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One of the most important parts of running a company is managing your shareholders. And there are many company compliance requirements that your company must follow to make sure it’s properly managed. One part of this is to understand whether your shareholders have beneficial or non-beneficial ownership.

So, when it comes to your company’s shares, what does beneficial ownership and non-beneficial ownership mean?

If someone has beneficial ownership of a share it means that you can benefit directly from the shares. If they own shares in your company but aren’t entitled to receive the benefits from them, then you have non-beneficial ownership.

A non-beneficial owner often holds a share for someone else. Some common examples of non-beneficial owners include parents who hold shares for their children, the executor of a will who owns shares on behalf of an estate, or a trustee who holds shares for the beneficiaries of a trust.

What benefits can you have from a share?

A direct benefit of a share may include:

• a right to the dividends paid
• a right to vote at the company’s AGM or other voting rights
• a right to the value of the share when it is sold or transferred.

So if you have a shareholder who is a trustee, they’re not entitled to receive the dividends of the trust. They may receive the dividends but they must hold this on trust for the beneficiaries of the trust. The trustee will be required to distribute the dividends to the beneficiaries based on the details of the trust.

Many people choose to hold their shares under a structure of non-beneficial ownership. This is because using a trust or other similar structure can be a convenient way to hold shares anonymously so details of who the beneficial owner is are not publicly available.

What company compliance is required for beneficial ownership and non-beneficial ownership?

Shareholders who don’t have beneficial ownership of the shares they hold in your company must tell you within 14 days of holding the shares. They must tell you in writing and include the following information:

• The name and address of the person who transferred the shares to them
• The number of shares they hold both beneficially and non-beneficially
• The type of each share.

Your company must keep records of every share that it has issued in its share register. This must include information about each shareholder including:

• The number of shares they hold in your company
• Whether they hold the shares as a beneficial owner or not
• Their name and address
• The date they started to hold the shares
• The number of shares in your company they have
• What type of shares they hold
• Whether the shares are fully paid, partly paid or unpaid, and how much has been paid for them.

The only exception to this is if you have shares in a listed company. In that situation, a trustee or executor of a will would be listed as the beneficial owner of the share.

Every time any of these details change, your share register must be changed to reflect this. If you’re a proprietary company with 20 or less shareholders then you must also tell ASIC about all of these changes to your share register. You can do this on the ASIC online portal or CCASA can manage this aspect of company compliance on your behalf.  

If you’re a proprietary company with more than 20 members, you only need to tell ASIC about changes that affect your 20 largest shareholders for each type of share that you have. The information that you need to tell ASIC includes:

• If someone has become one of your 20 largest shareholders
• If someone is no longer one of your 20 largest shareholders
• One of your 20 largest shareholders transfers their shares to someone else
• One of your 20 largest shareholders increases or decreases the number of shares they hold in your company
• One of your 20 largest shareholders changes their shares from being beneficially owned to non-beneficially owned
• One of your 20 largest shareholders changes their shares from being non-beneficially owned to beneficially owned
• One of your 20 largest shareholders increases how much they have paid on their share.

There are several ways these changes could come about, including if:

• Your company issued more shares
• Your shareholder bought shares from another shareholder
• Another member is no longer one of your 20 largest shareholders.

Your company, whether it’s proprietary or public, also needs to tell ASIC when you:

• Issue or cancel new shares – The information you provide to ASIC must include the number of shares issued or cancelled, what type of shares they are, how much is paid or agreed to be paid on each share and any unpaid amount on each share. This must be provided to ASIC within 28 days.  
• Make any changes to how your shares are structured – You must include information about each different type of share you have, their codes and a description of them. You must also tell ASIC the total number of shares issued by your company, how many shares have been issued for each type of shares, and the amount paid and the amount unpaid on each share. This must be provided to ASIC within 28 days by proprietary companies. Public companies must tell ASIC about changes to their share structure after they’ve issued their annual statement.

What happens if you forget to tell ASIC?

When it comes to shares and company compliance, there’s a lot to get your head around – but if you don’t tell ASIC about the changes to your company’s shares, your company may be fined.

That’s why many companies find it helpful to let us handle things for them. We can remind you when updates are due, or simply do it for you. Contact us to find out more about we can help you manage your company’s shares. We have company compliance offices in Melbourne and Perth.