Business News

Legal case dilutes formality of trustee changes

A recent court decision has potentially lessened the formality needed to strictly adhere to the requirements of an SMSF trust deed when removing or appointing trustees of the fund.

In the case of Perry v Nicholson, a father removed his daughter as a trustee of his SMSF and appointed his de facto partner as her replacement. The procedure was executed by way of a minute signed by all of the parties involved, but was further complicated by the wording that stated the relevant individuals had “decided to appoint trustee” and “decided to remove trustee”.

The validity of the removal and appointment was challenged with respect to the control of the father’s death benefit and the court decided the process satisfied the requirements of the fund’s trust deed.

The trust deed dictated the removal and appointment of a trustee of the SMSF had to be done in writing and the continuing trustees had to be advised of the change immediately.

The court held “the ‘minute’ satisfied the trust deed as it was signed by all relevant parties – so was a ‘in writing’ and by signing the ‘minute’ the continuing trustee had notice of the removal/appointment”.

Commenting on the decision, Townsends Corporate and Business Lawyers questioned whether the acceptance of a less formal trustee and appointment removal process would satisfy third parties.

The legal firm also pointed out the case was interesting as the words “decided to appoint” and “decided to remove” were interpreted to mean appoint and remove, and the minute constituted notice in writing because it had been signed by all the relevant parties.

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