Division 9 of Part V of the Capital Market Act 2015 (sections 264 to 270) sets out when a scheme must or may be wound up, who decides, and what the trustee must do. The deed must also deal with the subject: section 210(1)(d) makes “winding up the scheme” a matter for which every trust deed must make adequate provision.
When winding up becomes compulsory
Section 268(1) lists four events. When any of them happens, the trustee “shall ensure that the scheme is wound up in accordance with its trust deed” and any directions the Court has given.
| Event | Sections |
|---|---|
| The time, circumstance or event specified in the trust deed arrives | 264, 268(1)(a) |
| Members pass a special resolution directing the trustee to wind up | 265, 268(1)(b) |
| The National Court orders the trustee to wind up | 267, 268(1)(c) |
| Members remove the trustee without choosing a consenting new trustee at the same meeting | 268(1)(d) |
A fifth route is voluntary: under sections 266 and 268(2) the trustee may wind up a scheme whose purpose has been accomplished or cannot be accomplished, if members do not object in time. Court-ordered winding up is covered in a separate article.
Winding up required by the trust deed
Section 264 allows a trust deed to provide that the scheme is to be wound up at a specified time, in specified circumstances or on a specified event: a fixed-term property trust might end when its last building is sold. One kind of clause, however, is forbidden.
“A provision of the trust deed that purports to provide that the scheme is to be wound up if a particular company ceases to be its trustee is of no effect”, including for the purposes of section 268(1)(a).
The scheme belongs to its members, not to the trustee. Members may remove the trustee under section 201, and a change of trustee under sections 200 to 207 passes the trustee’s rights and obligations to its successor without ending the scheme. When the Commission revoked the Pacific Balance Fund trustee’s licence in 2023 and appointed an interim trustee, the fund itself continued.
Winding up at the direction of members
Section 265 lets the members of a registered scheme take action to call a members’ meeting “to consider and vote on a special resolution directing the trustee to wind up the scheme”. A special resolution needs holders of at least 75 percent of the value of the units voted (section 2(1)), decided on a poll (section 245(1)). Members with 10 percent of the votes, or 100 members, can require the trustee to call the meeting (section 214); members with 10 percent can call it themselves at their own expense (section 216). Once the resolution passes, section 268(1)(b) obliges the trustee to wind up. See special resolutions and requiring a meeting.
Winding up when the purpose is accomplished or impossible
Section 266 deals with the trustee’s own initiative. Where the trustee considers that the purpose of the scheme has been accomplished, or cannot be accomplished, it may give the members and the Commission a written notice that does three things. It explains the proposal, including how the purpose has been accomplished or why it cannot be. It informs members of their right to call a meeting to consider the proposal and vote on any special resolution about the winding up. And it tells members that the trustee is permitted to wind up the scheme “unless a meeting is called to consider the proposed winding up of the scheme within 28 days of the trustee giving the notice”. If no meeting is called within those 28 days, section 266(3) allows the trustee to proceed.
A church investment fund set up to finance one building has accomplished its purpose once the building is paid for; a fund formed to invest in a project that never gets off the ground cannot accomplish its purpose. In both cases the trustee can start the process, while leaving members the last word.
Section 266(2)(b) refers members to “Subdivision 4 of Division 5” for the calling of a meeting. That subdivision deals with holding meetings; the provisions on calling them are sections 214 to 217 in Subdivision 1.
Removal of the trustee without a replacement
Section 268(1)(d) requires winding up where members remove the trustee but do not, at the same meeting, choose a new trustee that consents to act. This sits uneasily beside sections 202 to 204, under which an interim trustee is appointed when the office falls vacant and has three months to find a permanent replacement.
On the words of section 268(1)(d), a resolution removing the trustee with no replacement in hand may trigger a compulsory winding up. Unit holders who want a new trustee rather than a liquidation should put both resolutions to the same meeting.
What happens during the winding up
Once the trustee is obliged to wind up, or the winding up has started, no further units may be issued (section 268(3); the text says the “trust deed” has become obliged, plainly a slip for the trustee). The trustee then follows the deed: realising the investments, paying creditors and the costs of the winding up, and distributing the balance to members in proportion to their units. If the deed is inadequate or the trustee is not doing the job properly, the Court may give directions or appoint someone else to conduct the winding up (section 269). Money or property that cannot be distributed goes to the Commission under section 270; see unclaimed money. When the winding up is complete the Commission may deregister the scheme under section 272(1)(f). The trustee’s own licence is unaffected; it may still operate other schemes.
Sources
- Capital Market Act 2015 — ss 2(1) (“special resolution”), 200–204, 210(1)(d), 214, 216, 245, 264–270, 272(1)(f)
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.