Patrick Lim
Partner at Raj, Ong & Yudistra

As the name suggests, a protector appointed under a trust is usually charged with protecting the integrity of the trust as well as the stakeholders thereunder. In Malaysia, this role is rarely encountered or used.

While the Labuan Trust Act provides a detailed explanation of the function of a protector under Labuan’s offshore jurisdiction, the Trustee Act and Trustee Corporation Act, which apply to the mainland jurisdiction of Malaysia, do not expressly define the term “protector.”

Generally, a protector can be described as a person who holds various powers within the trust. These powers can range from positive powers, such as the ability to appoint trustees or make changes to the trust instrument, to negative powers or veto powers, where the protector can prevent the trustees from exercising certain powers without their consent. In Malaysia, the protector (or protectors) derive their power from the provisions of the trust instrument.

The specific role of a protector will vary depending on the trust instrument and the intentions of the settlor. Some examples include appointing new trustees, adding or removing beneficiaries, making amendments to the trust instrument, or changing the governing law of the trust.

When it comes to the fiduciary duties of a protector, Malaysian legislation does not specifically address this aspect. Whether a protector’s role is considered fiduciary in nature depends on how the trust instrument is constructed and interpreted. In other jurisdictions, it has been established that protectors have a legal obligation to act in the best interests of the beneficiaries and are prohibited from using their powers for personal gain.

If used correctly, the role of the protector provides a strong system of checks and balances to the trust and may provide structured longevity to the tenure of a trust.