Legal Opinion regarding opening of account by COTECNA Employees Provident Fund Trust.

Mr. Z


Dear Sir

RE:     Legal Opinion regarding opening of account by COTECNA Employees Provident Fund Trust.

We refer to your letter dated 5 December 2006 on the same subject.

From perusal of your letter it appears that the proposed COTECNA Inspection SA Employees Provident Fund (“Provident Fund”) wants to open a savings account with BANK 1 for their day to day transactions and possibly a fixed deposit account in future when surplus funds are available.

The Provident Fund has not applied to the National Board of Revenue (“NBR”) for recognition yet and BANK 1 has advised the Provident Fund that withholding tax would be deducted until such time they get the necessary approval from NBR.

In such situation BANK 1 has asked us to review the proposed Provident Fund Trust Deed and to give our opinion regarding whether the Provident Fund can open such accounts with BANK 1. You have also asked us whether or not you would need any undertaking from the Provident Fund, if yes you have requested us to draft such a letter for you.


On perusal of the Provident Fund Deed of Trust, it appears that the Trust Deed and the Rules regulating the Trust has been intermingled in the agreement. This is improper. The Trust Deed, defining the constitution of the Trust (i.e. defining the purpose of the trust, the beneficiary and the trust property) and the powers of the Trustees, should be drafted separately. And there should be a separate section which could be in the form of a schedule to the Trust Deed which will contain the Rules regulating the trust. Please ensure the Provident Fund Deed of Trust is drafted properly.

As the Provident Fund has not applied to the NBR for recognition, the Fund is yet not exempt from tax deduction. As such it is our legal opinion that, in order to protect its own interest, BANK 1 should not open the Bank Accounts until and unless the necessary approval from NBR has been received by the Provident Fund.

After the necessary approval has been received by the Fund, BANK 1 can open the Bank Accounts provided the terms contained in Clauses 11 (b) and (c) of the draft Provident Fund Trust Deed is followed (presuming that these terms will be included in the redrafted Deed of Trust). These clauses states as follows:

“11 (b) The Trustees by resolution shall decide on the banker with whom the Bank Accounts shall be maintained. Sums may be withdrawn from the Bank Accounts at any time by the Trustees for making payments or for investment in accordance with those rules. Cheques drawn on the bank shall be signed by two Trustees.

11 (c) All investments and Bank Accounts of the Fund shall be in the name of the Fund.”

So, for the Provident Fund to open Bank Accounts with BANK 1, the Board of Trustees of the Provident Fund shall have to pass a resolution authorising the Provident Fund to open and maintain Bank Accounts in the name of the Fund with BANK 1. The Resolution should also mention by name the Trustees representing the Fund who shall operate the account and who shall sign cheques drawn on BANK 1.

BANK 1 should ensure that the above steps are taken before opening the Bank Accounts. In our opinion there is no need to take any undertaking from the Fund for opening Bank Accounts.

If you have any further query, please do not hesitate to contact the undersigned.

Thanking you.

Yours faithfully,


For: “The Lawyers & Jurists”