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Unit Trust Deed

Unit Trust Deed
Document Type: Microsoft Word
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Unit Trust Deeds fall within the definition of 'managed investment schemes' as defined under Section 9 of the Corporations Act 2001 (cth). Therefore, this Unit Trust Deed should only be used if there are no more than 20 investors (unit holders). Also it should not be used if the Unit Trust is being promoted as part of a business of promoting managed investment schemes. Also note that the Australian Securities and Investments Commission (ASIC) may require the trust to be registered under Section 601ED of the Corporations Act 2001(Cth) if there are more than 20 members (unit holders) or there are related unit trusts or it is being promoted by a person in the business of promoting managed investment schemes. LawLive strongly recommends that you should not use this document to set up a unit trust except in conjunction with and on the advice of your lawyer, accountant and tax adviser.

Unit trusts are a form of trust recognised by law whereby a trustee (usually a company) will own certain assets eg. Property or a business, it will run that business or engage others to conduct the business (managers), and it will hold its ownership of that property or business beneficially for the Unit Holders according to the number of Units that they hold. A unit trust allows several people or companies to collectively share through specific percentages (the number of Units issued) in the benefits of an asset by having it acquired by a trustee and held for them in those percentages.

Unless there is a clause in the unit trust deed that limits the trustee's rights of indemnity, the trustee can normally claim for any liabilities from the Unit Holders. LawLive has included a clause that limits the trustee's right of indemnity to the trust assets and excludes any right that the trustee might have to claim from the Unit Holders.

This trust deed provides for meetings of Unit Holders and also that certain decisions of the trustee can only be made if the Unit Holders by resolution approve. The assets are held on trust until the distribution date which is called the vesting date. On the vesting date, the trustee must distribute all the assets to the Unit Holders in accordance with their percentage of Units held at that time. LawLive has included a provision that allows the trustee to partly distribute trust assets before the vesting date. Under the unit trust deed, Unit Holders share in the income of the trust for each year and this must be distributed by the trustee. They also share in the capital ie. The fund on any distribution of assets.

Units are usually issued for a unit price. When the trust is established by this deed, Unit Holders must contribute the amount which equals the price of the Units they are going to receive in the trust; for example, if you were to receive One thousand units and each unit had a price of $2.00 then your contribution as a Unit Holder would be $2,000.00 and you would receive a Unit Certificate for One thousand fully paid units.

The use of unit trusts can have considerable taxation and legal implications. LawLive recommends that you first discuss whether it is appropriate for you to use a unit trust for your proposed venture with your lawyer, your accountant and your tax adviser. They will be able to advise on the advantages and disadvantages of using a unit trust.

You should also note that if you are a director of a trustee company you can be personally liable to third parties for the liabilities of the trust in certain circumstances. See Section 197 of the Corporations Act 2001.

ADDITIONAL DOCUMENTS IN LAWLIVE: see Directors' Minute for the appointment of a trustee to a unit trust. Also see Directors' Minute for the allotment/issue of units in a unit trust or the approval of transfer of units in a unit trust. LawLive also has Checklists for executing a unit trust deed which are attached.

This Unit Trust Deed includes the following provisions:

1. Definitions
2. Creation of the Trust
3. Trustee's right of indemnity
4. Transfer of Unit
5. Cancellation of Units
6. Register of Unit Holders
7. Rights attaching to units
8. Continuation of the trust and distribution of the fund
9. Amendment of the Trust
10. Powers of the Trustee
11. Trustee dealing with the trust
12. Retainer of professionals, consultants and contractors
13. Covenants by the trustee
14. Retirement and removal of trustee
15. Appointment of auditor
16. Notices to unit holders
17. Meetings of unit holders
18. Remuneration of trustee; and attachments:
SCHEDULE ONE (unit Holder details); SCHEDULE TWO (application For Units); SCHEDULE THREE (transfer Of Units); SCHEDULE FOUR (request For Cancellation Of Units); SCHEDULE FIVE (unit Certificate); SCHEDULE SIX (form Of Proxy For A Company Unit Holder/Form Of Proxy For An Individual).

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