What Does Stapling Securities Mean? A Guide For Australian Businesses

If you’re planning a capital raise, expanding into property or infrastructure, or reviewing a potential investment, you may come across “stapled securities”. It’s a structure we often see in Australia, especially where valuable assets are held in a trust and the operating business sits in a company.

In simple terms, stapling ties two (or more) different securities together so they can only be bought, sold, or transferred as a single package. That can align incentives, attract investors, and streamline how value flows through a group - but it also adds legal and tax complexity you’ll want to manage carefully.

In this guide, we’ll break down what stapled securities are, when you might encounter them, how they work in practice, the steps and documents typically involved, and the key legal and tax issues to keep in mind. Our aim is to help you decide whether stapling fits your strategy and set you up to do it safely if you proceed.

What Are Stapled Securities?

A stapled security is created when two or more separate investments are legally bound together so they cannot be traded separately. Most commonly in Australia, this means a unit in a trust (which holds the asset) is stapled to a share in a company (which operates the business connected to that asset).

Think of it like physically stapling two documents: wherever one goes, the other must go with it. If you sell or transfer the unit, the share goes with it - and vice versa.

Common Example

• A unit in a property or investment trust (often owning land, buildings or infrastructure), and
• A share in an operating company (managing the business conducted on or using that asset).

By stapling, an investor receives exposure to both asset returns (for example, rental income or capital growth) and operating profits (for example, hotel management fees or toll revenues). This alignment is one reason stapled structures show up in real estate investment trusts (REITs) and infrastructure groups in Australia.

Why Do Businesses Use Stapling?

• To align interests between “asset owners” and the “operator” so investors participate in both streams of value.
• To make complex groups easier to invest in, especially when raising private capital or preparing for listing.
• To support risk allocation - e.g., placing property in a trust while isolating trading risk within a company.

Stapling isn’t a must for most SMEs, but if you’re working with significant assets or structured investments, it’s useful to understand the basics.

Where Might You Encounter Stapled Structures In Australia?

Stapled securities are common in listed property and infrastructure groups, but private groups also use them in specific scenarios.

• Property or infrastructure projects: A trust holds the asset while a company operates the business using that asset, with interests offered as a stapled package to investors or joint venture partners.
• Capital raising: Founders planning to raise funds may staple units and shares to give investors exposure to both the asset base and operating income.
• Group restructures and M&A: During mergers, demergers, or spin-outs, stapling can be used to pair ownership interests without merging entities.
• Employee or founder arrangements: In sophisticated incentive plans, stapling can align equity outcomes with specific assets and operational performance.

If your business is growing into asset-heavy activities (commercial property, accommodation, energy, or logistics), you’re more likely to come across stapled models - either as a participant or an investor.

How Do Stapled Securities Work In Practice?

At a structural level, stapling relies on separate legal entities and carefully drafted rules that make their securities inseparable for issue, transfer and holding.

Two (or More) Separate Entities

• The asset-holding vehicle: Often a trust. Trusts in Australia are created by a trust deed - they are not registered with ASIC. If the arrangement involves offering interests broadly to investors, it may be a managed investment scheme, which can trigger registration and licensing requirements under the Corporations Act 2001 (Cth).
• The operating company: A company is incorporated with ASIC and governed by its Company Constitution and the Corporations Act.

The Stapling Mechanism

• Constituent documents (the trust deed and company constitution) are tailored so units and shares must be issued, transferred and held together.
• Transfer provisions, registers and offer documents reflect the “one security, two components” concept, so you can’t deal with one component on its own.
• Governance rules handle voting, distributions and corporate actions so the stapled package moves in lockstep.

Listed vs Private Contexts

Listed stapled entities must also comply with ASX Listing Rules and continuous disclosure. Private stapled structures won’t have ASX obligations, but may still be captured by managed investment scheme rules and fundraising provisions if offering interests beyond a small, private circle.

It’s also worth noting the distinction between “managed investment schemes” (a legal concept under the Corporations Act) and “managed investment trusts” (a tax concept). A managed investment trust (MIT) is a trust that qualifies for specific tax treatment. This is separate from whether a trust is a registered managed investment scheme for Corporations Act purposes.

Setting Up A Stapled Structure: Key Steps And Documents

Stapled structures are complex. If you’re exploring this path, involve legal and tax advisers early. Here’s the high-level pathway many businesses follow.

1) Strategy And Feasibility

• Clarify your objectives: align incentives, support a capital raise, prepare for a future listing, or ring-fence operational risks.
• Map your investor base and deal terms: who will participate, minimum investments, rights, and exit expectations.
• Check regulatory pathways: whether any managed investment scheme registration, licensing, or disclosure requirements are likely to apply.

2) Establish The Entities

• Trust: Create a trust by executing a trust deed. The deed will set out unit classes, powers and trustee obligations. For foundational context on how trusts fit into business planning and asset protection, see this overview on trusts in Australia.
• Company: Incorporate the operating company with ASIC and adopt or update a fit-for-purpose Company Constitution to support stapling mechanics, share classes and transfer restrictions.

3) Draft The Stapling Rules

• Amend the trust deed and company constitution so units and shares are issued, transferred and held together - neither can move alone.
• Include mechanics for corporate actions (splits, consolidations, capital returns) so both sides of the stapled security remain in sync.
• Confirm execution and authority provisions (for example, how documents can be executed under section 126 or section 127 of the Corporations Act) work smoothly across the group.

