Trust Agreement

The Institute of Trust (Treuhand) is not known in Bosnia and Herzegovina law, but it is often used in German law and in other legal systems built under its influence. Although similar institutes exist in some other legal systems such as Anglo-Saxon law (the well-known trust institute), the trust agreement has some specifics that require detailed analysis. Namely, since the founders of a large number of companies in Bosnia and Herzegovina come from countries where the Trust Agreement (German: Treuhandvertrag) is often used, it is necessary to highlight some of its main characteristics.

It is not uncommon for some co-owners to want to keep their share in a limited liability company hidden in order to protect themselves from competitors, the media or certain prohibitions of competition. That can be realized through a trust agreement. Through the trust agreement, it is possible to achieve that a certain person holds a share in a company or that a share in a limited liability company is transferred to that person, without it being formally evident that that person is a shareholder of the said company.

Very often, fiduciary relationship in relation to shares in limited liability companies are based in such a way that the person behind the scene who holds a share in the company is not disclosed as its shareholder. In this case, the principal acts in the background. In such relationships, only the trustee will be publicly represented as a formal shareholder of the limited liability company in question, and the identity of the principal as well as the trust relationship itself as such will not be disclosed in the commercial register. Such fiduciary relationships are often applied in cases where there are prohibitions of competition in the form of provisions on protection against competition and protection of clients. Time and again, there are situations in which principals through trust agreements try to avoid prohibitions of economic activities as well as prohibitions of competition.

This law office represented the plaintiff before the Doboj County Commercial Court in court proceedings number: 60 0 Ps 030404 21 Ps, in which it was proved during the proceedings that the defendant, on the basis of the Agreement on the Fiduciary Holding of Shares, actually “acts” as the owner of shares in the company. Namely, in this particular case, a fiduciary relationship was established, which implied the fiduciary holding of shares in the company by the trustee, in its own name, but for the account and in the sole interest of the principal. Unfortunately for the principal, the interests of the principal in the aforementioned are not adequately protected for what reason the principal lost ownership of the shares in the company, since the other contracting party did not comply with the contract, and the principal did not have an adequate mechanism to protect its interest due to the deficiency of the contract itself.

If you need counseling on the subject of the Trust Agreement (German: Treuhandvertrag;) or you need a commercial law attorney in Sarajevo for your company or for your business idea, then you are in the right place with us and you can contact our corporate law attorneys  directly by phone (+387 62 342 463), WhatsApp, Viber or e-mail (rasid@haracic.ba).