Ask a family business owner who controls the family group and the answer is usually a person: “Dad does.” Ask what happens if Dad dies or loses capacity tomorrow and the answer becomes less certain. “My brother, I think.” “The accountant knows.”
In most Australian family groups, control does not sit in one place. It runs through a chain: a family trust, a trustee company, the shares in that company, the company’s constitution and its board, often with operating companies, unit trusts and a self-managed super fund alongside. For Chinese and Asian families, there may also be holding companies in Hong Kong, Singapore or Malaysia.
This article is not about the roles in a family trust as such. It is about mapping the whole group, so you can see where power really sits, where one person can act alone, and what happens to that power when circumstances change.
The law allocates power. Governance shapes how it is used.
Family charters, family councils and good intentions are important, but they do not decide who can sign, appoint or remove. The trust deed, the company constitution, the share register and the Corporations Act do that. When the family agrees, the difference rarely matters. When the family stops agreeing, legal power is what counts. That is why the map must be drawn from the legal documents, not from how things are usually done.
Following the chain of power
Step 1: The trust and its appointor or guardian
In most discretionary trusts, the ultimate control lies with the appointor (sometimes called the principal, guardian or nominator), who can remove and replace the trustee. Whoever holds this power can, in practice, decide who runs the trust. The deed should say who succeeds the appointor on death or incapacity. Some deeds pass the role to the appointor’s legal personal representative, which means the executor named in the Will may effectively take control. Others name successors, and some say nothing useful at all.
Step 2: The trustee company
Where the trustee is a company, the trust’s assets are legally held by that company and decisions are made by its directors. The appointor may be able to replace the company, but day to day the directors act.
Step 3: The shares in the trustee company
Shareholders appoint and remove directors. If the founder holds all the shares personally, those shares pass under his or her Will. That means the Will may decide who controls the trustee company, and therefore the trust, unless the appointor steps in. The appointor and the shareholder may end up being different people with different plans.
Step 4: The constitution
The company’s constitution (or the replaceable rules in the Corporations Act, if it has no constitution) sets out how directors are appointed, how many are needed for a quorum, whether a chair has a casting vote, and whether share transfers can be refused.
Step 5: The board
Finally, the board makes the decisions: distributions, borrowing, bank signatories, selling property. Who sits on the board, and whether any one director can act alone, is where control becomes practical.
Repeat this chain for every entity in the group: operating companies, unit trusts (where unitholders and their agreement matter), property-holding entities, the SMSF and any overseas companies. The answers often differ from one entity to the next.
The sole-director company
Many family companies have one director who is also the sole shareholder. This is simple while that person is well. On death, the company may have no one able to act. The Corporations Act allows the personal representative of a deceased sole director-shareholder to appoint a director, but the personal representative may first need a grant of probate or letters of administration, which takes time. On loss of capacity the position can be more complicated.
A proprietary company must also have at least one director who ordinarily resides in Australia. Where the next generation lives overseas, that requirement can create its own gap.
Finding single points of failure
A single point of failure is anywhere one person’s death, incapacity, absence, bankruptcy or change of heart would stop the group or hand it entirely to someone else. Common examples:
- one appointor with no named successor;
- one director who is also the only bank signatory;
- all shares in the trustee company held by one person, passing under a Will that has not been reviewed;
- a director who becomes bankrupt, since an undischarged bankrupt is automatically disqualified from managing a corporation without court leave;
- the only Australian-resident director moving overseas;
Checks on concentrated power
Concentrated power is efficient but risky. The question is not only “who decides?” but “who checks the person who decides?” Common checks include:
- A protector or second appointor. Requiring two appointors to act jointly, or giving a protector a veto over specified acts, such as changing beneficiaries or the trustee.
- A second signatory. Bank mandates requiring two signatures above a set amount.
- An independent director. A trusted outsider on the board who can break deadlocks and bring objectivity, particularly when siblings are equal shareholders.
- Reserved matters. Listing decisions, such as selling the main property, issuing shares or borrowing above a limit, that need shareholder or unitholder approval by special majority.
- Alternate directors and succession provisions. Allowing for an alternate director, and planning who becomes a director on death or incapacity, can keep a company functioning.
- Enduring powers of attorney that cover the person’s shareholdings and the appointor role, where the deed allows the appointor role to be exercised that way.
A practical mapping exercise
- List every entity in the group, in Australia and overseas, with its type (trust, company, unit trust, SMSF, partnership).
- Collect the governing documents: trust deeds and all variations, constitutions, share and unit registers, shareholders’ and unitholders’ agreements, bank mandates.
- For each trust, record the trustee, the appointor or guardian, and who succeeds them on death and incapacity.
- For each company, record the directors, the shareholders, who can appoint directors, and the quorum.
- Draw it. A single diagram with arrows showing who appoints or controls whom is often eye-opening for the family.
- Run scenarios. For each key person, ask: if this person died, lost capacity or moved overseas tomorrow, who would hold each power?
- Mark the gaps: single points of failure, unchecked powers, and places where the answer differs from what the family expects.
- Align the estate documents. Check that Wills, enduring powers of attorney and the trust deed succession clauses point in the same direction.
Frequently asked questions
Who controls a family trust after death?
It depends on the trust deed. Control usually follows the appointor role, which may pass to a named successor or to the deceased’s legal personal representative, while control of a corporate trustee also depends on who inherits the shares and who becomes a director. These must be read together.
Can the appointor of a family trust be changed?
Often yes, but only in the way the trust deed allows. Some deeds let the appointor nominate a successor in writing or by Will; others require a formal deed of variation. Changes should be checked for tax and duty effects.
What happens when the sole director of a family company dies?
The company may be unable to act until a new director is appointed. The deceased’s personal representative can generally appoint a director where the deceased was also the sole shareholder, but may first need a grant of probate. Planning ahead avoids the delay.
Does my Will control my family trust?
Not the trust’s assets, which are not yours personally. But your Will may pass shares in the trustee company, and in some deeds the appointor role passes to your executor, so your Will can affect who controls the trust.
How Chua Tan Associates can help
We help families map control across their whole group, from trusts and trustee companies to operating businesses, unit trusts, SMSFs and overseas entities, and identify single points of failure before they become a crisis. We then align trust deeds, constitutions, shareholders’ agreements, Wills and enduring powers of attorney so control passes as the family intends. Justin Chua is a Nationally Accredited Mediator and an Accredited Family Business Advisor who trained in accounting, and we work alongside the family’s accountant. We act for families across Australia and overseas, work with local lawyers in other countries, and advise in English, Mandarin and Cantonese.
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Chua Tan Associates acts for families, executors, trustees and their professional advisers in estate planning, estate administration and estate disputes in Australia and across borders. To arrange a confidential consultation, please contact our Melbourne office on +61 3 9602 3988 or submit an enquiry. Advice is available in English, Mandarin and Cantonese.
Justin Chua (蔡智勋), lawyer and mediator, Chua Tan Associates, Melbourne. General information only, not legal or tax advice.
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