Recent View posts have considered a number of aspects of the ASIC requirement that the beneficial ownership of shares in a private company be disclosed.
One potential difficulty in relation to ASIC’s requirements in this regard involves situations where the legal owner holds the share on an undisclosed trust for another party or entity.
In this type of situation reading of the relevant ASIC provisions suggests that the company report should disclose the fact that the legal owner holds the share non beneficially.
This said, in a true undisclosed trust situation most advisers will recommend that the ASIC records in fact are completed in a way that shows the legal owner is also the beneficial owner.
If this approach is adopted then full supporting documentation should be retained by the legal owner to rebut the presumption created by the way in which the ASIC records are completed.
** For the trainspotters, ‘presumption’ is a key word from Midnight Oil’s song from 1998, ‘Blot’ see here:
Previous posts have considered the issues about varying a trust that has not power to vary.
Previous posts have also looked at various aspects concerning the ability to vary trust instruments.
One iteration that is important to remember relates to attempts to vary problematic power of variation.
In other words, if a trust instrument has a variation power that is considered too narrow to achieve wider objectives, is it possible to use the pre-existing variation power to vary that clause of the trust instrument and create a wider power or variation?
As explained by the mantra ‘read the deed', the answer to this question will often depend on the exact terms of the trust instrument.
Very broadly however, the position appears to be as follows:
If there is a restriction on how the variation power may be exercised, it is generally not possible to vary the power to remove that restriction.
In other words, a trustee cannot implement steps indirectly to achieve something that is prohibited via direct action.
The reason for this conclusion is largely based on the rule that a trustee has an overriding duty to comply with the terms of the trust instrument as articulated on the settlement of the trust.
The corollary is also true – i.e. if the power of variation expressly contemplates itself being varied, then the trustee should be able to do so.
As is almost always the case with the trust deeds, there are a number of related potential issues that should be considered depending on the factual matrix.
For example, if a particular trust instrument prohibits distributions to a certain person, but not to a trust of which that person is a potential beneficiary, would a ‘back to back’ distribution from the initial trust to the second trust and then to the relevant person constitute a breach of trustee duties?
There is certainly case law to support an argument that where a trustee takes steps to achieve an ulterior purpose, this can constitute a ‘fraud on the power', which means the arrangements may be held to be void by a court.
As usual, please make contact if you would like access to any of the content mentioned in this post.
** For the trainspotters, the title of today's post is riffed from the Midnight Oil song 'Dreamworld’ – inspired by the Cavill Hotels and Star Hotel mentions last week and the icon line ‘the breakfast Creek Hotel is up for sale’.
Last week’s post considered various aspects of the rules in relation to assets owned as joint tenants.
At law there is a presumption that where property is gifted to two or more people, they receive that property as joint tenants (subject to any contrary intention).
A number of jurisdictions have also enacted legislation confirming this outcome, including Western Australia, South Australia and Victoria.
In New South Wales and Queensland however there is legislation that ‘flips’ the position at law.
This means that where real property is gifted to two or more people in those jurisdictions it will be deemed to pass to the parties as tenants in common, in equal shares.
** for the trainspotters, the title today is riffed from the Midnight Oil song ‘Blot’. View hear (sic):
