Winding up a scheme means turning its investments into cash, paying its debts and sending each unit holder a final distribution. In practice some unit holders cannot be found. Addresses in the register are years out of date, holders have died without their families knowing about the units, or a holding is too small for anyone to have chased. Section 270 of the Capital Market Act 2015 says what happens to the money left over.
The rule in section 270
If, on completion of the winding up of a scheme, the person who has been winding up the scheme has in their possession or under their control “any unclaimed or undistributed money or other property that was part of the scheme property”, the person shall, as soon as practicable, pay the money or transfer the property to the Commission. The Commission “shall make guidelines on how scheme property under Subsection (1) would be disposed of”.
Three features of the rule stand out. It applies to the “person who has been winding up the scheme”, which will usually be the trustee but may be a person the Court has appointed under section 269. It covers property as well as money, so unclaimed units in another fund, or shares that could not be sold, go across too. And the duty bites “on completion” of the winding up: the trustee is expected to have made genuine efforts to find and pay members first. A trustee that hands over money without trying to trace the holders is not conducting the winding up in accordance with the deed, and may answer for it under section 262.
Why the money goes to the Commission
The alternative would be to leave the money with the former trustee indefinitely, which is unsatisfactory for three reasons. The trustee may itself be wound up or lose its licence; the money would sit outside any regulatory supervision; and there would be an incentive to make little effort to find members. Paying it to the regulator keeps a public record and a permanent point of contact. Section 272(1)(f) then allows the Commission to deregister the scheme once it has been wound up, closing the file while the unclaimed funds remain traceable.
How a unit holder claims
The Act does not spell out the claims procedure; that is left to the guidelines the Commission is required to make. Anyone who believes money is owed to them from a wound-up scheme should expect to show the Commission:
- proof of identity, and of any change of name since the units were bought;
- evidence of the holding, such as a unit certificate, holding statement, distribution advice or an extract from the scheme’s register of unit holders;
- for a deceased holder, the grant of probate or letters of administration, or other proof of entitlement to the estate.
The trustee’s register of unit holders is the key document. Section 250 requires the trustee to record each member’s name and address, the number of units held, the dates of joining and leaving, and other particulars, and to keep the information for seven years. Former trustees must hand their books to a successor under section 205, and the Commission can ask for them. A claimant whose name appears in the register has strong evidence; the register is prima facie proof of what it records (section 250(4)).
It is far easier to be paid during the winding up than afterwards. A unit holder who moves house, changes bank or changes name should tell the trustee at once. Anyone who held units in a scheme that is winding up should contact the trustee as soon as the section 266 or 268 notice arrives, and keep the paperwork.
Deceased unit holders
Much unclaimed money belongs to estates. Section 255 allows the trustee, executor or administrator of a deceased member’s estate to be registered as the member in place of the deceased, with the same rights the deceased had, and allows units held for a trust to be marked as such in the register. A family dealing with the estate of a Lae businessman who bought units in the 1990s should therefore ask the trustee, or after deregistration the Commission, to search the register, and should bring the probate documents. Where no grant has been obtained, the Commission’s guidelines will govern what proof suffices. See units on death.
Unclaimed money under other laws
Papua New Guinea has no single unclaimed money statute that the Capital Market Act points to. The Act’s own takeover provisions show the gap: section 295(9) and (10) allow consideration held in trust for untraced shareholders to be transferred to the Commission after ten years, to be dealt with “as if it were monies paid to it pursuant to the law relating to unclaimed monies”, without saying which law that is. The Companies Act 1997 has its own rules for assets left over after a company’s liquidation, and superannuation funds regulated under the Superannuation (General Provisions) Act 2000 have their own arrangements for members who cannot be traced. None of those regimes applies to a unit trust; section 270 and the Commission’s guidelines do.
Section 270 does not say whether the Commission holds the money on trust for the unit holders, whether claims lapse after a period, or whether unclaimed funds may be applied to a public purpose such as the Capital Market Development Fund. Those matters depend on the guidelines. Until they are published and checked, nothing in this article should be read as confirming that a claim will succeed or how long it may take.
Sources
- Capital Market Act 2015 — ss 205, 250, 255, 262, 266, 268–270, 272(1)(f), 295(9)–(10)
- Companies Act 1997
- Superannuation (General Provisions) Act 2000
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.