When Is A Shareholder Actually A Shareholder?

It is extremely common for shares in offshore companies (both privately held companies and publicly listed companies) to be registered in the name of one person, but held for the benefit of another. The registered shareholder might be a trustee, a nominee, a custodian, a broker, a bank or an agent for another. There are a variety of commercial and legal reasons for separating the registered and legal title to, and the beneficial interest in, company shares. Many such reasons are valid and legitimate (such as taking security for loan finance, estate planning, promoting increased efficiencies for clearing and settlement of sales of such shares, or promoting economies of scale for the purpose of collective investment or employee share schemes). Others, occasionally, might be less so (tax evasion, creditor evasion or hostile takeovers). Whether or not the ultimate beneficial owner of the shares will actually be known to the company, or to any third parties, will, of course, depend on a variety of commercial, legal, KYC and other regulatory considerations, which vary from one jurisdiction to another. A common theme in most offshore jurisdictions with legal systems modelled on English law, however, is that only a registered shareholder can properly assert rights, claims or interests against the company, or its directors and officers, with respect to its shares. This is because a company is generally under no obligation to recognise or have regard to any trusts or beneficial interests in its shares, whether it is made aware of such a trust or not. This is generally made clear in each company's Articles of Association or Bye-Laws, and it is also reflected in a specific statutory provision in most countries' companies' legislation. It is a historic legal principle which has also been considered and upheld by the United Kingdom Supreme Court on a number of occasions, most recently in 2011, in the case of Enviroco Ltd v Farstad Supply A/S [2011] UKSC 16. However, there have been a large number of reported court decisions from offshore courts in recent months and years, in which the courts have had to re-examine the 'registered shareholder' requirement in the context of different types of shareholder complaint, including:

derivative actions, whether brought against directors, officers or professional service providers; minority oppression petitions; winding up petitions; applications for court sanction of schemes of arrangement; applications to enforce...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT