Purchasing a company from trustee shareholders
Purchasing a company from trustee shareholders

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Purchasing a company from trustee shareholders
  • Trusts and trustees
  • Power and capacity of the trustee
  • Power and capacity to sell the shares
  • Power and capacity to give warranties and indemnities
  • Enforcement of warranty and other claims against trustees
  • Limiting trustee liabilities for warranty and other claims

Purchasing a company from trustee shareholders

Trusts and trustees

A trust may be established for a number of reasons with a variety of objectives.

The one generally common feature of all trusts is that they will have a trustee (or a number of trustees) (the trustee). The trustee's main responsibility will be the holding and managing of the assets of the trust.

The powers and responsibilities of the trustee will usually be set out in a specific trust instrument, eg a trust deed (the trust deed).

Along with the general law the trust deed will set out, among other things:

  1. the powers and obligations of the trustee, and

  2. any limitations on the trustee's powers and obligations

A trust which holds shares in a private company will commonly be either a discretionary trust (under which various members of the same or extended family may benefit) or an employee trust.

The primary concerns for a buyer when dealing with a trust in the context of a share purchase will be determining that:

  1. the trustee has the requisite power and capacity to enter into and perform its obligations under the transaction documents, and

  2. if there is a breach of the agreement by the trustee, the buyer will be in a position to enforce its rights under the sale and purchase agreement and other documents against the assets of the underlying trust

Power and capacity

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