Aintree Group Legal’s Series on Trusts – Part 4
As part of Aintree Group Legal’s ongoing series on Family Trusts, this week we look at the role of corporate appointors in complex family structures.
This is not about Corporate Trustees
In our last article we discussed the advantages of corporate trustees in a family trust. We saw that corporate trustees present extremely useful benefits, including administrative simplicity and ease of trustee changes.
Corporate Appointors have their own upside, but not in the same way as corporate trustees.
What is an Appointor?
In brief, the Appointor has the power to replace the trustee, but does not participate in the management of the trust.
Therefore, whoever has control over the position of Appointor has control of the trust.
How are Appointors chosen?
A trust deed will nominate an appointor at the time of the trust’s creation. This will often be a central person behind the trust. The deed will also provide succession mechanisms in case the first Appointor cannot act or chooses to resign.
Where does a Corporate Appointor fit in?
Corporate Appointors come into play when control of a trust is likely to be transferred across multiple generations with children and grandchildren each belonging to their own bloodlines. In this situation, it can be difficult to vest the appointorship evenly in a neat list of individuals who represent each strand of the family.
Imagine a family business controlled by three siblings. One sibling remains involved in the business, one sibling remains involved but jointly with her child, and one sibling retires and effectively transfers his stake to his three children.
In this case, we see that one family strand has one representative involved in the business, one strand has two representatives and the third strand now has three representatives. How can the power of appointment be evenly and effectively shared between these three bloodlines?
A corporate appointor can give flexibility by allowing each family to be represented equally, even though the family strands are different sizes. Each strand chooses and appoints one representative director, thereby sharing control between the three family bloodlines.
Of course, it will be important to consider decision-making rules in the constitution for the corporate appointor, including whether director decisions are to be unanimous or by simple majority.
A Simpler Solution?
There is an alternative to a Corporate Appointor that achieves a similar outcome. If a trust has a corporate trustee, with rules (whether in a constitution or a shareholders’ agreement) that allow each strand of a family to participate in decision-making, it may be simpler to abolish the office of appointor and vest the powers of appointment in the trustee itself. With this approach, each family strand would presumably have a representative director on the board of the trustee and therefore have a say in any trustee succession.
It’s about fairness and control
Ultimately, what is important is that the office of appointor – and therefore effective control of the trust – is vested evenly in each strand of the family. In some circumstances, this can be more easily accomplished with a company rather than individual appointors.
Aintree Group Legal will be happy to discuss your family trust and succession needs. Contact us today.
For more on our series, read Part 2 and 2 below!