A nominee is a person, partnership or company that is entrusted to hold and administer shares or other property as the registered legal owner on behalf of the real owner (beneficial owner). The nominee holds the shares or property on trust and will have their name and details listed on public documentation in place of the beneficial owner who has the effective ownership and control of the shares.
The nominee is the legal owner in name only and the beneficial owner holds an equitable interest in those shares. In brief, an equitable interest is an interest in or right over property, which gives the holder of the right to acquire formal legal title from the person who is registered as the owner (nominee).
A corporate nominee is most frequently used to hold shares on trust on behalf of the beneficial owner. To ensure the beneficial owner retains control over the shares, an agreement between the nominee shareholder and the beneficial owner is executed stating that the shares or property are held on trust by the nominee for the beneficial owner’s benefit and that the nominee’s name and details will be used on documentation. An agreement can also outline specific terms, such as whether the nominee shareholder, as the registered owner of shares, can exercise any control such as voting rights. Express terms dealing with voting rights are often included and in the majority of cases, nominee shareholder does not and would not vote at all unless expressly directed or authorised by the beneficial owner.
Purposes of Nominee Shareholding
(A) Personal and Administrative Convenience
Personal convenience is the most common reason for the use of nominee shareholding. Overseas investors, which can be individuals or a company, may find it difficult to manage the day-to-day management of shares. Appointing a nominee can therefore save time and money and minimise the risk of lost opportunities arising from time delays. For example, sharebrokers generally use a nominee company to facilitate transactions while leaving their clients as the real owner of shares.
In terms of administrative convenience, it is common to use a nominee shareholder to separate shareholding from his other activities. Also, a group of companies may use a nominee either as a repository for shares acquired before it is decided which group member will hold the shares or as a central holder of all shares owned by the group.
Wishing to remain anonymous is often perfectly legal and legitimate. It may be for personal reasons such as wishing not to disclose financial affairs where he or she could be a politician, public servant or journalist who would be embarrassed if they are known to hold such wealth.
On the other hand, a company that wants to take over control of another company may wish to keep confidential of its identity so that it would encounter little or no resistance to the first stage of take over or perhaps be able to buy the shares at a lower price than otherwise, since the market price usually goes up when a take-over bid is made.
The Quinn Group have been offering nominee company services for more than 20 years. If you require further assistance with respect to the above, please contact our team of experienced taxation and commercial lawyers by submitting an online enquiry form or call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange a conference or appointment.