Unit trust deed

Unit trust deed

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This precedent is a template unit trust deed.

This precedent is not adapted for use as a security. If use of trust for security is preposed, there are many additional issues including the application of the Personal Property Securities Act 2009 (Cth)

There are various ways a unit trust may be constituted, some involving the appointment of a separate manager. In this precedent, the role of the manager is joined with that of the trustee. A unit trust created by this precedent is constituted by a deed between a trustee and the "initial unit holder" who contributes an amount of money which establishes the trust and creates units held by the initial unit holder. Thereafter, units can be issued to the other investors.

This method of constituting a unit trust ensures there is a trustee, trust property and a beneficiary, and avoids problems surrounding the definitions of "company" and "partnership" in section 995-1 of the Income Tax Assessment Act 1997. Under section 601ED of the Corporations Act 2001 (Cth), the unit trust must be a registered managed investment scheme if there are more than 20 unit holders (see clauses 4.5(b) and 4.6).

Throughout, the precedent provision is made to enable the person drafting the deed to tailor the deed to the particular needs of the parties by requiring the holders of not less than a certain percentage of units to consent to or initiate various actions. Clear instructions should be obtained in drafting these clauses; ie alternative clauses 7.1 and 8.2 and inserts for clauses 13.3, 14.1(b), 14.1(c), 15.1(d), 17.2, 18.1, 18.2, 18.5, 18.9 and 22.1(a). External unit holders may also require a shareholding and perhaps a directorship in the trustee, and/or a combined unit holders and shareholders agreement to regulate further the affairs of the trust and trustee including obligations to provide loans, capital, guarantees, restrictions on external interests and rights on default.

As to the investment of trust funds, see clause 20. It will be necessary to ascertain whether clause 4.5(c) with respect to issue of unit’s pre-emption rights is to be inserted in the trust deed. This provision is in similar terms to the replaceable rule in section 254D of the Corporations Act 2001 (Cth).

This precedent has been authored for LexisNexis by Selwyn L Black, Peter D Carroll, Carroll & O’Dea and updated by Jane Garber-Rosenzweig, Gable Lawyers.

This precedent is prepared with the assistance of Specialist Editor Stephen Newman, Executive Counsel, Ponte Earle.