Unitholders agreement

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When is a unitholders agreement necessary?

A unitholders agreement is generally recommended where there is more than one unitholder in the same unit trust; even if the other unitholder is a related party. This agreement confirms the terms and conditions of the relationship between unitholders and covers matters that are not adequately or appropriately addressed in the unit trust deed. This is important to minimise any future uncertainty, dispute or friction, should there be a difference of opinion between the parties in respect of how the unit trust should be operated or how a unitholder can transfer their units, etc.

What’s included

• Covering letter
• Trustee resolutions (for the trustee of the unit trust and unitholders)
• Unitholders Agreement
• Unitholders Agreement Memo

SMSFs and Unitholder Agreements

Our unitholders agreement is ideally designed where one or more SMSFs are unitholders. The agreement provides special provisions to guide SMSF unitholders on potential contraventions of the Superannuation Industry (Supervision) Act 1993 (Cth) such as the in-house asset test, charging of assets and arm’s length test. Our lawyers can tailor an agreement to your specific needs.

A unitholders agreement, among other things, can cover:

•  The core purpose and objectives of the unit trust, eg, to acquire and hold a property for long-term. Some unit trusts impose a requirement that the property is to be sold at the end of every say 5 years unless a 75% majority of unitholders vote to retain the property.
• What happens when a unitholder wants to transfer or dispose of units in the trust to a related party of third party.
• What restrictions or limits apply to the unit trust’s activities when an SMSF invests in units to minimise any SMSF trustee contravening superannuation law, eg, the unit trust cannot borrow or its assets cannot be used as security and a Unitholders Agreement may also seek to preclude a unitholder using their units as security for any loan, etc
• Many unit trust deeds do not have adequate provisions regulating:
  • How units are valued and the process of how other unitholders obtain the first option to acquire from other unitholders, eg, an independent valuer determines net market value and whether unitholders have flexibility to transfer to a related party without obtain the other unitholders.
  • What happens upon a unitholder suffering an event such as bankruptcy, insolvency, death, divorce or disablement, etc, and whether the other unitholders obtain a right to purchase that unitholder’s units
  • What happens when there is a deadlock, dispute and provides for alternate dispute resolution processes

For more information and related articles

For more information on the benefits of this type of agreement, click on the article listed below:

• Should an SMSF have a unitholders agreement?