Trustees change for many reasons: a licence lapses, the members lose confidence, a company exits the business or the Commission steps in. Subdivisions 2 and 3 of Division 3 of Part V of the Capital Market Act 2015 provide one procedure for all of them.
The Commission’s record governs
“(1) Notwithstanding anything in this division, the corporation named in the Commission’s record of registration as the trustee or an interim trustee of a registered scheme remains the trustee until the record is altered to name another corporation as the scheme’s trustee or interim trustee. (2) A purported change of the trustee is ineffective unless it is in accordance with this subdivision.”
This is the pivot of the whole subdivision. Members may vote, a trustee may resign, a court may order, but nothing changes until the Commission alters the entry it keeps under section 186(2). A deed clause that purports to let the trustee appoint its own successor, or let a manager replace the trustee, is ineffective. Section 199 adds that no one may be chosen or appointed as trustee or interim trustee unless it meets section 189: a corporation holding a capital market licence authorising it to operate the scheme. See who can be the trustee.
The routes to a new trustee
| Route | Section | How it works |
|---|---|---|
| Retirement | 200 | Trustee calls a members’ meeting, explains its reasons, and members vote to choose a licensed replacement that has consented in writing. Notice to the Commission within two business days. |
| Removal by members | 201 | Members requisition a meeting under Division 5, vote to remove the trustee and, at the same meeting, choose a consenting new trustee. Notice to the Commission within two business days. |
| Interim trustee (Commission) | 202 | Commission may appoint an interim trustee within 12 hours after the office becomes vacant. |
| Interim trustee (Court) | 203 | On a member’s application, the Court may appoint a licensed company as interim trustee if the Commission has not. |
| Interim to permanent | 204 | Interim trustee must call a members’ meeting within three months (extendable by the Court) to choose a new trustee; members may choose the interim trustee itself. |
In each case the final step is the same: a notice lodged with the Commission asking it to alter the record, and the Commission’s compliance. If the outgoing trustee fails to lodge the notice, the incoming trustee may do so (sections 200(2)(b), 201(2)(b)). A notice may not be lodged before the new trustee’s written consent has been given (sections 200(4), 201(3)). On retirement, if the members choose no one or the chosen company declines, the Commission appoints an interim trustee under section 202 (section 200(3)). See removal by unit holders and interim trustees.
The commonest trigger in practice is not in this subdivision at all. When the Commission revokes the trustee’s licence under section 48, the company no longer meets section 189 and the office is treated as vacant, so section 202 is engaged. That is what happened to the Pacific Balance Fund in 2023, when the Commission revoked its trustee’s licence and appointed Weathermen Capital Advisors Ltd as interim trustee: see Melanesian Trustee Services Ltd v Securities Commission of Papua New Guinea [2023] PGNC 356; N10524.
Handover of books and assistance
Section 205 requires the former trustee, as soon as practicable, to give the new trustee “any books in the former trustee’s possession or control that this Act requires to be kept in relation to the scheme” and to “give other reasonable assistance to the new trustee to facilitate the change”. The register of members, minute books, accounting records, trust account records and contract notes all pass. In the 2023 revocation letter quoted in N10524 the Commission directed the outgoing trustee to “transfer all custody and authority of PBF’s assets and bank accounts to the Interim Trustee” and to hand over “the books and PBF records”, echoing section 205.
Rights, liabilities and documents
Section 206(1) transfers the former trustee’s rights, obligations and liabilities in relation to the scheme to the new trustee. Four things stay with the former trustee under section 206(2): its right to fees earned before it ceased to be trustee, its right to be indemnified for expenses incurred before then, any rights or liabilities it has as a member holding units, and “any liability for which the former trustee could not have been indemnified out of the scheme property if it had remained the scheme’s trustee”, which in practice means liability for its own breaches. Section 207 then provides that documents to which the former trustee was a party, or which refer to it, take effect as if the new trustee were named instead, except for matters section 206(2) leaves behind. Leases, management agreements and custody arrangements therefore continue without renegotiation. See contracts and liabilities on a change of trustee.
Drafting problems to be aware of
The subdivision is not cleanly drafted. Section 200(2)(c) says the Commission “shall accept with the notice” where section 201(2)(c) says “shall comply with the notice”; the intention is plainly that the Commission must alter the record. Section 200(3) says the Commission “shall appointment” an interim trustee. Section 203(1) gives the application to the Court to a member, yet section 203(3) speaks of the application being made by “the current trustee”. And the 12-hour window in section 202 is extraordinarily short, with no indication of when an office “becomes vacant”, given that section 198 keeps the named trustee in office until the record changes. Parties should follow the evident purpose and document every step.
Sources
- Capital Market Act 2015 — ss 48, 186(2), 189, 198–207
- Melanesian Trustee Services Ltd v Securities Commission of Papua New Guinea [2023] PGNC 356; N10524
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.