Synlait chief executive Leon Clement still hopes to open the company’s new Pokeno milk powder plant on time.
Namely, the special tasks and obligations facing a trustee of an entity based in rural NZ.
What is special about the role of a ‘rural trustee’? It all sheets back to NZ’s primary industry-based economy and the disproportionate – by global comparative standards – amount of wealth that sits in farms and other agriculture-based businesses. Many are often family-owned enterprises that have grown larger and more complex over generations. It is estimated at least 50% of rural properties in NZ are owned by trusts.
Against this backdrop, rural trustees should be keeping a handful of simple yet ironclad rules:
1. The fundamentals of trusteeship apply.
A good trustee welds technical knowhow with relationship skills. A rural trustee will maintain a variety of interpersonal relationships, some with other professional advisers (lawyers and accountants, most commonly) and others with family members (the trustee may be a family member or a professional outsider). Maintaining professionalism while devoting equal time and energy to several beneficiaries takes skill, experience and good instincts.
2. Listen to your clients, but maintain a professional distance.
The job of a rural trustee can be a delicate dance; you must know your clients well, and you may work with them over many years, but you must keep your place as a professional service provider rather than a friend. This can be especially tricky when the trustee is part of the family involved in the trust. The overriding responsibility is to understand from the trust beneficiaries what their desired outcomes are.
3. Have a sound awareness of the (ever-changing) legislative and regulatory requirements.
Get the governance right. The diversity of businesses run on rural properties and the legislative requirements in trust law mean the trustee needs a clear game plan to ensure the productive and compliant running of the rural business and sound trust governance. The rural trustee must be familiar with a variety of laws pertaining to trust-owned rural land or businesses.
4. Hold other trustees and interested parties to account.
To take one piece of legislation as an example, the rural trustee is responsible for Health & Safety at Work Act 2015 obligations on any site or property held by the trust. A trustee’s dominant thinking needs to be: What can I evidence that I have done to understand and enhance the hazard identification of the workplace environment for employees or third parties working on property owned by the trust, to make it a safe working environment for all users? Trustees stand personally exposed should legislative or regulatory obligations not be met, and ignorance of the law is not a defence.
5. Be a good partner to other service providers.
Collaboration is the art of linking arms, and the rural trustee needs a full stable of seasoned professionals in order to thrive. These include accountant, lawyer, banker, risk adviser, farm adviser, regional authority liaison officers, wealth managers, etc.
6. Always have a plan.
This team operates like any other successful business – based on a business model and plan directed at achieving the stated goals and objectives of the business and its owners. This model, once implemented and executed, ensures the goals of the business remain visible, which invariably flows into the goals of the trust beneficiaries being met.
7. Challenge misconceptions and erroneous notions.
Often good decisions don’t get made because of cost or the perception of cost.
There is, of course, a cost to good governance. There is an old saying that if you think the cost of doing something is expensive, wait until you see the cost of not doing it. A good trustee will steer clients away from false economies and towards responsible, prudent and necessary financial decisions.
• Graeme Frewin is a manager with Perpetual Guardian, Wellington.