If you own a business, protecting what you’ve built is just as important as growing it. One way to do that is by placing the shares you hold in your company, into a trust.
It’s a step many New Zealand business owners are taking, particularly as their operations grow, their personal assets increase, or they begin thinking about the next generation. A trust can help safeguard your business from unexpected personal risks and provide a clear structure for future decision-making.
According to Corban Revell Senior Associate Lawyer Frank Chan, a trust isn’t just about asset protection, it’s about planning ahead. “A trust can give you peace of mind. It creates a legal structure that helps protect your business from personal claims, smooths the path for succession planning, and reduces the chance of future disputes among family members or shareholders.”
Key benefits of using a trust
If your business is held in your personal name, it can be vulnerable if things go wrong in your private life, such as a relationship breakdown, a business dispute, or debt recovery proceedings. By transferring ownership to a trust, the business is no longer part of your personal asset pool and is therefore harder for creditors or claimants to access.
Trusts can also be used when business owners want to hand over control gradually, keep the business in the family, or make sure it continues operating even if they’re no longer involved.
“Trusts can work well for clients who are thinking seriously about succession and passing the business on to children, co-owners, or other beneficiaries,” Frank explains. “It gives them a mechanism to manage that transition smoothly.”
Are there downsides?
While the benefits can be significant, it’s important to understand the responsibilities. A trust must be properly set up and actively managed. That means keeping records, holding trustee meetings, carefully ensuring you comply with your trustee obligations, and making decisions in line with the best interests of beneficiaries, not just what’s convenient for you.
You also give up legal ownership of the business. That can feel like a big step for hands-on founders who are used to being fully in control.
“It’s something we talk about carefully with clients,” says Frank. “There are definitely situations where a trust adds unnecessary complexity. But in many cases, the advantages, particularly around protection and certainty, outweigh the disadvantages.”
Timing is everything
One of the biggest mistakes people make is waiting too long to act. If there’s already a relationship dispute, a family disagreement, or legal action underway, it may be too late to transfer the business to a trust.
“The best time to set up a trust is when things are calm and when you’ve got time to think clearly and plan properly,” adds Frank. “It’s a proactive step that protects not just the business, but the people who depend on what we call a ‘blue sky’ day – when there are no issues and no known problems on the horizon.”
Wondering if a trust is right for your business?
Contact Frank Chan for advice and guidance.