In short
A unitholders agreement is a private contract between the unitholders of a unit trust (and often the trustee) that governs decision-making, unit transfer and redemption, and exit — functioning for a unit trust the way a shareholders agreement functions for a company. Because most unit trust deeds grant the trustee broad discretion, the agreement is where unitholders actually negotiate the constraints on that discretion between themselves.
Why the trust deed alone rarely protects unitholders adequately
A unit trust deed establishes the trust and typically gives the trustee wide discretion over distributions, unit issues, and in some structures even unit redemption, because the deed is drafted as a standing instrument meant to work regardless of who the unitholders happen to be at any given time. That flexibility is a problem when unitholders want certainty — an incoming unitholder investing capital usually wants a guaranteed process for exit, protection against dilution from new unit issues, and a say in trustee decisions that a generic deed doesn't promise. The unitholders agreement sits alongside the deed and constrains how the trustee's discretion is actually exercised, usually by requiring unitholder consent (at an agreed threshold) before the trustee takes specified actions.
Unit redemption and transfer mechanics
Redemption clauses fix how a unitholder can require the trustee to redeem their units — the valuation methodology (often net asset value or an independent valuer), notice periods, and whether redemption can be deferred or paid in instalments if immediate redemption would strain the trust's liquidity. Transfer mechanics mirror pre-emptive rights in a shareholders agreement: a unitholder wanting to sell must generally first offer units to existing unitholders pro rata, with a fixed notice period and an agreed valuation mechanism if price isn't already settled. We also specify what happens on the death, bankruptcy or incapacity of an individual unitholder — whether units transfer to their estate automatically or trigger a mandatory offer to remaining unitholders, since unit trusts (unlike some company structures) don't always have this addressed adequately in a standard deed.
Trustee appointment, removal and appointor mechanics
Where the trust has a corporate trustee, the agreement should fix who controls that trustee company — usually mirroring the unitholding proportions in the trustee's own shareholding or board composition — so trustee decisions can't be controlled by a unitholder minority through a mismatch between unit and trustee-company control. Where the deed includes an appointor role (a person or entity with power to remove and replace the trustee), the agreement should address appointor succession clearly, since a vacant or contested appointor role can leave a trust's governance in genuine limbo, particularly if the deed doesn't provide a fallback mechanism.
Distribution policy and reserved matters
Unlike dividends from a company, trust distributions generally need to be made in line with trust law and the deed's distribution provisions, but unitholders can still agree between themselves on a distribution policy — for example, a minimum distribution percentage of trust income, or unanimous consent before income is retained rather than distributed. We also set out reserved matters requiring unitholder consent beyond the trustee's ordinary discretion: borrowing above a threshold, acquiring or disposing of major trust assets, admitting new unitholders, and amending the trust deed itself.
Dispute resolution and deadlock
Deadlock provisions work similarly to a shareholders agreement — escalation through negotiation and mediation, then a buy-sell mechanism if unitholders reach an genuine impasse on a reserved matter. Because unit trusts are commonly used for property and investment holding vehicles with fewer, larger unitholders than a typical company, we often see deadlock arise over a single major decision (selling the underlying asset, refinancing) rather than ongoing operational disagreement, so the mechanism is built around resolving that kind of one-off impasse rather than continuous governance conflict.
What the fixed fee covers
- Review of the existing (or proposed) trust deed to identify gaps the agreement needs to fill
- Unit redemption and transfer mechanics including valuation methodology
- Trustee control and appointor succession provisions aligned with unitholding
- Distribution policy and reserved matters requiring unitholder consent
- Deadlock and buy-sell mechanism suited to the unitholder structure
Mistakes we see
- Relying on a generic trust deed and assuming it protects unitholder interests the way a shareholders agreement would
- No mechanism for appointor succession, leaving trustee removal powers in limbo on death or incapacity
- Mismatch between unit percentages and control of a corporate trustee
- No agreed valuation method for redemption, leaving it to argument when a unitholder wants to exit
- Reserved matters left undefined, so a minority unitholder has no real say in major decisions
Who this is for
- Investors co-owning property or investment assets through a unit trust
- Family groups using a unit trust for a jointly-owned business or asset
- Unitholders bringing in a new investor and wanting exit certainty
- Trusts converting from a family-only structure to include unrelated investors
Frequently asked questions
- Do we need a unitholders agreement if we already have a trust deed?
- In most cases yes, if there's more than one unitholder or an incoming investor. The deed governs the trust as a standing instrument with broad trustee discretion; the unitholders agreement constrains how that discretion is exercised and fixes redemption, transfer and exit terms the deed usually leaves open.
- Can a unitholder force redemption of their units at any time?
- Only if the deed and the unitholders agreement provide for it. We draft redemption rights with defined notice periods and valuation methodology, and address liquidity — including deferred or instalment redemption — so a redemption request doesn't force a distressed asset sale.
- What happens if a unitholder dies or becomes bankrupt?
- This depends on what the deed and unitholders agreement say. We typically draft a mandatory offer mechanism so remaining unitholders have first right to acquire the departing unitholder's units rather than an unknown estate or trustee in bankruptcy becoming an unwanted co-unitholder.
- How does control of the trustee company relate to unitholding?
- They're legally separate — owning units doesn't automatically give you control of the trustee. We align trustee company shareholding or board composition with unitholding proportions in the unitholders agreement so trustee decisions can't be controlled disproportionately to unit ownership.
- Is a unitholders agreement different from a shareholders agreement?
- They serve a similar governance function but operate over different legal structures — a unit trust versus a company — so redemption, distribution and trustee-control mechanics differ in ways that matter. We don't simply relabel a shareholders agreement template for a trust structure.
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