Trust is – Definition, Types and Examples
Trust is – Definition, Types and Examples

Trust is – Definition, Types and Examples

Trust is – What is trust? The trust is the merger of different business entities into a new company, which will form or gain great power. For more details, we will discuss the material on Trus starting from the definition, Types, Trust Formation Process, Strengths and Weaknesses and Examples of Trust Companies. So check out the reviews below.


Understanding trust

Trust which is the merger of different business entities into a new company that will form or gain great power.

The business entities incorporated in this trust are legally independent within the meaning of the loss of independence. Its share capital is in the hands of a controlling body. Trust can also be formed by establishing a holding company as well as by consolidating business entities.

Types of trust

Types of trusts, including:

1. Object-based trust

A private trust is a trust intended for the benefit of a particular person or group of persons

A private trust is a trust that seeks to serve the public interest.

2. Trust depending on how it was formed

Express Kit, which is a trust created expressly by the trust generator. Trust It is said to be an express trust when the main wishes or desires of the party who created the trust can still be known with certainty.

Implied trust, a trust formed for the benefit of the settlor is not explicitly mentioned in the legal deed that created the trust.

Resultant trust, i.e. trust that can be terminated by the legal actions of the parties.

Constructive trust, a trust that is created because the law’s implementation and enforcement is enforced by the court.

The process of trust formation

In the formation of a Trust requires concentration, such as in the form of horizontal concentration (plate / horizontal), vertical concentration (vertical) and parallel concentration (parallel).

1. Horizontal concentration

Horizontal concentration is the concentration of several business entities that have the same concentration. The motivation or objective of horizontal concentration is to be able to dominate the market by achieving a relatively low cost of goods, to reduce the risk of being able to dominate the market.

The advantages of horizontal concentration are that it can streamline production and prevent excessive capital investment and save company costs.

Examples of horizontal concentration companies including;

  • For example, company one, which is the company that digs for iron ore
  • The second company is an iron smelting company that produces iron and steel parts.
  • Company three, namely the car manufacturing company
  • Company four, namely the packaging company
  • five companies, respectively transport companies

2. Vertical concentration

Vertical concentration is a combination of several business entities that become the company’s line in the production process that produces goods continuously in a single business entity.

For example, merging assets from multiple business entities that will become 1 business entity. The idea is that this vertical concentration can start from the production process (primarily) to serve consumers. In another sense, the vertical concentration of business entities is a series in the production process merging into one.

3. Parallel concentration

Parallel concentration is a combination of several business entities that have production activities or sell different goods.

For example, such as business entities operating in rubber and quinine plantations in one concentration or merger of different managementv. The benefits of parallel focus are that it has an influence on the level of efficiency and possible losses that will be felt.

Parallel concentration has several advantages including;

  • Cost efficiency, this can happen because costs for organization, advertising and sales management from several business entities are combined. The terms of sale will be better, more precise and more satisfactory.
  • If there is one item that was harmful, well, the loss can be covered by the benefits of other items.

The advantages and disadvantages of trust

1. The advantages of a reliable company

This trust has several advantages, including:

  • The company’s source of funds can be guaranteed because it has more than two members.
  • It can issue stocks and bonds.
  • The management system of the company will be better because every member wants to achieve a success.
  • It can take advantage of existing economies of scale.

2. Lack of reliable companies

However, it also has weaknesses, including:

  • First, the risk remains the responsibility of the joining company
  • the advantages and disadvantages of the companies holding the merger will disappear completely
  • The freedom of each merging company is also completely lost
  • Dependence on existing machinery and capital goods.

Example of a reliable company

Here are some examples of trusts, including:

1. Bank Mandiri which is a combination of Bank Dagang Negara, Bank Bumi Daya, Bank Pembangunan Indonesia, Bank Export Import Indonesia.

2. Bina Makna Indopratama (IMC) is 4%, PT Metro Lintas Nusa (MLN) is 3%, PT Indofood Sukses Makmur Tbk with PT Indofood Sukses Makmur Tbk shareholding is 8% and PT Binara Multidaya (BM) is 13%.

This is our review of Trust, I hope it is useful..

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