The Consequences of Deregistering a Trustee Company in Sydney
If a trustee company used by trusts and superfunds in Sydney is deregistered, it raises a crucial question that demands the attention of accountants in Sydney. They need to be aware of whether the trust relationship will persist, as this knowledge is essential for providing accurate advice to their clients. In some cases, the corporate trustee can face deregistration by ASIC due to failure in paying the annual review fee, highlighting the significance of understanding the potential consequences.
Applying for Voluntary Deregistration, Potential Errors and Legal Complications
In certain circumstances, it is possible for you to apply to ASIC to deregister a company. This option becomes available when the company has minimal assets and liabilities, and all shareholders agree to proceed with deregistration of the company. The process itself involves a straightforward one-page application, simplifying the overall procedure. However, sometimes errors occur, and the wrong company may be deregistered, or a trustee company may be deregistered without considering the trust relationship. For more information on how to apply for voluntary deregistration, click here.
When a company undergoes deregistration, it is important to consider the legal complications outlined in S.601AD (1) of the Corporations Act. According to this provision, the company ceases to exist and under subsection (1A), all assets that the company held before deregistration vest in the Government. This includes all assets that the company held on trust (i.e. if acting as a trustee). This comprehensive provision emphasizes the necessity of understanding the potential consequences of deregistration on both the company and any associated trust relationships.
So, if the trustee company’s life comes to an end upon deregistration, does the trust’s life also come to an end? Not. This is because of a fundamental principle in equity that states, “A trust will not fail for want of a trustee”. This principle safeguards the continuation of the trust, ensuring its persistence despite the trustee company’s deregistration. Reaching out to accountants in Sydney might help you understand the fundamental principle better.
Potential Role of ASIC and Options for Accountants in Sydney
In these circumstances, ASIC may step in as the potential trustee. However, it is important to note that the trust may enter a state of uncertainty or limbo since ASIC is unlikely to actively engage in trust administration. While ASIC could assume the role of trustee, the practicality of this arrangement may pose challenges, potentially leaving the trust in a state of temporary uncertainty until suitable measures are taken to address the trustee vacancy.
To address this problem, accountants in Sydney should be aware of several options:
- Apply to ASIC to reinstate the deregistered company;
- The Appointer of the trust could appoint a new trustee (depending on the trust deed);
- Apply to the Supreme Court for the appointment of a new trustee; and,
- Apply to ASIC to transfer the assets to the beneficiaries of the trust.
Accountants in Sydney should be vigilant when dealing with the deregistration of a company, ensuring that it holds no assets before proceeding with deregistration. Care must be taken to avoid errors, such as deregistering the wrong company or deregistering a trustee company without considering the trust relationship. Proper guidance and consideration of the available options are crucial in resolving any issues that may arise from trustee company deregistration and maintaining the integrity of the trust.
If you have any questions or concerns regarding your company trustee, the Kreston Stanley Williamson team is here to assist you. Please don’t hesitate to reach out to us for guidance and discussion.
Author – Zane Grigg
*Correct as of 16 December 2021
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek specific advice relating to your particular circumstances. Liability is limited by a scheme approved under professional standards legislation.
