Unit and Fixed Trusts

A Unit Trust and a Fixed Trust are generally used to conduct investment or trading activities between “unrelated” parties.

The structure of a Unit Trust and Fixed Trust is similar to a Company. In a Company members hold shares in proportion to their investment in the Company. Similarly, in Unit and Fixed Trusts, the beneficial interest in the Trust property is divided into Units and  beneficiaries (Unit holders) hold a number of Units according to their investment in the Trust.

The essential difference between a Discretionary Trust and a Unit / Fixed Trust is that the beneficiaries of a Discretionary Trust do not have a fixed interest or entitlement to the assets of the Trust whereas in a Unit / Fixed Trust the Unit holders have an entitlement to the capital/income of the Trust in fixed proportion to the number of Units held (depending on the rights attached to each class of Units).

There are two main types of Unit Trusts, those Deeds which confer a specific interest in the Trust assets and the Trust income to the beneficiaries (called a present entitlement) and which confer a right on the part of the beneficiaries to terminate the Trust.  Deeds where the beneficiaries have not conferred a specific interest in the Trust assets, or a right to terminate the Trust, are considered to have no specific present entitlement to the capital, although there may be classes of Units issued with fixed rights to the net income of the Trust.

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