Companies in Australia are legal entities – virtual people. They are capable of doing many things in their own right, including acting as the trustee of a self-managed super fund.
Many SMSF trustees are still unfamiliar with the consequences of deregistering a company especially when it’s been acting as an SMSF trustee.
Consequences of deregistering a trustee company
If a company is acting as the trustee of an SMSF, its deregistration may cause issues that could be difficult and costly to resolve and should not be taken lightly.
Upon deregistration of a company, it can no longer do anything on its own right and loses its right to own property. In such event, the Commonwealth normally takes legal ownership of all trust property in the name of the deregistered company. Legal ownership of non-trust assets on the other hand vests in ASIC.
What to do in these circumstances?
In order to resolve this, an application to ASIC or the Supreme Court can be made to reinstate the company.
Reinstatement will restore a company to the ‘registered’ status as if it was never deregistered.
Reinstatement can be difficult and costly so a different way of dealing with the issue is to simply change the trustee of the fund. This will depend in part on the current terms of the SMSF trust deed. It may even be possible to effect a change of trustee of the SMSF and to simply transfer all trust property to the new trustee.
This transfer is likely to be more complicated when the property is land. Queensland, Victoria and Western Australia allow such transfer application to be made direct to the relevant state’s titles office. In other states, application for transfer needs to be made to the Commonwealth who has the legal ownership of the trust assets of the fund.
Compliance issues
It is a requirement under the superannuation law that all members of an SMSF are either appointed as trustees or directors of a corporate trustee. If no replacement trustee is appointed prior to, or at the time of the deregistration of the corporate trustee, there is a risk of the fund being declared a non-complying fund which may have detrimental tax and other penalty consequences for the fund.
(In)voluntary deregistration
The directors of any company considering deregistration should seek specific legal advice from specialist lawyers before deciding to voluntarily deregister a company. This is particularly so where the company is acting as a trustee of a fund. The most important thing to consider in any deregistration is what the past assets held by the company were and whether those assets have all been properly transferred elsewhere before the deregistration is sought.
In some instances, ASIC may initiate and deregister a company (i.e. when the company has not paid its annual review fee within 12 months of the due date or if the company has not responded to a Company Compliance Notice).
It is important therefore to ensure that the company meets its regulatory obligations (including to pay its annual fee and comply with all notices from ASIC). For this reason, directors also need to keep the company’s registered address up to date.
Jeff Song
Solicitor
Townsends Business & Corporate Lawyers
M: 0432 162 318
jeff@townsendslaw.com.au
www.townsendslaw.com.au