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What is a Corporate Trust?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 27 November 2016
  • Copyright Protected:
    2003-2016
    Conjecture Corporation
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Corporate trusts are any of several different types of trusts that are established and maintained by a corporation. In the most usual circumstances, the creation of a corporate trust allows the corporation to turn over management of financial resources to another corporation that is charged with specific tasks in handling the assets. Banks and various types of financial services are often called upon to handle the particulars of a given corporate trust.

One of the more common reasons for establishing a corporate trust is in order to raise money to fund a particular project. Corporations who wish to issue bonds will often do so by first setting up a trust, and allowing all matters associated with the issuance of the bonds to be conducted under the auspices of the trust. Because the bonds are offered to the general public, the trust functions as a funnel for communication between the issuing company and the investors who purchase the bonds. In this manner, the corporate trust makes it possible to communicate with the holders of the bonds on such matters as interest payments and other matters relating to the terms and conditions that govern the issuance of the bond.

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The creation of a corporate trust also offers a structure that is thought to be somewhat neutral in terms of managing the assets involved. Corporations can continue to focus on the core business and leave the function of the trust to the corporate trustee. Investors also do not have to deal with persons within the corporate structure proper, as the trustee provides a source of information and dialogue that is readily accessible.

A corporate trust can help to fill the gap when a corporation does not have much in the way of expertise in the proper management of finances associated with special projects and other matters. By creating the trust through the services of a financial institution, corporations can effectively work on growing the business and draw on the expertise of an organization that specializes in one or more areas of finance.

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