Unit Trust Deed
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What is a Unit Trust Deed?
A Unit Trust Deed is a document that defines the relationship between the trustee and the beneficiaries of a unit trust.
As a deed, it is created by declaration so it is executed by the initial trustee, who becomes the trustee of the unit trust. The trustee’s powers (both general and specific) are set out in the trust deed.
The beneficial interest in the Trust is divided into units. Each unit confers an equal undivided interest in the Trust Fund. By holding units, unitholders are each bound by the terms of the deed.
When should I use a Unit Trust Deed?
A Unit Trust Deed should be used if you’re establishing a unit trust. The deed outlines the purpose of the trust and the rights and obligations of the trustee and unit holders.
This deed does not set out the rules of play between unitholders, such as rules governing pre-emption rights in favour of existing unitholders in relation to issues or transfers of units. You should consider putting in place a Unitholders’ Agreement to this deed to create those sorts of protections.
What topics does a Unit Trust Deed cover?
- Establishment of the Trust
- Units and Unitholders
- Partly paid units
- Redemption, transfer and transmission of units
- Register and certificates
- Meetings and resolutions of unitholders
- Duration of the trust
- Trust accounts
- Trust income
- Distribution prior to the vesting day
- Trustees’ manner of acting
- Liability of trustees
- Indemnity from the trust fund
- Trustees’ powers
What are the main decisions I need to make in creating a Unit Trust Deed?
- Is the trustee executing this deed an individual or corporation?
- What is the threshold percentage ownership for convening a meeting of the unitholders?
- What percentage ownership constitutes a quorum in those meetings?
- What unitholder approval threshold is required for winding up the trust?
What other names does a Unit Trust Deed go by?
A Unit Trust Deed is also known as:
- Unit Trust Establishment Deed
Frequently Asked Questions
- The only party involved initially is the initial trustee who becomes the trustee under the deed.
Generally you would need this document when you are establishing a fixed unit trust.
Unit trusts can be more tax efficient as they are eligible for CGT discounts. They are also not regulated under the Corporations Act 2001 (Cth) so they have more freedom in transactions affecting the unit capital, variations of class rights, financial reporting obligations and more. They may still be governed under the act as a ‘managed investment scheme’ and be required to register with the Australian Securities and Investments Commission (ASIC). Please contact us for legal advice if you have any doubts about whether your trust will be required to do so.
Trustees are personally liable for the trust’s liabilities, so companies are often incorporated for the specific purpose of acting as a trustee. This limits the liabilities and obligations incurred by the trust to the company’s assets.
The initial trustee needs to sign the document on behalf of the trust. As this is a Deed, it is likely that formalities will require ‘wet ink’ signatures. You should consult local laws to determine if e-signing is available in your state or territory.
If you need any assistance please contact us directly, we would be happy to assist.
If you have any questions or are uncertain about any aspect of the document please do not sign it or use it, Please contact us directly and we would be happy to assist.
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