4) Prepare Offer And Governance Materials

• Fundraising documents: If you’re inviting investors, prepare appropriate disclosure (e.g. an information memorandum or prospectus, depending on the offer and investor types). If you’re issuing shares as part of the raise, you’ll likely need a Share Subscription Agreement and board/shareholder approvals.
• Founder and investor arrangements: If there are multiple founders or co-investors on the company side, put in place a Shareholders Agreement to cover decision-making, exits and transfers alongside the stapling rules.
• Registers and administration: Set up processes to maintain accurate unit and share registers and to record the stapled pairing for every holder.

5) Ongoing Compliance

• Track ASIC obligations for the company (annual reviews, changes to officeholders, share issues and transfers) and trust administration requirements under the deed.
• Monitor any managed investment scheme or financial services licensing requirements if you’re making offers to a broader investor base.
• Coordinate tax reporting and distribution statements across the trust and company legs.

A solid document suite and governance framework will help you avoid operational headaches later - particularly if you grow, refinance, or restructure.

Legal, Regulatory And Tax Considerations

Stapled structures sit at the intersection of company law, trust law, fundraising rules and tax. Here are the key points to understand at a high level.

Corporations Act And ASIC Oversight

• Companies: Your operating company is governed by the Corporations Act 2001 (Cth) and ASIC oversight. The constitution and board/shareholder approvals must support any stapling mechanics and offer processes.
• Trusts: A trust is established by a deed. It isn’t registered with ASIC. However, if the trust is a “managed investment scheme” being offered to the public, scheme registration and a responsible entity may be required, along with financial services licensing considerations.
• Fundraising and disclosure: Offers to the public can trigger prospectus or other disclosure requirements. Private raises may be able to rely on small-scale offering exemptions, but you’ll still need clear offer documents and investor communications.

Execution And Authority

Because stapled structures involve multiple entities, ensure your sign-off and contracting processes are tight. That includes understanding who can bind the company under section 126 (agents with authority) and how to validly execute documents under section 127 (execution by directors/company secretary). Clear authority reduces the risk of disputes over validity.

Tax Treatment And ATO Integrity Rules

• Different tax profiles: Trust distributions and company dividends are taxed differently. A stapled package doesn’t merge tax outcomes - you still need to apply the correct rules to each leg.
• Capital gains and rollovers: Transfers or restructures to create or adjust a stapled structure can have capital gains tax impacts at the unit or share level.
• Integrity measures: Australia has specific integrity rules targeting certain stapled structures (particularly asset “rent” paid to trusts in circumstances that may re-characterise income). These settings have evolved over recent years and are detailed, so you’ll want targeted tax input.

Tax settings for stapled structures can be complex. It’s important to seek independent tax advice tailored to your structure and investor base before you proceed or make distributions.

Disclosure, Reporting And Investor Relations

• Investors should receive clear, consistent information explaining how returns flow through both the trust and the company, and how the stapling affects transfers and exits.
• Keep registers aligned and ensure any corporate actions are mirrored on both sides of the staple (for example, consolidations, splits or capital returns).
• If you scale or broaden the offer, revisit whether managed investment scheme registration, licensing or enhanced disclosure applies.

Pros, Risks And Alternatives

Potential Benefits

• Aligned incentives: Investors gain exposure to the underlying asset and the operating business together.
• Capital formation: A well-designed stapled package can be attractive to sophisticated investors looking for diversified exposure.
• Risk allocation: Separating asset ownership (trust) and operations (company) can support risk management within a group.

Key Risks

• Complexity and cost: Two (or more) entities, more documents, and higher ongoing administration and compliance.
• Regulatory overlay: Fundraising, managed investment scheme rules and financial services licensing may apply depending on how you raise and who you raise from.
• Tax traps: Missteps can lead to adverse tax outcomes or ATO scrutiny. Always get specialist tax advice before implementing or changing a stapled structure.
• Unwinding: De-stapling later is often difficult, paper-heavy and costly.

Alternatives To Consider

• Single-entity approach: Keep assets and operations within one company or one trust (simpler administration but different risk and tax profile).
• Service or lease arrangements: Use inter-entity agreements (e.g., licence, lease, or services) without stapling the securities.
• Joint venture or partnership: Where parties want shared ownership or control without stapling, explore a joint venture. This comparison of joint venture vs partnership can help you think through the fit.

If you’re earlier stage and not raising external capital yet, focus on a clean foundation (for example, picking the right structure, adopting a robust Company Constitution, and documenting relationships with a Shareholders Agreement). You can always revisit more complex structures as you grow.

Key Takeaways

• Stapled securities tie two or more investments - often a trust unit and a company share - so they’re issued and traded together as a single package.
• They’re used in Australia to align asset and operating returns, particularly in property and infrastructure, but they add legal, tax and administrative complexity.
• Trusts are created by deed (not registered with ASIC), while companies are incorporated with ASIC; fundraising, managed investment scheme rules and disclosure can apply depending on how and to whom you offer interests.
• Your documents matter: tailor the trust deed, Company Constitution, offer materials and governance so the stapling works in practice - and keep registers synchronised.
• Tax treatment for the trust and company legs remains distinct; stapled structures are subject to specific ATO integrity measures, so independent tax advice is essential.
• If stapling isn’t the right fit, consider simpler alternatives like inter-entity service arrangements or a joint venture without stapling.

If you’d like a consultation on stapled securities or you’re weighing up the right structure for your next raise, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.