Tuesday, May 17, 2016

Resolutions v minutes – is there a difference?

Previous posts have looked at a number of the key aspects in relation to trust distributions (for example Trust distributions – 3 reminders for 30 June 2014, and A further reminder – read the deed).

One key issue in relation to effectively distributing from a trust is whether the trustee should prepare a resolution or minute.

The threshold issue under any trust instrument is making sure that the terms of the deed are followed.

This can include, for example:
  1. If a decision is initially going to be made orally, confirming that there is the power to do so under the trust instrument. 
  2. Methodically following all requirements set out in the trust instrument, including evidencing the decision by the date required under the instrument (regardless of what might otherwise be permitted under the tax laws). 
Assuming the above issues are properly addressed, then generally a trustee can invariably make a distribution either by way of a resolution or a minute.

A minute effectively records the decision made in an earlier meeting. It need not be made contemporaneously with the meeting (in other words, it can be prepared, dated and signed sometime after the meeting).

In contrast, a resolution is effective only from the date of signing. Where a circular resolution is made by a multiple director company or multiple trustees, it is valid on the date that the last director or trustee signs it.

  1. Sole director companies can only make distributions by way of resolutions. Generally, for trust distributions, this means that a sole director must determine how distributions are to be made and record by way of resolution the decision no later than 30 June in the relevant income year.
  2. For individual trustees or trustee companies with more than one director, any decisions can be made up until 30 June and then later documented by way of a minute of meeting.
  3. Again, subject to the trust instrument, where a trust has derived a capital gain, it should be possible to delay any decision at all until 31 August immediately following the end of the relevant financial year pursuant to provisions under the tax legislation.
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