What are Non-Beneficially Held Shares? (2019 Update)
Learn about non-beneficially held shares, how they differ from other types of shares, and when they matter in this article.
A critical step in setting up your company is allocating and managing shares. Shares serve to allocate ownership in your company to different shareholders (also called members) and in different amounts. They can also give members certain rights within your company, such as voting. This is why it’s important to understand the different share types that you may be eligible to propose. Depending on the company structure of your business you can offer a variety of shares types, including but not limited to beneficially held and non-beneficially held. In this article, we’ll discuss non-beneficially shares and how they can help you structure your business.
Non-Beneficially Held Shares
‘Non-beneficially held shares’ are a type of share. These are held by a trustee on someone else’s behalf. This means that they do not hold the share for themselves. These are not beneficially held ie. not for the shareholder’s benefit. This means they won’t receive any direct benefits from the shares.
For example, a trust cannot own company shares. To combat this, a trustee may be listed as the legal owner and hold shares on behalf of the trust.
Alternatively, beneficially held shares directly benefit the person who holds them. For example, if you’re a sole shareholder, you will receive all dividends. You benefit directly from your ownership of those shares. Put simply, ‘beneficially held shares benefit you’ whereas ‘non-beneficially held shares benefit someone else’.
The Y Trust has acquired a 27% stake in Company X. This equates to roughly 27,000 shares. When it comes to share allocation, the trustee of the Y Trust becomes the shareholder, holding them non-beneficially.
ASIC and Non-Beneficially Held Shares
Once you have registered your company, you can allocate shares online. At this point, you may also want to create a shareholders agreement. If the shares aren’t held beneficially, they will be listed as ‘No’ on ASIC Connect. ASIC will not inquire into the trust. This is a useful way to hold shares in a company anonymously. However, if they are held beneficially, they will be listed as ‘Beneficially Held – Yes’.
If you wish to make an application for additional shares you can use the customisable and ready to use application for shares. ASIC requires companies to record the shares they issue on a register. In addition to this, you must also update ASIC on the status of these shares. Non-beneficially held shares can be a great way to structure ownership of your company, but it’s important to know if it’s the right share structure for you. If you’re unsure as to what share structure is right for you, it may be worth contacting a business lawyer.
Zac is a consultant at Lawpath, Australia’s largest and fastest growing online legal platform. Since joining Lawpath, Zac has assisted 1000s of startups and small business’s with their legal needs.