Research Handbooks in Financial Law series
Edited by Barry Rider
Chapter 9: The misuse and abuse of the corporate form
Although the corporation is sometimes seen as an unruly horse, it has created enormous wealth and, for various reasons, other types of business vehicles have not been utilised as much. Perhaps one reason is political rent-seeking, favouring the use of the corporate form, but there must be some intrinsic advantages to the corporate structure that other vehicles find difficult to mimic. We see, for example, that UK real estate investment trusts (REITs) have been required to adopt the corporate form and how REIT deeds in Singapore typically attempt to replicate the dual property structure of a company in order to provide artificial entity status to the REIT, in the process creating a form of non-charitable purpose trust, with the following clause: The Trust Deed sets out the rights of the Unitholder. Each Unit represents an undivided interest in the (REIT). A Unitholder has no equitable or proprietary interest in the underlying assets of the (REIT) and is not entitled to the transfer to it of any asset or of any estate or interest in any asset of the (REIT). A Unitholder’s right is limited to the right to require due administration of the (REIT) in accordance with the provisions of the Trust Deed, including by suit against the Trustee or the Manager. Consequently, it is the separate legal status of the corporation, and the ring-fenced fund that it owns, that is crucial and which Commonwealth trusts do not generally have.
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