Peter Johnson highlights the complexities that arise from historical issues in SMSF trust deeds and provides practical strategies to address these challenges. […]
All May Not Be Lost
Acis, current as of: 19 May 2022.
We’re sure some of you can relate to the moment when your team discovers that legal documents relating to companies or trusts have either been lost, destroyed or never existed. The recent natural disasters that have hit so many Australians have certainly raised this issue to the surface.
Unsurprisingly at times like this, there’s a level of urgency associated with finding or replacing the missing documents.
Not having important documents when they are needed can cause unnecessary costs and delays. We’ve outlined some examples and the support which Acis can provide.
A common reason advisers come to Acis for company register reconstructions is when their client has registered a company directly with ASIC, believing this is a cheaper option. What isn’t commonly understood by end clients when companies are registered this way is that ASIC only provides a certification of registration, which is just one of the documents required.
Examples of where this becomes a problem:
- Prior to company registration, it’s mandatory to hold written consents from each person who will become a director or member as well as consents authorising the use of a location as the registered office of the company. These requirements aren’t usually complied with when companies are registered directly with ASIC.
- A company is required by law to maintain a register of members, directors and debenture holders. Although failure to do so is a breach of the Corporations Act 2001 (Cth) (Corporations Act), these requirements are not usually complied with when companies are registered by end clients directly with ASIC, leaving the Adviser to rectify the situation when they become aware.
- Companies registered this way are generally governed by replaceable rules. These are the very basic set of rules outlined in the Corporations Act for companies that do not have a constitution. A properly drafted constitution is generally far more beneficial.
Where companies have been registered without these documents, Acis can provide a Company Document Pack which essentially recreates the company register that would have been provided had the original company registration been undertaken by Acis.
The existence of a trust, generally, cannot be established, or the trust administered, without a trust deed. The absence of a trust deed presents particular difficulties when it comes to proving a trust’s existence, and makes it almost impossible for a trustee to administer a trust.
Routine activities like opening bank accounts, borrowing money and making distributions may fail as a result. In some cases, the courts have found that a trust fails where there is a lost trust deed and an inability to illustrate the terms of the trust. As a result, trust assets may be held in a resulting trust in favour of the Settlor or a person who transferred assets to the trust.* This becomes problematic since the intended beneficiaries may lose any entitlement they might otherwise have to trust income or capital.
While it’s preferable to keep original trust deeds safe, there are circumstances, for example floods or fire, where their loss simply can’t be avoided. In these instances, extensive searches (with advisers, titles offices, deed providers, banks etc) should be undertaken to obtain a copy of the lost trust deed.
If a signed or unsigned copy of the original is located, Acis can prepare a Deed of Confirmation, which:
- acknowledges that the signed, original copy has been lost, misplaced or destroyed;
- ratifies the trust’s establishment; and
- adopts the terms of the copy (which would be annexed) as the terms of the trust.
If a signed or unsigned copy cannot be found, Acis can prepare a Deed of Confirmation which does the same as the above, but adopts new trust terms based on whatever information is available.
In some situations it may also be prudent, or even necessary, for an application to be made to the courts for a declaration regarding the validity of the terms of the trust.
Power of attorneys
Many will be familiar with Acis’ Power of Attorney Service where the proposed trustee of a trust appoints Acis Nominees Pty Ltd as its attorney, for the purpose of signing the trust deed and accepting the settlement sum.
When trustees of trusts that are set up in this way are dealing with third parties (banks/brokers etc), a copy of the power of attorney document (POA) will usually be requested to establish that the trust deed has been validly executed. Therefore, it’s important that the power of attorney document is kept safely with the trust register.
Where the POA cannot be located and a copy is retained in Acis’ records, we are more than happy to provide it. This will generally be the case for any trust’s ordered from 1 July 2011 onwards. Where Acis doesn’t have a copy on file, we can:
- provide a statutory declaration confirming the way the trust was established under POA; or
- where third parties will not accept a statutory declaration, provide a Deed of Confirmation confirming the way the trust was established under POA.
In our experience, one of the above options will always satisfy third parties where the original POA cannot be located.
Takeouts to remember
- Despite an adviser’s best efforts documents can go missing/never be created; and
- Acis can help in these situations to recreate, as best as possible, the missing documents
Don’t hesitate to contact the Acis legal services team with any enquiries.
*Mantovani v Vanta Pty Ltd (No 2)  VSC 771
Acis does not provide advice in relation to commercial law, taxation, duty, company law or any other matter. We do not purport to provide advice nor should you construe anything in any correspondence with us, or material provided by us, as advice of any kind.