A unit trust is a commonly used structure for business ventures between multiple unrelated parties. Unlike a discretionary trust, beneficiaries or unitholders have a fixed interest (units) in all the property that is subject of the trust. The unitholders rights to income and capital are not subject to discretion of the trustee rather, their interest in both is in proportion to their holding of units.
Parties to a unit trust are as follows:
It is common practice for a shelf company to be set up specifically as the trustee of the trust. Unitholders appoint the Trustee, and the Trust Deed contains the Trustee’s powers. The Trustee legally owns the trust, and may be held personally liable for debts incurred in their capacity as a trustee. Unitholders beneficially own the trust via the acquisition of units in the trust.
The beneficiaries of a unit trust are usually referred to as “unit holders.” Unit holders have fixed rights to the trust’s income and capital.
The Trust Deed outlines the Unit Trust’s purpose, the rights and obligations of the trustee and unit holders, the trustee’s powers and identifies the parties. The Trust Deed also includes issues such as what is to happen if someone wants to sell their units or sell the unit trusts underlying assets and wind the unit trust up.