FBE2604
ASSIGNMENT 2 SEMESTER 2 2025
UNIQUE NO.
DUE DATE: 2025
, Forms of Business Enterprise
Question 1
1.1 Legality of Tshepo’s intended action
The transferability of a beneficiary’s interest in a trust depends on whether the interest is
vested or contingent. A vested right is a present, enforceable right to benefits, while a
contingent right depends on a future event (Braun v Blann and Botha NNO 1984 (2) SA
850 (A) at 859H–860B). Where the trust deed is silent, vested rights are generally freely
transferable or capable of cession, provided such transfer does not prejudice other
beneficiaries or conflict with the trust’s objectives (Crookes v Watson 1956 (1) SA 277
(A) at 289A–C).
Under the Trust Property Control Act 57 of 1988, trustees have a fiduciary duty to act
in the best interests of beneficiaries (s 9), and any change in beneficiaries should be
recorded in the trust’s records. Therefore, if Tshepo’s interest is vested, he may lawfully
sell it to Zwane, but the trustees should consent to update the records. If the interest is
contingent, the transfer cannot occur until the interest vests.
1.2 Advantages of a business trust
Zwane may enjoy the following benefits from holding an interest in a business trust:
1. Asset protection – Trust assets are separate from personal assets, limiting
creditors’ claims against Zwane personally (Van der Linde, 2012, TSAR, 3, p.
442).
2. Estate planning – Trust structures can reduce estate duty and ensure continuity
in asset management (Abrie & Doussy, 2006, South African Business
Management).
3. Tax flexibility – Income can be distributed among beneficiaries to minimise
overall tax liability (Income Tax Act 58 of 1962, s 25B).
ASSIGNMENT 2 SEMESTER 2 2025
UNIQUE NO.
DUE DATE: 2025
, Forms of Business Enterprise
Question 1
1.1 Legality of Tshepo’s intended action
The transferability of a beneficiary’s interest in a trust depends on whether the interest is
vested or contingent. A vested right is a present, enforceable right to benefits, while a
contingent right depends on a future event (Braun v Blann and Botha NNO 1984 (2) SA
850 (A) at 859H–860B). Where the trust deed is silent, vested rights are generally freely
transferable or capable of cession, provided such transfer does not prejudice other
beneficiaries or conflict with the trust’s objectives (Crookes v Watson 1956 (1) SA 277
(A) at 289A–C).
Under the Trust Property Control Act 57 of 1988, trustees have a fiduciary duty to act
in the best interests of beneficiaries (s 9), and any change in beneficiaries should be
recorded in the trust’s records. Therefore, if Tshepo’s interest is vested, he may lawfully
sell it to Zwane, but the trustees should consent to update the records. If the interest is
contingent, the transfer cannot occur until the interest vests.
1.2 Advantages of a business trust
Zwane may enjoy the following benefits from holding an interest in a business trust:
1. Asset protection – Trust assets are separate from personal assets, limiting
creditors’ claims against Zwane personally (Van der Linde, 2012, TSAR, 3, p.
442).
2. Estate planning – Trust structures can reduce estate duty and ensure continuity
in asset management (Abrie & Doussy, 2006, South African Business
Management).
3. Tax flexibility – Income can be distributed among beneficiaries to minimise
overall tax liability (Income Tax Act 58 of 1962, s 25B).
