Markets change and regulators issue new guidelines, so every long-lived unit trust will eventually need its deed altered. Because the deed is the investors’ protection, the Capital Market Act 2015 does not let the trustee rewrite it alone. Section 211 lays down a single route.
Only by an approved supplementary deed
“A modification may be made to a deed only by a deed expressed to be supplementary to the principal deed and submitted by the trustee to the Commission for approval and a supplementary deed shall not have effect unless it has been so approved and registered.”
Three points follow. The amending document must itself be a deed and must say on its face that it supplements the principal deed. Only the trustee may submit it, so unit holders who want a change must persuade the trustee to act or, if necessary, replace the trustee. And nothing happens until the Commission has both approved and registered the supplementary deed; a trustee that charges a new fee on the strength of an unregistered amendment is acting outside the deed.
The Commission’s decision
Section 211(2) mirrors the powers over the original deed: the Commission may approve the supplementary deed, approve and register it “with such revisions or subject to such terms and conditions as it thinks fit”, or refuse to approve it. Under section 211(3) it “shall refuse” a supplementary deed that does not comply with the Act or with any other requirement the Commission has specified. Once approved and registered, section 211(7) deems the supplementary deed “to be part of the deed to which it relates for the purposes of this Act”, and section 209 requires it to be lodged with the Registrar of Companies within seven days. See how a deed is approved and registered.
Members’ resolution or trustee’s certificate
Section 211(4) requires every supplementary deed submitted for approval to be accompanied by one of two documents.
| Route | What is needed | When it is available |
|---|---|---|
| Members’ resolution (s 211(4)(a)) | A resolution “of not less than two-thirds of all unit holders or members” at a meeting duly convened and held under Division 5, sanctioning the modification | Always; compulsory for fee increases and whenever the Commission demands it |
| Trustee’s certificate (s 211(4)(b)) | A statement from the trustee certifying that in its opinion the change “does not materially prejudice the interests of members and does not operate to release the trustee from any responsibility to the members” | Minor, technical or regulator-driven changes that leave members no worse off |
The certificate route exists so that correcting a cross-reference or adopting a new Commission guideline does not require a meeting of thousands of unit holders. But it is policed in two ways. Section 211(5) allows the Commission to require the trustee to obtain a resolution “if in the Commission’s opinion any modification, alteration or addition to the deed may prejudice the interests of members”. And a trustee that certifies falsely commits an offence under section 120 (false or misleading information to the Commission) and breaches its duties of honesty and loyalty under section 191.
Fee increases always need a vote
Section 211(6) removes the certificate option entirely for changes that touch the trustee’s remuneration. A supplementary deed that would increase the maximum service charge or annual management fee payable to the trustee, whether paid out of scheme property or otherwise, or would increase the maximum payment allowed out of scheme property to the trustee by way of remuneration, “shall be submitted for approval accompanied by a resolution” under section 211(4)(a). The trustee cannot certify that a pay rise for itself is harmless. This dovetails with section 210(3), under which fees are payable only if specified in the deed and only for the proper performance of duties. The Commission’s 2019 Gazette notice that the Pacific Balance Fund’s trustee had paid itself significant fees while insolvent shows why the decision sits with members. See fees.
Holding the meeting
The resolution must be passed at a meeting “duly convened and held according to Division 5”. That means at least 21 days’ notice (section 218), a notice stating the general nature of the business and members’ proxy rights (section 221), a quorum (section 228), one vote per unit (section 239), and minutes (section 248). The trustee and its associates cannot vote on a resolution in which they are interested (section 241), which will usually include a fee increase. See calling meetings and voting.
Section 211(4)(a) speaks of “two-thirds of all unit holders or members”, which on its face is a head count of every member, not just those voting, and is different from the Act’s defined special resolution (75 percent by value of units voted). Whether the threshold is counted by heads or by units, and whether absent members count against the resolution, is not spelt out. A trustee should ask the Commission how it reads the provision before convening the meeting, and draft the notice to satisfy the stricter reading.
Amending without approval
Section 211(8) makes it an offence to contravene section 211(1), that is, to modify a deed other than by an approved and registered supplementary deed. No penalty is stated in the section, so the general penalty in section 461 applies: a fine of up to K10 million or ten years’ imprisonment, or both. A deed that no longer complies with section 211 is also a ground for deregistration under section 272(1)(b), and the trustee’s duty under section 191(1)(f) to ensure the deed meets sections 210 and 211 is itself enforced by the same K10 million penalty.
Sources
- Capital Market Act 2015 — ss 2(1) (“special resolution”), 120, 191(1)(f), 209, 210(3), 211, 218, 221, 228, 239, 241, 248, 272(1)(b), 461
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.