When a party to a business sale contract is a trust (normally a discretionary or unit trust) it is important to reflect this correctly when completing the buyer’s or seller’s details on the contract. A failure to do so could create ambiguity as to the correct party entering into the contract. This may leave the other party high and dry if things go bad.
Every trust must have a trustee. This is the entity that controls the trust and is the legal owner of all trust property (owning it for the benefit of the beneficiaries of the trust). Therefore, the business broker must simply find out:
- the complete name of the trust (e.g. The Johnson Family Trust);
- the complete name of the trustee(s) (e.g. JMT Enterprises Pty Ltd A.C.N 456 789 123).
Be careful to ensure that all trustees are ascertained as there could be more then one. This information is found in the trust deed itself. Every trust has one. This is the document that sets out the powers and responsibilities of the trust. What it can and cannot do.
Therefore, in the example given above, the party would be noted on the contract as: JMT Enterprises Pty Ltd A.C.N. 456 789 123 ATF The Johnson Family Trust. The trustee is always written first and the acronym “ATF” stands for “As Trustee For”. When the trustee is a company, inserting the ACN is also recommended for identification purposes.
Getting this right upfront could avoid a big problem for a party and at the very least some mucking around to get the information right down the track.
Joe Kafrouni, Legal Practitioner Director, Kafrouni Lawyers
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