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If a trust holds your company and you are about to sell it, the question is no longer only who buys the business. It is also what your trustee must do when business sale proceeds reach the trust. The shares are replaced by cash or other assets, the risk profile of the structure changes overnight, and the trustee becomes responsible for a very different kind of portfolio.
This page looks at the situation from the point of view of choosing, assessing or changing the trustee. It does not cover the tax treatment of a sale or the choice of governing law, which depend on where you and your beneficiaries live and need individual analysis.
Why the signing date matters for the trustee
Founders often tell the trustee late, after the price has been agreed. That is the wrong moment. The trustee holds the legal title to the shares in the name of the trust, so the trustee, not you, is the seller on the share purchase agreement. Under Article 2 of the Hague Trusts Convention, trust assets form a separate fund, title stands in the name of the trustee, and the trustee must manage and account for them. A sale is therefore a trustee decision, taken in that capacity, even when you are the settlor and the driving force behind the deal.
Two practical consequences follow:
- The trustee must be satisfied that the sale is within its powers and in the interest of the beneficiaries, or for the stated purpose of the trust.
- Any powers you reserved as settlor, for example a right to be consulted or to give an investment direction, must be read against the trust deed before anyone signs. The Convention accepts that reserved powers are not, in themselves, incompatible with a trust, but they do not remove the trustee's duty to decide. See settlor reserved powers and the trustee relationship for how this works day to day.
A trustee that first hears about the sale from the buyer's lawyers is a warning sign. If that is your experience, a due diligence review of your trustee is worth doing before the closing, not after.
From closing to the trust accounts
The path of the money is where most practical problems appear. The diagram shows the usual sequence; your own structure may add or remove steps.
Who actually receives the money
The wording of the contract decides. If the trustee personally holds the shares, the price is paid to the trustee as trustee, into an account in the name of the trust. If a company sits between the trust and the business, the proceeds arrive in that company first.
Example: a founder in Lausanne holds an operating company through a family holding company, itself owned by a discretionary trust. The buyer pays the holding company. The money is then a corporate asset, and the trustee must decide, with the company's directors, whether to keep it there, distribute it as a dividend up to the trust, or reinvest it. Each choice has different consequences for control, reporting and tax, which is why the answer is individual.
What your trustee must decide
A sale turns a concentrated holding into liquid wealth. The trustee's decisions fall into a few groups.
Governance and records
The trustee should be able to show, in writing, why it agreed to sell, what alternatives it considered and what advice it took. Where the deed requires a protector's consent for a disposal of the main asset, that consent must be obtained before signing. Our page on working with a protector explains the limits of that role.
Banking and source of funds
A large inflow triggers questions at the bank. Anti-money-laundering rules (AMLA / GwG) require the financial institution and the trustee to understand where the money comes from and who the beneficial owner is. Expect to supply the sale agreement, evidence of how the founder acquired the shares and a clear chart of the structure. A well-prepared trustee collects these before closing. For the practical side, read about your trustee and the trust bank accounts.
Investment and liquidity
Holding a company is not the same as holding a portfolio. The trustee has to decide how to manage a large amount of cash in the interim, how quickly to invest, and under which written policy. If you want to influence this, the trust deed and your letter of wishes are the proper tools. A letter of wishes guides the trustee; it does not bind it.
Distributions and beneficiaries
Founders sometimes expect proceeds to flow straight to family members. In a discretionary trust the trustee holds the discretion, and a sale is a moment when beneficiaries ask questions. Whether to distribute, to whom and when is a decision for the trustee within the deed, not an automatic consequence of the sale. What a trustee owes the beneficiaries sets out the duty of fairness and the information they may ask for.
