Borrower Authority and Execution: Companies, Trustees and Trust Deeds

Published 2 October 2026

Introduction

When lending to a company that acts as trustee of a trust, verifying who has authority to bind the borrower is essential. Private lenders and non-bank financiers face distinct risks if a loan agreement or security document is not executed correctly by the right people.

This article explains the key execution and authority requirements under the Corporations Act 2001 (Cth) (‘Corporations Act‘), how to review trust deeds and trustee appointments, and the practical consequences of getting it wrong.

Interactive Tool: Check Your Loan Documents & Trustee Authority Before You Lend

Corporate Authority & Execution Essentials for Private Lenders

Prioritising Authority & Execution Over Corporate Capacity

A lender’s primary question is whether the company entered the transaction through an authorised person and a valid execution method. The company’s constitution may regulate internal decision-making, but the execution review should identify who approved the transaction, who signed it, and the capacity in which the company acted.

A company may execute a document through any of the following methods:

• under Section 127 of the Corporations Act;
• through an authorised agent under Section 126 of the Corporations Act;
• in accordance with its constitution; or
• by another method authorised by the company and permitted by law.

The trust structure should also be identified where the company signs as trustee.

Verifying Statutory Execution Formalities & Signing Authority

Lenders should check the board resolution, the signatory’s authority, and the execution method used. Under Section 126 of the Corporations Act, an individual may sign for the company as an agent, including where the authority arises from a board resolution, written delegation, power of attorney, or constitutional provision.

Section 127 of the Corporations Act permits execution without a common seal by:

• two directors;
• one director and one company secretary; or
• the sole director of a proprietary company with only one director.

The company’s current officeholder details should be checked before signing.

Evaluating Trust Deeds & Trustee Appointments for Syndicate Lenders

Confirming Valid Trustee Appointments & Governance

A lender should confirm that the named trustee was validly appointed and remains the trustee when the loan documents are signed. The review should include:

• the executed trust deed;
• any deed appointing or removing a trustee; and
• records showing the trustee’s acceptance of the role.

Where the trustee is a company, its company constitution should also be checked for provisions governing director authority, decision-making and execution. Board resolutions should approve the borrowing, security and related documents, with records retained alongside the trust documents.

Any change in trustee should be supported by a valid appointment process before the lender relies on the trust structure.

Reviewing Trust Deeds for Borrowing & Security Powers

The trust deed should be read for express powers allowing the trustee to borrow money and grant security over trust property. The lender should also identify the relevant restrictions and approval requirements, with assistance from private lender and non-bank finance lawyers:

• restrictions on how trust funds may be used;
• approval requirements;
• limits on liability; and
• provisions affecting the trustee’s ability to enter the proposed transaction.

A loan agreement should name the trustee in its trustee capacity, such as the corporate trustee “as trustee for” the relevant trust. The trustee must have authority to enter the loan and security documents.

If the deed does not provide the necessary powers, the transaction may create uncertainty about the trustee’s authority and the lender’s recourse to trust assets.

Securing Trust Assets & The Right of Indemnity for Mortgage Funds

Understanding the Trustee Right of Indemnity & Exoneration

Trust assets are not beneficially owned by the trustee company. However, the trustee’s right of indemnity is company property, allowing the trustee to meet liabilities properly incurred in administering the trust from trust assets. That right is secured by an equitable lien over those assets.

The right has two branches:

• Exoneration: trust assets are applied directly to discharge trust liabilities; and
• Recoupment: the trustee is reimbursed for liabilities already paid from its own funds.

A lender should review the trust deed and transaction records to confirm that the debt was incurred for trust purposes and within the trustee’s powers. A breach of trust or conduct outside those powers may reduce or defeat access to the indemnity.

Assessing the Impact of the Trusts Act 2025 on Trust Property

The Trusts Act 2025 (Qld) (‘Trusts Act‘) replaced the earlier 1973 legislation and commenced on 28 April 2026. The changes granted trustees broader powers to deal with trust property and introduced enhanced protections for beneficiaries.

The related land title updates included:

• requirements for recording more than four trustees on title; and
• no limit on the term of a lease granted by a trustee.

Lenders reviewing Queensland trust property should account for the updated statutory framework, the trust deed, and any title requirements applying to the relevant property.

Practical Consequences of Defective Execution for Non Bank Financiers

Risks to Loan Enforceability & Statutory Assumptions

Defective authority or execution can create doubt about whether the company is bound by the loan agreement or security document. As a result, the lender may need to establish several matters rather than relying on the document alone, including:

• the signatory’s authority;
• the company’s capacity as trustee; and
• compliance with the trust deed.

Sections 128 and 129 of the Corporations Act may allow a counterparty to rely on assumptions about company execution and authority. However, those assumptions are unavailable if the lender knew or suspected that the relevant assumption was incorrect.

A lender should retain board resolutions, delegations, powers of attorney and other evidence supporting the execution method.

Insolvency Risks & Loss of Priority

As noted above, trust assets are not beneficially owned by the corporate trustee, and the trustee’s right of indemnity — secured by an equitable lien — may be reduced or lost where the trustee breached the trust or acted outside its powers. A lender may then be unable to access trust assets to satisfy a debt.

If the right of indemnity is available, the proceeds are applied to trust liabilities and distributed under the priority rules in Section 556, Section 560 and Section 561 of the Corporations Act, including priority for employee entitlements. The High Court confirmed this position in Carter Holt Harvey Woodproducts Australia v Commonwealth [2019] HCA 20 (‘Amerind‘).

A trust deed that removes the trustee’s power to deal with assets after insolvency may also require court directions or a receiver, causing delay and added expense.

Conclusion

Private lenders should verify borrower authority, execution formalities, trustee appointments and trust deed powers before funding a transaction. Proper documentation also protects access to trust assets through the trustee’s right of indemnity and clarifies priority issues if the corporate trustee becomes insolvent.

With these issues in mind, contact GRM Law’s private lenders and non-bank finance lawyers in Queensland for assistance reviewing loan documents, trust structures and security arrangements. Our lawyers can help identify authority and execution gaps before funding, supporting clearer documentation and greater certainty when enforcement or insolvency issues arise. reporting entities’ obligations and the application of the AML/CTF Act to your financial services.

Frequently Asked Questions

Disclaimer: This is general information only and is not legal advice. For advice on your circumstances, contact GRM LAW.