Legal Tip 32: What happens to trust property if the trustee is deregistered?

What happens to trust property if the trustee is deregistered?


Sometimes companies are deregistered by accident, or by ASIC after fees are not paid etc.


What happens if that company is a trustee?


Under trust law the trust will suddenly be without a trustee which would cause the trust to fail. But there is legislation to prevent this as s 601AD(1A) of the Corporations Act provides that all the property will vest in the Commonwealth. The Commonwealth will become trustee.


It may then be possible for the Appointor to appoint a new trustee or for an application for the courts to appoint a new trustee under the relevant Trustee Act.


All this will be very expensive so don’t forget to pay those ASIC fees.

 

But a trust can only exist where there is property being held by a trustee, so the trust could fail for these reasons instead.

 

Bizzare story in the afr

Jamie Pherous' ASIC snafu could trigger $140m tax bill

 

CORPORATIONS ACT 2001 - SECT 601AD Effect of deregistration