What’s the point of classifying units in a unit trust?

There can be many advantages in classifying the units in a unit trust. It can allow for a more precise regulation between the unit holders (for example, a quorum for a meeting of unit holders may need to comprise one person representing the A Class unit holders and a second person representing the B Class unit holders; etc). Additionally, special rights can be attached to classes of units.

The most popular right is for there to be a class of unit to which is attached discretionary income rights. This enables the Trustee of the unit trust to distribute income at the Trustee’s discretion to one, some or all of the holders of such units, in priority to – or ranking behind – the distribution of income to holders of units where the distribution is fixed.

Other rights which may be attached to different classes of units include:

  • voting rights, and/or
  • rights to capital distributions.