Guidance for Trustees – When to Notarise.
One of the most common questions we are asked by clients in relation to the administration of their trusts is: “Which documents should be notarised?”
The answer is simple but also important.
We should begin by briefly recapping what notaries do in relation to documents. According to law, some documents need to be executed as a public or notarial deed in order to be valid. One example of this is your Trust Statute. Notaries charge for this as a percentage based on the value of the assets involved and, as a result, it can sometimes be quite expensive. In order to reduce these costs, this is one of a number of reasons we recommend clients establish trusts with an initial sum of 1,000 CZK
In addition, notaries can also verify signatures. This second procedure is less complex than the first and basically involves the notary checking the identity of the person signing and then recording that verification in a register. This removes any doubt as to who signed the document, and also as to when it was signed. This service is very cheap.
In both cases, you will receive lots of excellent looking stamps and stickers on your documents.
The only document associated with your trust that absolutely must be notarised in the Trust Statute, which, as mentioned above is executed as a public or notarial deed.
There is strictly speaking no need for any other trust documents to be notarised, but in practice some of them should be. There are three reasons for this.:
- If you plan to use documents for registration at the Land Registry or Commercial Registry (i.e. if you are transferring shares or real estate) then verified signatures will be required.
- The second reason for verification is to remove any future doubt about whether the documents were validly signed and importantly also WHEN they were signed. As we mentioned in a previous article, some decisions that trustees make are considered to be ‘momentous’. These are important decisions which could significantly affect the Trust and/or its beneficiaries. As we explained in our earlier article, like all trustee decisions, ‘momentous decisions’ must be recorded in writing, and in the case of momentous decisions, the trustees should also provide detailed written justification for their decision.
- As also mentioned in a previous article, when the validity of a trust is challenged in court, one of the arguments which can be used to defeat the trust is that it was not administered correctly. The fact that at least some of the Trustee’s decisions have been verified is good evidence that the trust was being correctly administered at the relevant time.
For these reasons, we recommend as follows:
1. The Trust Statute:
This must be executed as a notarial deed. (This is an any case a legal requirement).
2. The Trust Contract:
The Trust Contract is the document that (under current law) actually establishes your trust. The signatures on this document should be notarised in order to remove any possible dispute about whether and when the trust was validly established. Notarial verification of signatures on this document will also be needed if you plan to settle any company shares or real estate on the trust.
3. Contracts of Addition:
Verified signatures will be required by the Land Registry or the Commercial Register if the assets being transferred are company shares or real estate.
In other cases, verification is not required, but should be considered anyway if the value of the assets is high or if you have any reason to suspect that the transfer might be queried or challenged in the future.
4. Trustee’s Decisions / Minutes of Meetings and AGM:
These do not need to be notarised, and for most trustee decisions. verification is not necessary. However there are some situations where you should have signatures verified, including:
- When the decision is ‘momentous’ or might be challenged by someone in the future.
- If no other decisions have been verified in the preceding year, it is a good idea to have the signature the person who prepared the Minutes of the Annual Meeting verified (it is not necessary for all Trustee signatures to be verified). This helps establish a chain of constant administration if this is ever challenged in the future.
5. Memorandum of Wishes:
This is a private document and does not need to be notarised. However, it if contains anything that might be contentious in the future, notarial verification is also probably a good idea
6. “Standard’ Trustee decisions
Decisions involving relatively smaller amounts of money and or ‘mundane’ matters such as bank account establishment etc, do not need to be notarised.
Remember, signature verification by notaries is very cheap and is not very time consuming. So if in doubt, have signatures verified. This can help eliminate the possibility for disputes in the future.