What a trust can and cannot do here
| Question | What a trust can do | What it cannot do |
|---|---|---|
| Control of the sale | Separate ownership from your personal estate and give a clear decision-maker | Make you the legal seller if the trustee holds the shares |
| Use of proceeds | Keep the money under a single, documented regime | Remove the trustee's duty to act in the beneficiaries' interest |
| Continuity | Let the structure outlive any one person | Replace the need for a tested continuity plan |
| Recognition | Be recognised in Switzerland as a trust, with assets kept apart from the trustee's own estate | Guarantee how another country will treat the structure |
On recognition, the Convention provides that a validly created trust is recognised as such, which at a minimum means the trust assets are separate from the trustee's personal estate and the trustee may sue and be sued in that capacity (Article 11). Switzerland has applied the Convention since 1 July 2007. A state is not obliged to recognise a trust whose significant elements are connected essentially with states that do not know the institution (Article 13), so the position of your family's country of residence matters.
Does the sale change who should be your trustee?
It can. A trustee well suited to hold shares in a private company, and to sit on the board or monitor it, may not be the one you want for a large liquid portfolio. Ask yourself:
- Does the trustee have the capacity to handle bank onboarding, reporting and investment oversight at the new scale?
- Is it independent of the buyer, the company's advisers and your own family office?
- Can it show how it has handled previous liquidity events?
If the answers are unclear, compare options in switch trustee or stay and fix the relationship, and read changing trustee step by step before choosing a date. Changing in the middle of a transaction adds risk; changing shortly before or after, once the proceeds are settled, is usually calmer. A trustee established in Switzerland and supervised by FINMA, through a supervisory organisation, is a reasonable item on that comparison list, although it is only one criterion among several.
Alternatives to consider
- Selling through the holding company rather than the trust, so the trustee remains at one remove.
- Keeping an individual or professional co-trustee for the sale, with the corporate trustee taking over afterwards.
- A staged exit, where part of the shares stays in the trust.
None of these is better in the abstract. They depend on the deed, the buyer's requirements and the tax position of those involved.
Points to check before signing
- The trust deed allows the disposal and states who must consent
- Minutes record the trustee's reasons and the advice received
- The paying entity and the receiving account are identified in the contract
- Source-of-funds documents are assembled for the bank
- An interim investment and liquidity policy is agreed in writing
- The protector, where there is one, has been consulted as the deed requires
- The letter of wishes is current
- Reporting duties, including automatic exchange of information (AEOI / CRS), have been reviewed for the new asset mix
For a broader routine, see the annual trust health check.
Frequently asked questions
Does the trustee or the founder sign the sale agreement?
It depends on who holds the shares. If the trust owns them directly, the trustee signs as trustee. If a company in the structure owns them, that company signs, and the trustee acts through its control of the company. Reserved powers do not change this.
Can the trustee refuse a sale that I, as settlor, want?
Yes, where the trustee has the discretion under the deed. The trustee must act in the interest of the beneficiaries or for the purpose of the trust, not simply follow the settlor. A trust in which the settlor can compel every decision raises its own questions.
Where will the money be held after closing?
In an account opened for the trust or for the holding company, depending on the structure. The bank will carry out its own checks, so the trustee should prepare the source-of-funds file before the closing date.
Will my family receive the proceeds immediately?
Not automatically. In a discretionary trust the trustee decides on distributions. Your letter of wishes can express what you hope for, but it guides rather than binds.
Should I change trustee before the sale?
Only if there is a real reason, such as a lack of capacity or independence. A change mid-deal can slow things down, so it is usually better to plan it around, rather than during, the closing.
Does a Swiss trustee have to report anything about the sale?
Reporting depends on the structure, the residence of the settlor and the beneficiaries, and the banks involved. Anti-money-laundering and exchange-of-information rules may apply. This requires an individual analysis.
Is the trust recognised if the family lives abroad?
Switzerland recognises trusts validly created under the applicable law. Other countries apply their own rules, and Article 13 of the Convention lets a state decline to recognise a trust that is closely tied only to states without the concept. Check the position in each relevant country.
Sources
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