A corporate trustee SMSF may be able to call upon state trustee and guardian services to step in as a legal personal representative for a trustee director who loses mental capacity, according to a superannuation legal expert.
Townsends Business and Corporate Lawyers solicitor Elizabeth Wang said having the trustee and guardian service step in was a possibility in New South Wales (NSW) even though the NSW Trustee and Guardian did not meet the definition of an individual trustee or director of a corporate trustee.
“The NSW Trustee and Guardian does not meet the definition of an ‘individual trustee’ as defined in the SIS (Superannuation Industry (Supervision)) Act and cannot be considered an ‘individual’ for the purpose of section 201B(1) of the Corporations Act. Instead, it is a statutory corporation and its status is that of a NSW government agency,” Wang explained.
“Therefore, the NSW Trustee and Guardian cannot be appointed as a co-trustee of an individual trustee fund or as a director of a company.”
She pointed out, however, where the trustees of the fund were individuals, the NSW Trustee and Guardian may formally appoint either a delegate or its delegate may sub-delegate an individual as a co-trustee of an individual trustee fund.
This created two possible solutions for a corporate SMSF seeking to replace a trustee director who has lost capacity, she noted.
“The NSW Trustee and Guardian may also formally appoint a delegate or its delegate may sub-delegate an individual to act as a director who is authorised to exercise in part the powers and functions conferred on the NSW Trustee and Guardian,” she said.
According to Wang this can occur as the NSW Trustee and Guardian Act 2009 gave the NSW Trustee and Guardian power to “prepare instruments that create powers of attorney and carry out professional services in connection with powers of attorney”.
“Alternatively, the NSW Trustee and Guardian could delegate an individual to take up the role as director of the corporate trustee of the fund. The appointment of the individual as a director of the corporate trustee would also need to satisfy the definition of a legal personal representative under the SIS Act for the fund to continue to satisfy the definition of [an SMSF],” she said.
In addition, she advised trustees to review the fund deed to determine whether the member loses directorship automatically once mentally incapacitated.
“The governing rules of a fund’s trust deed should also be reviewed when it comes to who can be appointed as a trustee/director of a fund.”
“The governing rules of a fund will usually mirror the SIS Act requirements in relation to the appointment of a trustee/director of a fund and contain provisions when it comes to who can act as a legal personal representative of a fund and when a person ceases to be a member and trustee/director of a fund.”