A trustee that would rather not face its investors cannot simply refuse to meet them. The Capital Market Act 2015 turns a members’ request into a duty, puts the trustee on a clock, and penalises a trustee that tries to pass the cost of its own default on to the fund.
Who may make the request
The trustee “shall call and arrange to hold a meeting of the members or unit holders to consider and vote on a proposed special resolution” on the request of (a) members with at least 10 per cent of the votes which may be cast on the resolution, or (b) at least 100 members who are entitled to vote on the resolution.
Each member has one vote per unit (section 239), so the 10 per cent test is a test of units held, not of heads. A superannuation fund holding 12 per cent of the units can act alone; a church group, a landowner company and 98 individual retirees holding a tiny fraction of the units can act under the 100-member limb. The percentage is measured “as at the midnight before the request is given to the trustee” (section 214(7)). Regulations may prescribe a different number of members for a particular scheme or class of scheme (section 214(2)–(3)); none has been published, so the 100-member figure stands. The request must be to consider a special resolution, a term examined in what a special resolution is.
What the request must contain
Section 214(4) requires the request to be in writing, to state any resolution to be proposed, and to be signed by the members proposing to move it. It may be accompanied by a statement about the resolution (section 214(5)). Because collecting a hundred signatures on one sheet is impractical, section 214(6) allows separate copies to be signed if the wording is identical in each. A practical request contains:
- the scheme’s name and a heading showing it is a request under section 214;
- the exact text of the special resolution;
- a supporting statement of no more than 1,000 words;
- each signatory’s name, address and unit holder number, with signature and date.
The trustee’s deadlines, distribution and costs
Section 214(8) sets two deadlines. The trustee “shall call the meeting within 21 days after the request is given to it”, and the meeting “is to be held not later than two months after the request is given”. Since at least 21 days’ notice is required (section 218), a trustee that waits until day 21 leaves itself little room. The trustee must give every member a copy of the proposed resolution and any statement with the notice, or as soon as practicable afterwards, distributed in the same way (section 214(9)–(10)). One exception: the trustee “does not have to distribute a copy of the resolution or statement if either is more than 1,000 words long or defamatory” (section 214(11)). The trustee bears the expense of the meeting and the distribution and “may meet those expenses from the scheme’s assets” (section 214(12)). See what notice must be given.
A statement accusing the trustee of “stealing” members’ money, without a finding to support it, risks being defamatory and may be withheld. Say what the accounts show and what the auditor and the Securities Commission have said.
When the trustee fails to act: section 215
If the trustee has not called the meeting within 21 days of the request, “members with more than 50 percent of the votes carried by interests held by the members who make a request” may call and arrange the meeting and distribute the statement themselves (section 215(1)). The majority is measured within the requesting group, not the whole scheme: if the requesting members together hold 10 per cent of the units, members holding just over 5 per cent can proceed. The meeting must be called, so far as possible, in the same way the trustee would call it, which means using the register of members and the notice rules in sections 218 to 221, and it must be held within three months of the original request (section 215(2)–(3)). Getting the register from a reluctant trustee may itself require an application to the Court under section 256; see records and the register.
The cost falls on the trustee. Section 215(4) requires it to pay the reasonable expenses the members incurred because of its failure, and forbids it from paying them from the scheme’s assets. A trustee that nevertheless dips into the fund “shall repay three times the value of the assets applied” (section 215(5)), and a trustee that fails to make that repayment commits an offence under section 215(6), for which “every director of the trustee and its chief executive officer is liable to pay three times the value of the assets of the fund applied under this section or imprisonment for a term not exceeding ten years, or both”.
Section 215(6) is awkwardly expressed: it declares the trustee guilty of an offence but imposes the treble payment and the ten-year term on the directors and chief executive. The likely intention is that if the trustee does not repay, its directors and chief executive are personally exposed. No court has yet construed the subsection.
The alternative: members call it themselves
Members holding 10 per cent of the votes need not ask the trustee at all: section 216 lets them call a meeting directly to consider a special resolution, at their own expense. The 100-member limb is not available and the requesters pay, so section 214 is almost always preferable. See how meetings are called.
Sources
- Capital Market Act 2015 — ss 214, 215, 216, 218–221, 239, 256
Before relying on anything here, read the current text of the Capital Market Act 2015 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.