A Lawful “Successor Fund Transfer”

“Successor Fund Transfer” is a jargon term that is applied to an amalgamation of funds pursuant to Part 18 of the Superannuation Industry (Supervision) Act 1993.

A number of steps have to be completed to lawfully transfer the Trust Estate of The Provident Fund (aka Elders IXL Superannuation Fund) to the Trust Estate of another fund and to then revoke the trust established on the 23 December 1913 and to wind-up the associated “Fund”. This process is referred to a  “successor fund transfer“.

Step 1: There must be a unanimous resolution of the Directors of the “successor company” SABMiler Plc to revoke the trust established on the 23 December 1913 and to transfer the assets of the Trust Estate to another Trust Estate before the Fund is then wound-up.

Step 2: All the Trustees, who by law must be lawfully appointed to the office of Trustee must given their consent in writing to the revocation of the trust.

Step 3: An enactment of the Parliament of South Australia is required to amend the terms of the trust established on the 23 December 1913 in South Australia so that the assets of the Trust Estate can be transferred without the Trustees committing a breach of trust for which they would be personally liable.

Step 4: The governing rules of the Transferee Fund must be amended and properly executed to ensure that members and beneficiaries receive “equivalent rights and benefits“, unless the governing rules already provide equal or better benefits.

Step 5: Both the lawfully appointed Trustees of The Provident Fund (the Transferor Fund) and the Trustee or Trustees of the Transferee Fund must sign the “Approved Form” pursuant to Section 145 of the Superannuation Industry (Supervision) Act 1993{SIS Act}and provide a copy of the “governing rules” of the Fund to APRA along with a submission explaining why APRA should approve the the “successor fund transfer” pursuant to Section 146 of the SIS Act.

The definition of the “governing rules” can be found here.

A copy of the the “Approved Form” {Form APT 08/13} can be found on the following link:

RSEL-Approval-of-transfer-s145 APPROVED TRANSFER FORM

A copy of guidelines issued by APRA {which includes a disclaimer by APRA} can be found on the following link:

I-C-4-Equivalent-Rights-for-Members-in-Successor-Fund-Transfers  

On Page 2 of the “Approved Form” the following is stated:

“In support of the Application for approval of transfer, applicants should provide APRA, with up-to-date copies of the governing rules together with a submission addressing all issues to be considered in accordance with s 146 of the SIS Act.”

A provision of “Section 146 Approval of transfer” is subsection 146(1)(b)(i):

“the transfer is reasonable in all circumstances , having regard to :

the benefit entitlements of members and beneficiaries under the governing rules of the transferor fund”

Regulation 6.29  of the Superannuation Industry (Supervision) Regulation 1994 stipulates that the transfer of members from one Fund to another fund without their consent can only take place if the transfer is to a “successor fund“. Therefore the provisions of Part 18 of the SIS Act must be applied.

The provision of Part 18 of the SIS Act should, in theory, mean that the “rights and benefits” of the members are not compromised by their transfer to another fund without their consent. However the proviso is that both the Transferor Trustee and the Transferee Trustee act honestly in the best interests of the members and beneficiaries.

 
 

When a superannuation trust is established it is generally anticipate to exist for several decades, if not indefinitely. However changing circumstances may mean that either:

  • The trust and the associated fund impressed with the trust are wound-up, or
  • The the fund, the members and beneficiaries are transferred to another trust and associated fund, and the original trust and fund is then wound-up.

The Trust Deed will also include a provision for the revocation of the trust (ie the legal obligations imposed by the trust) and for the way the assets of the fund are to be distributed (including any actuarial surplus) when the trust and associated fund are wound-up.

The revocation provision will determine who holds the power to wind-up the trust and what conditions and restrictions are imposed on the wind-up process and the distribution of the assets of the Fund.

The power to revoke a trust, like any other power, must used for a proper purpose, and not for an improper purpose or an ulterior motive, such as concealing a breach of trust.

Most superannuation Trust Deeds will include protective clauses to prevent the assets of the fund being misapplied for unauthorised purposes.

Therefore the terms of the trust will in general need be amended to allow the assets impressed with the trust to be transferred to another trustee and fund, so that the “Transferor Trustee” does not commit a breach of trust.

If trust property in transferred in breach of trust to another party, then the receiving party has a liability, which is known as “knowing receipt“./p>

More details on “knowing receipt” can be found here.

The Wind-Up Provisions of The Provident Fund

The original Trust Deed made on the 23 December 1913 included a revocation and wind-up provision in Regulation 33, which was later renumber to Regulation 52 in the consolidation Deed of Variation dated 6 May 1958.

The power to revoke the trust and to win-up the fund was provided to the Directors of the sponsoring Employer.

The Elder Smith & Co Limited Provident Funds Act 1963 (SA) amended the terms of the trust so that the Directors of any “successor company” would have the power to revoke the trust and to wind-up the associated fund impressed with the trust.

Conditions imposed by Regulation 52 include the requirement that the Directors have to agree to a unanimous decision to revoke the trust and to wind-up the fund and all of the trustees must also give their consent in writing to the revocation of the trust and the wind-up of the fund.

A copy of Regulation 52 can be found here.

Regulation 52 requires that the members and beneficiaries receive a “cash payout” to the value of their pension entitlement in the event that the trust is revoked and the fund wound-up.

If it is proposed to transfer the members and beneficiaries to another fund, then the terms of the trust (Regulations of the Fund) will need to be amended, since no provision was made in the original Trust Deed to allow the Trustees to transfer the Trust Estate to the Trust Estate of another Fund.

This amendment cannot be achieved by a Deed  of Variation, but an Act of the Parliament of South Australia, must be used to amend the terms of the trust (Regulations of the Fund) to allow the Trustees to transfer the Trust Estate without committing a breach of trust.

The requirement for an Act of the Parliament of South Australia is confirmed by the Elder’s Trustee and Executor Company Limited Provident Funds Act 1971 (SA).

A more recent enactment related to another superannuation fund also confirms that an Act of Parliament is often required to allow trustees to transfer the Trust Estate to another fund.

The Parliament of South Australia enacted the Local Government (Superannuation Scheme) (Merger) Amendment Act 2012 (SA) to amend the terms of the Trust Deed of the Transferor Fund {Local Super} to allow the transfer of the Trust Estate to the Transferee Fund without the Trustees committing a Breach of Trust and to ensure that the members’ rights were protected. Copy of this enactment can be found on the following link.

Local Government (Superannuation Scheme) (Merger) Amendment Act 2012

For the Trust Estate of The Provident Fund to be transferred to the Trust Estate of another fund would require and Act of the Parliament of South Australia to amend the Regulations of the Fund similar to the following Regulation which is an extract from the Elder’s Trustee and Executor Company Limited Provident Funds Act 1972 (SA).

  Regulation 54A
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