A technical specialist has highlighted the distinction between alternate and successor director arrangements as to how they operate within an SMSF corporate trustee in the event of an incumbent office holder’s death.
Accurium senior SMSF educator Anthony Cullen noted the appointment of an alternate director is effectively only to cover the temporary absences of relevant individuals.
“Generally an alternate director is where one director may still be appointed, but there are going to be times where they will be unable to act,” Cullen told attendees of an Accurium practitioner webinar held last week.
“Say, for example, I spend a lot of time travelling overseas for work and so I want somebody to be able to make decisions for the company [controlling the SMSF] while I’m away. So I might set up an alternate director [with the instruction] in the instance I’m overseas my wife will be the alternate director.
“So basically when I’m in Australia, I’m the one making the decisions, but when I’m overseas my wife is the one making decisions.”
He pointed out the dynamic of the relation between the two individuals involved.
“The thing about alternate directors is they are intrinsically linked to the main director. So if I’m removed [as a director] because I die, then my wife is removed as well. [Basically] she can’t be an alternate if I’m not the original director because I’m dead,” he explained.
He then emphasised how this type of contingency plan differs from the appointment of a successor director.
“[The successor director] goes back to that concept [stating] if a particular person passes away, [another] person has been identified who will step into the role and become the director,” he indicated.
He warned appointing a successor director did come with procedural consequences for the corporate trustee company.
“[A successor director arrangement] might be able to bypass the shareholder voting power [determining the future structure of the company],” he said.
