It is not uncommon for SME companies to be trustees of trading
trusts. It is a common asset protection device. Accountants and
lawyers love them. The trading company will act as a trustee of a
trust, with beneficiaries entitled to the income and net assets of
the trustee company. The corporate trustee is often a shell in its
non-trustee capacity, holding only trust assets. The trust deed
governing the trust almost always excludes any obligation on a
beneficiary to indemnify the trustee. Beneficiaries are usually
family members of the directors of the corporate trustee.
The risk
Trusts add a layer of complexity and risk for third parties
dealing with the trustee company, as the trust assets are held by
the trustee on trust for its beneficiaries and are not always
available to meet debts incurred by the trustee.
