A unit trust has no board of directors elected by its investors. The one place where unit holders exercise collective power is a meeting of members, and the Capital Market Act 2015 is careful to say who may convene one. The rules in Division 5 of Part V apply to every scheme registered with the Securities Commission; the trust deed may add to them but cannot take them away.
Five ways to get a meeting
| Section | Who calls it | Condition | Who pays |
|---|---|---|---|
| 213 | The trustee | At any time, at its discretion | The scheme |
| 214 | The trustee, on members’ request | Members with 10% of votes, or 100 members, request a special resolution | The scheme |
| 215 | The requesting members | Trustee fails to call the meeting within 21 days of the request | The trustee personally |
| 216 | Members with 10% of votes | To consider a special resolution | The members |
| 217 | The National Court | Impracticable to call a meeting any other way | As the Court orders |
Section 213 is the simplest: “the trustee of a registered scheme may call a meeting of the scheme’s members”. The Act fixes no annual meeting, so a trustee that is never asked may never hold one. The compulsory route is section 214, explained in can unit holders require the trustee to call a meeting.
When the Court orders a meeting
The Court may order a meeting of unit holders or members “to consider and vote on a proposed special resolution if it is impracticable to call the meeting in any other way”. The application may be made by the trustee, the Securities Commission or any member who would be entitled to vote at the meeting.
This route is for deadlocked cases: a trustee that has collapsed or lost its licence, or a register so disordered that notice cannot be given. The Court may also direct who chairs (section 229(3)).
When the Act itself requires a meeting
- Retirement of the trustee. A trustee that wants to retire must call a meeting to explain why and let members choose a new licensed trustee (section 200).
- Removal of the trustee. Members who want to remove the trustee “may take action under Division 5” to call a meeting (section 201). See can unit holders remove the trustee.
- Interim trustee. An interim trustee must call a meeting to choose a permanent trustee within three months (section 204).
- Changing the deed. Some supplementary deeds, including any fee increase, need a resolution of two-thirds of all unit holders at a meeting “duly convened and held according to Division 5” (section 211(4)). See how a deed is amended.
- Winding up. Members may call a meeting to pass a special resolution directing the trustee to wind up the scheme (section 265), and a trustee proposing to wind up a scheme whose purpose is accomplished must tell members of their right to call a meeting within 28 days (section 266).
Time, place and technology
Section 226 requires a meeting to be held “at a reasonable time and place”: a weekday morning in a Port Moresby hotel, not 6 am in a private office. Section 227 lets the trustee hold the meeting “at two or more venues using any technology that gives the members as a whole a reasonable opportunity to participate”, so a Lae venue linked by video to Port Moresby is permitted; the notice must then name the technology (section 221(a)). The trustee may appoint a chair in writing for a meeting called under section 213 or 214; members elect their own chair for meetings called under sections 215, 216 or 217 (section 229). Quorum, voting and polls are covered in how voting is conducted.
The Pacific Balance Fund meeting of 14 July 2006
The best-known unit holders’ meeting in Papua New Guinea was held under the earlier Securities Act 1997, when the deed rather than the statute governed meetings. The Pacific Balance Fund deed obliged the trustee, Melanesian Trustee Services Ltd, to convene a meeting within 42 days of learning that the manager was in material breach. After the National Superannuation Fund, holder of 21 per cent of the units, alleged serious breaches, the trustee gave notice of a meeting for 14 July 2006 to some 30,000 unit holders. The manager, Pacific Equities and Investment Ltd, obtained a National Court injunction stopping the meeting from considering its removal. In National Superannuation Fund Ltd v Pacific Equities and Investments Ltd [2006] PGSC 12; SC845, Lay J stayed that injunction so far as it stopped the meeting from voting on removal: the deed gave unit holders the right to decide the manager’s future, courts should be reluctant to interfere with that right, and transparency in the use of public investors’ money outweighed the interests of the corporations running the trust. The meeting voted to remove the manager. In Pacific Equities and Investment Ltd v Melanesian Trustee Services Ltd [2007] PGNC 24; N3122, Hartshorn J refused to restrain the resolution: the manager had five weeks’ actual notice, had sent its own mail-out and had its lawyer address the meeting, so a meeting held on day 52 rather than day 42 raised no serious question to be tried.
Today those events would run under Division 5. A single large unit holder with 10 per cent of the units, or a hundred small investors acting together, can force a meeting. The deed may still set shorter deadlines, as the PBF deed did, and the trustee must honour both.
Sources
- Capital Market Act 2015 — ss 200, 201, 204, 211(4), 213–217, 221, 226, 227, 229, 256, 265, 266
- National Superannuation Fund Ltd v Pacific Equities and Investments Ltd [2006] PGSC 12; SC845
- Pacific Equities and Investment Ltd v Melanesian Trustee Services Ltd [2007] PGNC 24; N3122
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.