Beneficially Owned Shares Explained

Posted by , May 2nd, 2014

It has been a while between posts but that doesn’t mean we haven’t been busy! Apart from working on new services like our ABN registration service, we are always tweaking and improving our company registration service to make it easier and better. One thing we have done is slightly change how beneficial ownership of shares work.


What does beneficial ownership mean?

Beneficial ownership confuses a lot of people, not just first timers but lawyers and accountants as well. The terminology from ASIC certainly doesn’t help in making it easy to understand either. Beneficial ownership has to be indicated when allocating a new parcel of shares. If shares are beneficially owned then it is the listed owner(s) who derives direct benefit from the shares. If the listed owner(s) is holding the shares for the benefit of someone/something else, then the shares are non beneficially held.

For example, Joe Smith is the only shareholder in his company Smith Enterprises Pty Ltd. All dividends are going to be paid directly to him. Since he is the one deriving benefit from the shares he is beneficially holding them.

Laura Jones is a shareholder for Jones International Pty Ltd. She has set up a family trust and wants any dividends from the company to go through her trust. A trust cannot own shares in a company, only a legal entity, ie a person or company can. So Laura is listed as the legal owner of the shares in Jones International Pty Ltd, but indicates the shares are non beneficially held, as she is holding them for the benefit of her family trust in her capacity as trustee.

When shares are non beneficially held, ASIC does not ask who the beneficial owner is, nor is it required by the Corporations Act to be shown on any of the documents contained in the company register. This is the means whereby someone could anonymously hold shares in a company. They find someone who agrees to legally hold the shares for them and they have an agreement between each other the shares are held for the benefit of the person who wants to stay anonymous.


What has eCompanies changed?

Many registration sites, ours included until now, therefore don’t for the name of the beneficial owner. But many consider it best practice to list the beneficial owner on the share certificate to remove the need for more documentation to prove ownership. eCompanies has listened to our clients and have implemented the option to supply the name of the beneficial owner and have it listed under the name(s) of the legal owner(s) on the share certificate.

 



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