Beneficial owners: Contributions to trust; obligations; penalties.
1. A contribution of a beneficial owner to a business trust may be any tangible or intangible property or benefit to the business trust, including cash, a promissory note, services performed, a contract for services to be performed, or a security of the business trust. A person may become a beneficial owner of a business trust and may receive a beneficial interest in a business trust without making, or being obligated to make, a contribution to the business trust.
2. Except as otherwise provided in the certificate of trust or the governing instrument, a beneficial owner is obligated to the business trust to perform a promise to make a contribution even if he is unable to perform because of death, disability or any other reason. If a beneficial owner does not make a promised contribution of property or services, he is obligated at the option of the business trust to contribute cash equal to that portion of the agreed value, as stated in the records of the business trust, of the contribution which has not been made. The foregoing option is in addition to any other rights, including specific performance, that the business trust may have against the beneficial owner under the governing instrument or applicable law.
3. A certificate of trust or governing instrument may provide that the interest of a beneficial owner who fails to make a contribution that he is obligated to make is subject to specific penalties for, or specified consequences of, such failure. The penalty or consequence may take the form of reducing or eliminating the defaulting beneficial owner’s proportionate interest in the business trust, subordinating that beneficial interest to those of nondefaulting owners, a forced sale of the beneficial interest, forfeiture of the beneficial interest, the lending by other beneficial owners of the amount necessary to meet the defaulter’s commitment, a fixing of the value of the beneficial interest by appraisal or formula and redemption or sale of the beneficial interest at that value, or any other form.
Last modified: February 26, 2006