Corporate Trusteeship

Common reasons for raising finance via a bond, is for a company to acquire funds for a particular project such as a large capital investment, an acquisition or general debt re-structuring.

• A company that wishes to issue debt financing instruments will often do so by setting up a corporate trust which allows the governance of the bond to be carried out by an independent third party i.e. the Trustee
• Once this type of financing is raised by a public company, it is a legal requirement that such company appoint a corporate trustee under the borrowing instruments.

In RBC Trust (Trinidad & Tobago) Limited’s role as a corporate trustee, we act as a funnel for communication between the company issuing the bond (the Borrower) and the investors who purchase the bonds (the Lenders). The Trustee therefore ensures that the terms and conditions that govern the bond are upheld or at least varied by the requisite majority where necessary, and particularly on contentious issues such as late interest payments, refinancing of the structure, release of security, early maturity dates etc.

The role of the corporate trustee therefore allows the Borrower to focus on their core day to day business, in the knowledge that the trust is being managed and administered by an experienced and neutral third party. The advantage to the Lenders and to the Borrower is that they do not have to deal with each other directly, but can contact the Trustee for information governing the bond or for impartial guidance.

All companies registered under the Insurance Act of Trinidad and Tobago are required to place assets equal to their liabilities and contingency reserves into a statutory fund, on behalf of local policy-holders. The statutory fund is a legal deposit required to meet policyholders' obligations in case the insurance company runs into financial difficulties, so that in a possible wind up scenario, the policyholders will have first priority on these assets of the company.

The Insurance Act requires that a Trustee is properly appointed to act in a custodial capacity over these assets, and RBC Trust (Trinidad & Tobago) Limited’s Corporate Trustee duties include ensuring that:

• the assets are segregated and available only to policyholders and not to creditors in the event that the insurance company goes into receivership;
• these assets are not subject to liens or encumbrances during the period for which they are pledged to the statutory fund;
• when the value of assets in the fund falls, the insurance company is promptly notified and places additional assets into the fund to make up that shortfall.

By law, insurance companies are only permitted to pledge assets and instruments to the statutory fund, that qualify under the Second Schedule of the Insurance Act. 

As a licensed financial institution, RBC Trust (Trinidad & Tobago) Limited can hold the collateral on behalf of investors of a bond, as security for performance of the borrower's obligations under the trust deed governing that bond.

The borrower grants a security interest in the collateral to the collateral agent, who takes all necessary administrative and enforcement actions with respect to the collateral on behalf of the investors. The structure avoids granting security separately to all lenders, which would be costly and impractical.

This service may be required for instance in private placements which are not required to have a Trustee, or sometimes in cross-jurisdictional transactions where independence between the Trustee and Collateral Agent is required.

At RBC Trust (Trinidad & Tobago) Limited the services we provide as collateral agent include:

• Drafting/Vetting necessary security documentation,
• Creation of security and registration of charges and necessary filings with the appropriate regulatory authorities,
• Safekeeping of all the original title documents of properties/assets in accordance with the financial structure,
• Acting impartially on the instructions of the Issuer, Investors, and Trustee (where applicable),
• Enforcing security in the event of default.