will exercise the ownership rights to the assets set aside into the trust fund solely to the extent of the administration of those assets (upon registration in public registers, it is the trustee who is stated as the owner of these assets, but with a note that this is a trustee).
The ownership right of the trust fund's founder ceases at the moment the trust fund is created. In the case of a trust fund, it is necessary to distinguish between the concepts of the establishment and the creation of the trust fund. A possible parallel can be seen here in connection with the formation and creation of companies under the Slovak legal order. A trust fund is established at the moment its trustee accepts the mandate to administer the trust fund, and it is created by the registration of the trust fund in the register of trust funds. Where a trust fund was established for the event of the founder's death, it is created only upon their death (and is entered in the register after its creation, in accordance with the preceding sentence).
A trust fund must have a statute (drawn up in the form of a notarial record), which contains basic information concerning the trust fund, such as its designation, the designation of the assets, the definition of the fund's purpose, the designation of the person to whom performance is to be made as well as the conditions of performance, and the designation of the trustee of the trust fund and the determination of the manner in which they act. The statute of a trust fund can be compared to the founding document of a company (e.g. to the memorandum of association of a limited liability company).
The beneficiary entitled to performance from the trust fund
In connection with the trust fund, Czech law also uses the term "obmyšlený". The obmyšlený (this term can be translated as the beneficiary) is the person to whom a certain performance is to be provided from the trust fund (the law places no special conditions on this person; it may be a natural or a legal person, or several persons). In other words, the founder of the trust fund sets aside the assets that will form the trust fund and entrusts them to the trustee, all for the benefit of the beneficiary, or for the benefit of the purpose of the trust fund (the purpose of the trust fund may be precisely to secure a benefit, or performance, for the beneficiary).
The beneficiary is appointed by the founder of the trust fund. If the beneficiary is not appointed by the founder but the founder, at the same time, specifies in the statute the group of persons who may be appointed as beneficiary, the beneficiary may also be appointed by the trustee. The person of the beneficiary (as well as the person of the founder and the trustee) is entered in the register of trust funds.
Under the legal regulation contained in the Czech Civil Code, the beneficiary has the right to several possible types of performance, namely to (i) the fruits or benefits from the trust fund, (ii) the right to assets from the trust fund, and (iii) the right to shares in them (i.e. the right to a share in the fruits and benefits or in the assets). By exercising the beneficiary's right to the release of the assets held in the trust fund, the beneficiary also simultaneously acquires ownership of those assets. The assets that were held in the trust fund thus once again acquire an owner (during their placement in the trust fund, these assets were not owned by any person involved in the trust fund, as stated above).
The beneficiary's right to performance follows from the statute of the trust fund, and the beneficiary has the right to demand this performance from the trustee of the trust fund. The trustee of the trust fund is obliged to provide performance to the beneficiary in accordance with the statute of the trust fund. The beneficiary's rights to performance can be characterised as rights with erga omnes effects (i.e. rights with effects towards everyone). In the statute of the trust fund, the founder may also lay down any (legally permitted) conditions, the fulfilment of which is a condition for providing the performance specified by the statute to the beneficiary (e.g. reaching a certain age).
The beneficiary does not, however, have the right to dispose of the assets held in the trust fund, and for that reason these assets are also protected from any creditors of the beneficiary (the beneficiary is not the owner of these assets).
Termination of the trust fund
The administration of the trust fund terminates upon the lapse of time (where its duration was limited in time under the statute), upon achievement of the defined purpose, or by a court decision. Where the beneficiary waives their right to performance from the trust fund, the administration of the trust fund also terminates.
Upon termination of the administration of the trust fund, ownership of the assets held in the trust fund must be settled. These assets will be released by the trustee to the beneficiary or to the founder (if neither of them exists, the assets pass to the state). The next step is the filing, by the trustee of the trust fund, of a petition for the deletion of the trust fund from the register.
Despite the fact that the trust fund is a relatively new institution of private law within Czech legislation, it enjoys considerable popularity. The main reason is the possibility of entrusting assets into administration by establishing a trust fund and, in this way, providing them with protection (in the case of inheritance, insolvency and even as an alternative to a prenuptial agreement). Protection is provided to the assets chiefly by the fact that, by setting the assets aside into the trust fund, the founder ceases to be their owner. However, the institution of the trust fund, or an institution with similar characteristics, cannot currently be found in the legal order of the Slovak Republic.