Deregistration of SMSF corporate trustee

26/04/2018

What happens when the corporate trustee of a SMSF is put to bed, but it’s not yet bedtime?         Jeff Song explains.

Companies in Australia are legal entities – virtual people.  They are capable of doing many things in their own right. This includes acting as the trustee of a self managed super fund.

Over time, this artificial personality of companies has become very natural to us. However, many of us are still unfamiliar with the consequences of deregistering a company especially when it’s been acting as an SMSF trustee.

Consequences of de-registering a trustee company

If a company is acting as the trustee of a SMSF, its deregistration may cause issues that could be difficult and costly to resolve and should not be taken lightly.

Upon deregistration of a company, it can no longer do anything on its own right and loses its right to own property. In such event, the Commonwealth normally takes legal ownership of all trust property in the name of the deregistered company. Legal ownership of non-trust assets on the other hand vests in ASIC. 

What to do in these circumstances?

 In order to resolve this, an application to ASIC or the Supreme Court can be made to reinstate the company.

Reinstatement will restore a company to the ‘registered’ status as if it was never deregistered.

Reinstatement can be difficult and costly so a different way of dealing with the issue is to simply change the trustee of the fund.  This will depend in part on the current terms of the SMSF trust deed.  It may even be possible to effect a change of trustee of the SMSF and to simply transfer all trust property to the new trustee.

This transfer is likely to be more complicated when the property is land. Queensland, Victoria and Western Australia allow such transfer application to be made direct to the relevant state’s titles office.  In other states, application for transfer needs to be made to the Commonwealth who has the legal ownership of the trust assets of the fund.

Compliance issues

It is a requirement under the superannuation law that all members of an SMSF are either appointed as trustees or directors of a corporate trustee. If no replacement trustee is appointed prior to, or at the time of the deregistration of the corporate trustee, there is a risk of the fund being declared a non-complying fund which may have detrimental tax and other penalty consequences for the fund.  

(In)voluntary de-registration

The directors of any company considering deregistration should seek specific legal advice from specialist lawyers before deciding to voluntarily deregister a company.  This is particularly so where the company is acting as a trustee of a fund.

The most important thing to consider in any deregistration is what the past assets held by the company were and whether those assets have all been properly transferred elsewhere before the deregistration is sought.

In some instances, ASIC may initiate and deregister a company (i.e. when the company has not paid its annual review fee within 12 months of the due date or if the company has not responded to a Company Compliance Notice).

It is important therefore to ensure that the company meets its regulatory obligations (including to pay its annual fee and comply with all notices from ASIC). For this reason, directors also need to keep the company’s registered address up to date.

If you are in a situation where your fund’s corporate trustee is improperly deregistered, for whatever reason, speak to one of our SMSF lawyers here at Townsends Business & Corporate Lawyers on (02) 8296 6222 or email us at info@townsendslaw.com.au to see how we can assist.