Purchasing a trust company

Sounds complicated! I am assuming that a company (say xyz pty ltd) is the trustee of a trust (abc discretionary trust). And you are negotiating to buy a 90% share in xyz pty ltd?

I would think that how the company distributes profits depends on the trust deed of the trust. If you are not listed as a beneficiary of the trust then I dont think that you can recieve profit distributions so even though you own the company (which sounds like the trustee) you dont really control the coffee store.

Another thing would be the appointer of the trust can fire the trustee at any time. So after you take a 90% share of the comany (the trustee), the appointer could fire the trustee and hire another company as the trustee. Which leaves the company that you own 90% in control of nothing and you royally screwed!!

This is one for the lawyers out there!

Cheers,
Luke

Sounds like you misunderstand trusts.

As Luke said you could buy the company, but the company is only the legal owner and the ultimate owners are the beneficiaries of the trust. You probably are not a beneficiary and if that is the case it will cause you serious problems as the trustee cannot distribute any profit to you or your family.

You could get around this by amending the deed. But this is likely to mean the trust is converted into a new trust and stamp duty and CGT on all the assets of the trust.

It is also very dangerous to buy a company – you will be taking extreme risk with any legal liability that may arise. That company may have entered into a contract for example and if you take over the company will be bound.

What you need to do is to buy the business and to set up your own company and trust to take over the existing lease and assets etc.

Dont do it that way. You will be putting yourself at great risk.

There may not be any stamp duty at all, it would depend on what the assets are and the State the business is located in. Your solicitor can advise you. So changing the trust and causing a resettlement may not be a big issue from a stamp duty point of view. But there is also CGT to consider.

What you should be concerned about it legal liability. How do you know there are not legal issues which haven't arisen yet? You could enter a contract for the current people to indemnify you, but what if they went bankrupt. An extreme eg maybe but what if the commpany didn't pay GST for the past year. You jump on board and they ATO gives the company a bull for $200k. Company cannot pay so they may come after the director – which could be you.

Take my advice and seek legal advice about this. You will not find a solicitor who would recommend you take over a discretionary trust and trustee company. It would be costly to set up too. You would have to change directorships, share holdings, trustees maybe, appointors and beneficiariies.