-. --

,

endoranagement,aintenance1dkeepingickages update are a

~rybig part oflinimisingthe)sts of I.T.'

Nevin says that in some parts of Asia, where the

firm has several offices, the costs of transferringdata can be up to seven times higher than inAustralia. At SKM's production centre in Manila,

where it has teams of engineers who work ontelecommunications and mining projects for clientsin Australia and the United Kingdom, connectionscan also be erratic. "In the Philippines, when itrains heavily the communications usually go out."

Expensive and unreliable bandwidth also creates

problems when the firm needs to send updatesfor its software. One solution is to use third-partysoftware that strips out any unnecessary data fromthe updates so only what is essential is transmitted.

Delays on transferring data are not alwaysthe fault of the deficient telecommunicationsinfrastructure. "We have locations in the

Middle East where it is likely the governmentis running the links through various local

government-run services to ensure the right datais going forward and backwards, and that tends to

add considerably to delays as well," Nevinsays. 8

Falling faith in family trustsFamily trusts have long been held as a "safe as houses" strategy for asset

protection and income splitting for the wealthy and professionals such

as doctors, lawyers and accountants who carry above-average risks of

being sued. But the outcome of a recent Federal Court case involving

the Westpoint collapse has changed all that.

In simple terms, a family trust allows individuals to place their

investments into a structure where no individual person has direct or

indirect ownership of the assets.

In the event of being sued, this has been a useful practical defence in

warding off plaintiff lawyers. If defendants declare they are broke, plantiffs

believe they have a low chance of recovering any money owed, including

lawyer's fees. Not surprisingly, many cases are settled or dropped foreconomic reasons.

Individuals remain indirectly in control of their assets if they are an

appointor of their family trust. The appointor of a trust is usually referred

to in the trust deed and has the power to remove and appoint a trustee

to direct how the trust's income and capital is paid to beneficiaries.

Owners of small family trusts tend to appoint themselves or a companyas the trustee in addition to being its appointor.

The case of Richstar Enterprises v Carey deals with the Australian

Securities and Investments Commission's prosecution of a director who was

involved in the failed financial planning company Westpoint. The Federal

Court judges found that under section 1323 of the Corporations Act, the

receiver has powers to pursue the director's family trust to recover funds.

The failed director was a trustee and appointor of a family trust.

This ruling creates a precedent. By bankrupting a director who is

also the family trust appointor, section 1323 effectively gives control of

the family trust's assets to the receiver.

The receiver can replace the bankrupt's role as an appointor then appoint

a new trustee for the trust. The new trustee would then be in a position totake control of the family trust and deal with its assets.

This could involve distributing sufficient trust funds to settle any

outstanding debts back to the directors' (who are beneficiaries of the

trust) bankrupt estate. Potentially, this can expose some or all of the trust's

assets to a successful litigation claim.

Individuals who risk being sued will no doubt be reviewing their trust

deeds to make provisions, in the event of bankruptcy, for a new independent

appointor to be installed. However, those who nominate a spouse will be

stymied because spouses can be implicated under new bankruptcy laws.

Others may choose a trusted friend to take the role. This can be more

difficult than it seems because it gives a lot of power to the friend, which

is generally not advisable.

Some family trust owners may feel forced to establish a corporate

appointor in a tax haven where it is difficult to establish who owns and

controls the corporate appointor. Alternatively, one could examine whether

an independent family trust could own shares in the corporate appointor.

David Dahm is chief executive of the practice management andaccounting firm Health & Life.

WWW.BRW.COM.AU BRW MAY 24-30 2007 69