Contents

Chapter 8
Corporate trustees and insolvent trusts

Introduction

8.1In our Fifth Issues Paper we examined a particular type of trust used in business, the trading trust.182 By “trading trust” we were generally referring to a structure in which the trustee of a trust is a limited liability company, instead of a natural person. A particular feature of such arrangements is commonly that the corporate trustee holds few or no assets in its own right, with the assets instead held on trust for the beneficiaries.

8.2This chapter will address several of the same issues raised in the Fifth Issues Paper discussion on trading trusts. However, as we outline below, we now consider that the issues and possible solutions apply more broadly than just to the particular structure described above.

8.3This chapter considers the following areas:
(a)the definition of a trading trust and the scope of any reforms;
(b)the trustee’s right to indemnity;
(c)disclosure of trustee status;
(d)the liability of directors of corporate trustees;
(e)appointment of liquidators or receivers for trusts; and
(f)insolvent corporate trustees.
8.4There are also proposals relating to the appointment and removal of corporate trustees in chapter 6.183
182Law Commission Court Jurisdiction, Trading Trusts and Other Issues: Review of the Law of Trusts – Fifth Issues Paper (NZLC IP28, 2011) at chs 6-8. Key submitters on these issues were Chapman Tripp, Perpetual, the Trustee Corporations Association, the New Zealand Law Society (NZLS), Taylor Grant Tesiram, Greg Kelly, Jeff Kenny, KPMG, the Inland Revenue, the Ministry of Social Development and Dirk Hudig.
183See [6.15]–[6.23].