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NSW Trustee Advice - (Company as Trustee)

Discussion in 'Commercial Law Forum' started by LawTapper, 11 October 2017.

  1. LawTapper

    LawTapper Member

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    Hi

    We're looking to set up a Discretionary Trust to provide protection for our business (currently set up as a company, with 2 even shareholders that are a couple). We would like the business protected from any personal debts and the opposite so we're protected personally from any company/business issues that may arise in the future.


    We're questioning whether we would need to setup a new company to act as the trustee or if we can use the current company that the business is operating under.


    Note: the company currently has no debt

    Note: the directors currently have debt
     
  2. Rob Legat - SBPL

    LawTap Verified Lawyer

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    You should go and get some advice on your particular position - because you are already 'protected' in the way stated. At law a corporation is a legal entity, able to incur debts in its own name. That means where a company has incurred a debt in its own name, it is liable - not anyone else (unless there is some other 'layer' added, such as a director's guarantee). The only liability shareholders have in a "Pty Ltd" company is the fully paid up price of their shares.

    The same is true in opposite: the company is not liable for your personal debts.

    Discretionary trusts are generally set up for income and tax reasons, not limiting liability.
     
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  3. LawTapper

    LawTapper Member

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    Hi Rob

    Thanks for your reply, our concern is if down the track any personal debts may affect the company, ie, the creditors take claim of the shares in the company.
     
  4. Tim W

    Tim W Lawyer
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    Trusts are not always and automatically
    the legal silver bullets that people think they are.
    Where did you get the idea that a discretionary trust
    was a vehicle that might suit you?

    All in all, I agree with @Rob Legat - SBPL above.
     
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  5. LawTapper

    LawTapper Member

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    Hi Tim

    Thanks for your reply, we have already setup the PTY LTD for many of the the reasons Bob mentioned.

    In regards to who advised.. We've been advised from a past accountant and lawyer that a Trust would allow more flexibility and asset protection.

    Also, after doing some further digging today some articles I've read mention the same (eg. Which Business Structure Provides The Greatest Asset Protection? | My Money Calculator)
     
  6. Rob Legat - SBPL

    LawTap Verified Lawyer

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    What you're indicating is an insolvency-level event. It's possible to lose your shares this way, and there are some measures you can take to safeguard them. It's not guaranteed, and you'll need specialised advice on how to do it - not the sort of thing you'll get here. I recommend you seek personalised advice.
     
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