Using a corporate trustee can enhance the protection offered by a trust, making it a highly effective structure for asset protection. This holds true, particularly for accountants in Sydney.
If a corporate trustee incurs a liability in excess of the trust’s assets, the corporate trustee can be placed into administration or liquidation without the directors or shareholders being personally liable.
While the individual directors of the corporate trustee would not usually be liable for the debts incurred by the corporate trustee, there are exceptions where the directors have:
- Caused the corporate trustee to act outside its powers
- Signed a personal guarantee or indemnity
- Been negligent in their duties
- Allowed the corporate trustee to trade whilst insolvent
- Committed fraud or misleading or deceptive conduct
- Breached directors’ duties, including contravening the law
- Not remitted the correct employee PAYG withholding tax or superannuation
The Corporations Act 2001, section 197, also deals with a director’s personal liability and where the corporate trustee is to be indemnified out of the trust’s assets. It should be noted that a director will not be liable under this section merely because there are insufficient trust assets out of which the corporate trustee can be indemnified.
If you are a corporate trustee director concerned about your personal liability, please get in touch with us. It is safer to act early in the event something has gone wrong.
Kreston Stanley Williamson Team
*Correct as of October 2019
*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.