A trust arises from the union of companies that come together to dominate the market.
Trust is a term that comes from English and can be translated as “confidence” . The word is used in the field of business to name the group of companies that decide to join together to dominate a market .
For example: “The government announced that it will prevent the creation of a trust within the telecommunications sector,” “This multinational trust controls the soybean market,” “If we could associate with other firms and set up a trust, we would be able to increase our profits.” ” .
Objectives of a trust
The intention of the companies that associate is to create a monopoly and be able to set the price of the products and/or services according to their convenience. Typically, a common management team is formed that jointly makes the main decisions related to the members of the trust.
In general, the State controls and prevents the creation of a trust, since companies that associate in this way acquire a dominant position in the market that allows them to commit all types of abuses, violating the rights of clients or consumers and of its competitors.
In the United States , a law was passed in 1890 prohibiting the formation of trusts. This rule was promoted by Senator John Sherman , which is why it is usually known as the Sherman Act .
It is important to highlight that, by subscribing to a trust, a company loses its autonomy : its production and marketing decisions become dependent on the trust's board of directors. Its legal status, on the other hand, is also modified.
Advantages and disadvantages
Among the advantages of a trust are the following:
- The company does not suffer decapitalization, that is, it does not consume or lose its capital, which occurs when the net equity becomes negative and the state of technical bankruptcy reaches.
- The company 's expansion opens the doors to greater collection in the future.
- Since the control is stricter, there is less chance of evasion occurring.
- The staff of employees is expanded.
Let's see, on the other hand, some of its disadvantages:
- After the formation of a trust, there is usually a tendency towards excessive nationalization.
- Investment by capitalists may tend to decline.
- In the short term, you see lower income tax revenue.
The trust is known as a living trust in some countries.
The trust or living trust
In another sense, a trust can be a contract that an individual signs to manage assets for another person.
The term trust is known in certain Spanish-speaking countries by its English name, living trust . It is a written legal document that partially replaces the will; When active, all of the owner's assets (which may include his or her real estate, stocks, and bank accounts) are managed for his or her own benefit until he or she is killed or incapacitated, at which time they are transferred to its beneficiaries.
The living trust is very popular in the United States , where it is used in the following way: the trustor transmits certain assets to the trustee, who assumes the obligation to manage them for the benefit of a third person (the beneficiary ). Although this document exists in different forms, it is most commonly written for the benefit of children, grandchildren or spouses.
Some of the advantages of the living trust are that it allows the owner of the assets to decide what will be done with them when they die, that the creditors of the trustor or the trustee cannot seize them (unless there is a fraudulent situation) and that it does not require the succession for transfer to heirs. As negative points, it is true that in some cases its cost exceeds that of a will and that fiduciaries can take advantage of the trustor due to the lack of supervision by the court.