Welcome to part four on forming a Unit Trust. Here we will discuss the process of winding-up the trust, how to manage the Trust Bank Account, and how Trustees can be replaced. As you will have learned from the first 3 parts of this series, the setting up and management of Unit Trusts can become quite complex and usually requires the assistance of a commercial lawyer.
Typically, the Unit Trust is wound up on the Vesting Day but can be wound up before this point. When this happens, the property held in trust is released, or distributed, to the unitholders of the Unit Trust in accordance with their proportionate ownership
After the Vesting Day, the Trustee holds whatever assets make up the Trust Fund until they are distributed to the unitholders in the correct proportions.
At this point, the Trustee does not need to convert or “realise” the assets of the Unit Trust. Instead, the Trustee may transfer the remaining assets “in specie”, i.e. in their current form.
Entering into Contracts
As you already know, a Trustee is in charge of managing a trust. The Trustee can, in its own name and on behalf of the beneficiaries of the trust, enter into legally binding commercial contracts.
The Registrar General and company share registers do not record transactions that recognise individuals/companies as acting in Trustee capacity. Companies can, however, under the Corporations Act, obtain information relating to share ownership.
Transfer documents need only identify the Trustee, but do not need to identify the capacity with which the Trustee entered the contract.
Whenever a Trustee (Company) is entering, or considering entering, into contractual dealings for property, any decision made by the Trustee to deal with the property must be kept as a record in the minutes of the directors’ meeting.
Trust Bank Account
If there are many transactions under the Unit Trust, it would be wise for the Trustee to conduct an account on behalf of the trust in its own name. If there will not be many transactions, a building society/savings account will be sufficient.
Any payments being made by or to the Trustee ought to come through the Trustee’s account.
Changing the Trustee
Normally the Trust Deed will be drafted in such a way that the unitholders will be empowered to remove the Trustee and find a replacement at any time, provided the majority agree by instrument in writing.
Are you look at setting up a Unit Trust and don’t know where to begin? You’re certainly not alone. Many people have little understanding of how Unit Trusts operate and what rights and duties the Trustee has in relation to the administration and operation of the Unit Trust.
If you’re after legal advice on Unit Trusts, contact LegalVision on 1300 544 755.