Well, weren’t we all bowled over this week when our dear sporting leader made a Captain’s Call that stumped all of us and broke the nation’s trust!
That did get us thinking about Trusts though, a perfectly legal device often used in business for trading and protection of assets.
In the words of Steve Smith, “Do you wanna explain” is still a question we are often asked when it comes to trusts. Instead of deflecting, we’ll give you 5 (tamper free) tips on Trusts, so you never have to ask ‘Howzat?’ again!
1. You Need (sand) Paper
Trusts are not separate legal entities. They are usually created by a person (a “settlor”) by signing a document (a “Trust Deed”) that provides for a Trustee (this could be a person or Company) to hold assets on trust for the benefit of others (“the beneficiaries”). The Trust assets can be added to at any time and the written Trust Deed sets out the rights and obligations of the various parties (think of it like a Code of Conduct).
2. Don’t Hide It (certainly not down your trousers!)
If you are operating as a Trust, be open and frank about it and make it clear so there can be no misunderstandings between the trading parties. The idea is to limit your exposure to the Trust assets, not your own personal assets. The same applies to your Customer – ask if he/she/it operates as a Trustee and if so, ask for a copy of the Trust Deed and a list of beneficiaries so that you have full knowledge of the entity you are trading with.
3. Ask – Who’s in the Leadership Team?
Beneficiaries are the ones who benefit from a Trust and therein lies the rub. The Trustee may have no assets available to pay creditors since any assets are held for beneficiaries. Beneficiaries need to be identified (called out) and, if possible, personal guarantees, indemnities and charges should be obtained from them.
4. Protect Your Wickets
When dealing with a Trust (and any swinging loose balls), remember to properly register your security interest in your goods on the PPSR. The PPS Act is highly prescriptive, if you don’t properly register against the Trust’s ABN you may be no-balled and consequently lose your ownership in the goods if your Customer becomes insolvent.
5. Team Changes
When dealing with a Trust, make sure you regularly review to ensure that the Trustee hasn’t been changed without you being notified. A condition and indemnity in your terms requiring that you be notified of any changes to the Trust Deed together with regular ABN checks may help you avoid a loss.
The Over View
Leaders are there to, well…. Lead. That means abiding by the rules of the game whether the covers are off or play has been interrupted. Your team looks to their leader to make decisions about how to play the “trust game”. By getting on the front foot with Trusts, setting the boundaries and performing well on the field, you can minimise any damage to your business.
Play starts now!
For more information, contact Terry Ledlin, Special Counsel
Direct line: 02-8488-3383
Ledlin Lawyers’ articles are intended as general information and commentary and should not be used or relied on in place of legal advice. Please seek formal advice on particular transactions, circumstances and matters related to any articles, blog posts or case studies posted on this website.