The recent proposed legislative changes to foreign person exclusions in NSW have resulted in the largest review of trust deeds we’ve seen since the Bamford decision nearly a decade ago. What has bubbled to the surface are years’ worth of errors that are only being revealed now because there hasn’t been any other strong legislative motivation to examine deeds.
Each year, the Acis legal team examines thousands of documents for various purposes, including amending trust deeds and updating SMSF deeds for entry into our SuperDepot system. We are seeing an increasing number of deeds with errors, and our SMSF Services Director recently reported one firm with errors in 50% of their deeds.
This increase we’re seeing is, I believe, partly due to the emergence of DIY and robotic template systems. Technology companies are taking template legal documents from law firms and distributing them to end users via online systems, at which point neither the tech company or law firm takes any further responsibility for them. The end user is preparing the document without any further legal review or oversight, putting the accountability for any errors squarely on their shoulders.
This is not how it is done at Acis.
It’s not just a matter of serving up fries and Coke with any document review undertaken by the Acis legal team. It’s our job to bring issues to the attention of our clients so they can make informed decisions about fixing them. While we will always advise you of issues detected during our review, you and your client know the circumstances of the trust in question and can decide if and how you would like us to deal with those issues. We serve up a deluxe burger with the works.
This is why we ask clients to provide all previous deeds with their order, and why we may even request the submission of missing deeds as part of the review process. Once we have all available documents, here’s what we look at:
We review the execution of all previous deeds, ensuring companies have executed the deeds in accordance with the Corporations Act and that individuals have executed deeds validly.
A potential issue: Individual trustees witnessing each other’s execution of a deed, or a company apparently executing a deed on a date when that company did not exist.
We trace the chain of trustees of a trust right from the initial trustee to the current trustee, identifying if there are any gaps, missing actions or issues with the validity of previous changes.
A potential issue: A deed is missing that evidences a change of trustee from individuals to a company.
We review any previous exercises of various powers to ensure there are no issues in relation to their validity.
A potential issue: The clause relied upon to undertake a previous upgrade of a SMSF’s governing rules is incorrectly recorded.
We review all previous deeds to ensure any names recorded in them, whether they be of companies, individuals or the trust itself, are both complete and correct.
A potential issue: The record of individuals’ names in the deeds omits their middle name.
We review all previous deeds to ensure that any parties essential to the validity of the deed are included.
A potential issue: An Appointor has the power to appoint a trustee, but was not party to the deed appointing the trustee.
We cannot stress enough the importance of knowing if the supplier you’re using for your legal documents is reviewing them, or whether that responsibility has been left to you.
And in the case of existing deeds, while dealing with issues will likely incur additional costs to correct errors that have emerged during our review, these are far less if done now rather than left to a later date for a third party to identify.
We don’t see these issues disappearing any time soon, and our legal team is here to answer any questions in relation to your deeds.