A nominee shareholder is an individual or entity who holds shares in a company on behalf of another person or entity, who is the ultimate owner. The nominee shareholder’s name appears on the company’s shareholder register but not the ultimate beneficiary.
Nominee shareholders are commonly used for various purposes, including:
Confidentiality: Similar to nominee directors, nominee shareholders may be appointed to maintain confidentiality regarding the beneficial ownership of the shares. This can be particularly relevant where individuals or entities wish to keep their ownership interests private.
Legal Compliance: In some jurisdictions, there may be legal requirements regarding the residency or nationality of shareholders. Nominee shareholders may be appointed to fulfil these requirements without revealing the true ownership structure of the company.
Asset Protection: Nominee shareholders can be part of asset protection strategies to shield the beneficial owner’s assets from potential creditors or legal claims. By holding shares in the name of a nominee, the beneficial owner may reduce the risk of having their assets targeted in legal proceedings.
Facilitating Investments: In complex investment structures or when dealing with certain types of investments, such as mutual funds or collective investment schemes, nominee shareholders may aggregate and manage on behalf of multiple investors.
It’s important to note that while nominee shareholders hold legal title to the shares, they typically have no rights or control over the management or voting rights. Instead, they act as custodians of the shares on behalf of the beneficial owner, who retains the economic interest and control over the shares.