A DBA Lawyers company offers many advantages that are not found anywhere else. These benefits are present for all companies, even if the company is not an SMSF trustee.
New companies through DBA Lawyers are provided with our constitution at the outset and can enjoy all the benefits discussed here straight away. On the other hand, existing companies can utilise our constitution upgrade service to obtain an up to date company constitution with the added features set out.
Advantages for all companies
Ordering a DBA Lawyers company provides the following general advantages.
- Successor directors and value-added template — A director can appoint one or more successor directors to step in as directors on the incapacity or death of the director. A template successor director form is provided with every company for no extra charge. Few to no other companies allow for successor directors or provide the documents to implement them.
- Division 7A loan agreement — A Division 7A loan agreement is included in case a debit loan arises and to ensure a written loan agreement can be documented.
- Executor or attorney under enduring power of attorney stands in a shareholder’s shoes — A shareholder’s legal personal representative (‘LPR’) is fully empowered to exercise shareholder rights (such as voting in directors). The general law requires LPRs to be empowered in this way, but many other constitutions do not clearly deal with this issue.
- Flexibility, not rigid formality — The DBA Lawyers constitution contains many provisions to prevent decisions and meetings from coming unstuck due to lack of formality. Many other constitutions are rigid and require onerous procedures to be followed.
- Expansive powers to execute documents — A DBA Lawyers constitution allows a sole director to execute documents, even when they are not also a secretary. Many other constitutions follow the stricter provisions in the corporations law.
- Fair voting for directors acting for someone else — When more than one director acts in place of somebody who would have been a director, the directors in office only have the voting power of the one person who would have been a director. This is useful for succession planning (not just in the SMSF context) to ensure fairness. It can apply, for example, when attorneys under an enduring power of attorney are directors in an SMSF member’s place. Many other constitutions do not deal with this fairness issue, resulting in the other parties being outvoted.
- Compliant and backed by lawyers — The DBA Lawyers company complies with the latest laws and is supported by a dedicated team of lawyers.
- Detailed memo — A detailed memo on the operation of a company and directors’ duties and shareholders’ rights is included. This document can assist clients to understand what they need to know when they have a company.
- Flexibility in share classes — The constitution has flexibility to issue various share classes. This can allow planning for differentiated voting, dividend and capital rights. Also, ‘Guardian’ shares, for example, allow a guardian to exercise control in the event of dispute. The different shares are summarised below.
|Right to vote||Right to dividends||Right to repayment of share price on winding-up||Right to distribution of surplus assets on winding-up|
- Issuing SMSF shares reinforces the special requirements for qualifying as a special purpose SMSF company and assists in ensuring these are not inadvertently breached. However, SMSF shares are not strictly required for the company to qualify as a ‘special purpose company’ (the constitution itself contains appropriate provisions to ensure the company qualifies).
- Broadly, Guardian Shareholders must be present at meetings and must consent to any decision before it can be passed. Guardian Shareholders also have a deciding vote in the event of deadlock).
Advantages for SMSF trustees
DBA Lawyers is recognised as Australia’s leading SMSF law firm. Most of the benefits already described have been included to cover SMSF and non-SMSF situations. However, there are also some SMSF-specific benefits, including the following.
- Special purpose company to normal company switching provision — If a company wants to act as a special purpose SMSF trustee (or cease to act as a special purpose SMSF trustee), there is no need to incur costs to change the constitution. The DBA Lawyers constitution has a switching provision that applies when needed. When acting as a special purpose company, a reduced ASIC annual fee (approximately an 80% discount) applies.
- SMSF guide for superannuation compliance — A handy ‘SMSF Guide’ assists in complying with superannuation rules that are often overlooked.
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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional.