Alternative recourse is available to SMSFs when the company acting as the fund’s corporate trustee has been deregistered, with the appointment of new corporate trustees an option, according to a law firm.
Nicoll Legal principal David Nicoll said while the court can make an order that ASIC reinstate the registration of a company under section 601AH(2) of the Corporations Act if it fits various criteria, a recent court case illustrated a simpler option could achieve the same desired result.
Speaking at a SuperCentral breakfast seminar in Sydney last week, Nicoll quoted a 2017 court case where an estate had been left to the Victor Chang Cardiac Institute charity and where the assets of the deceased’s estate included her interest as the sole member of an SMSF.
The deceased established the fund in June 2007, appointing a corporate trustee, and the company was deregistered in 2015, a little over four months after the sole member’s death and around two years before the grant of the letters of administration to the plaintiff.
“There was a corporate trustee; the corporate trustee had actually been deregistered prior to the member passing away, so there were a number of issues that the court needed to consider,” Nicoll said, adding the application was brought by a party seeking either the reinstatement of the company and the appointment of a new director or the appointment of new trustees over the SMSF.
While new trustees could ordinarily be appointed under the power of appointment bestowed by the trust deed constituting the fund, the nature of this particular trust deed created hurdles to that option.
“What the court did in this case was [because] there were some difficulties with having the company reinstated and the director appointed to the company, the court said, well, rather than going through that process because it may or may not affect control and therefore allow the estate to be distributed, they looked at the alternative and that was to appoint the new trustees,” Nicoll said.
The court could appoint the new trustees under the power it has under section 70 of the Trustees Act, and this was a more expedient route through the process, he said.
