The term “syndicate trust” is not defined in English law. It is often used to describe arrangements in which a number of investors use a trust structure to make one or more investments.
6 June 2014
The Oxford Dictionaries’ definition of ‘syndicate’ is as follows:
“A group of individuals or organizations combined to promote a common interest.”
This definition fits the current context, and the use of the word ‘syndicate’ usually implies that the number of investors is small, so that they can be in communication with each other.
A syndicate trust is similar to a unit trust, so that investors contribute to the trust’s assets and become beneficiaries of the trust. They usually participate in the income and capital profits of the trust in proportion to their capital contributions (which may also be referred to as subscriptions).
In practice, a “syndicate trust” usually refers to a stand-alone trust, as opposed to a trust which is a feeder for investment in a limited partnership or other structure. This means that the legal documentation is often very simple – the core document being a declaration of trust. This deals with matters such as:
the duties and powers of the trustee
the process for admitting investors (beneficiaries)
how profits are allocated and distributed
how investors can transfer or redeem participations in the trust
the processes for decision-making.
Unless all the investors participate in day-to-day decision-making, the syndicate trust will be likely to be a Collective Investment Scheme and an Alternative Investment Fund (AIF) for the purposes of UK and EU financial services regulation. This means that an FCA authorised operator may be required, as well as an AIF manager and possibly a depositary (depending on the amounts of money involved).
Need some help?
If you would like to know more about how to set up a self-managed property syndicate, this is a great place to start: