Previous posts have looked at various issues that arise in relation to trustee companies (let me know if you would like access to any of these posts).
One issue that comes up relatively regularly is the way in which the trustee indemnity provisions work where the same company acts as trustee for multiple trusts.
Briefly, the strict legal position is that the right of indemnity of a trustee is limited to the assets of the trust in relation to which the liability was incurred.
In other words, where a company is a corporate trustee for multiple trusts, a claim or liability in relation to one trust should not expose the assets of the other trust.
Practically however, if the trustee becomes insolvent it can be difficult to establish the beneficial ownership of particular assets to the liquidator’s satisfaction, particularly given some third parties such as ASIC and the NSW Titles Office do not record the name of the beneficial owner.
There are a number of commercial issues that arise in relation to the same company acting as trustee for multiple trusts and some of these will be considered in next week's post.
** for the trainspotters, the title here is riffed from the John Lennon song that has a line mentioning multiple plays, namely ‘Beautiful Boy’.