A Company’s shares may be for the benefit of one person (“Beneficial Shareholder”) and be registered in the name of another person (“Registered Shareholder”), except to the extent that a company’s Memorandum of Incorporation provides otherwise. As such, the rights depicted in the share register is independent of the ownership of the shares.
This type of an arrangement is similar to the doctrine of the undisclosed principle as the Beneficial Shareholder essentially has all the rights and entitlements, while the Registered Shareholder is the person in whose name the shares are registered.
However, the Companies Act makes it mandatory for a Registered Shareholder whom holds shares in a company to unveil the identity of a Beneficial Shareholder as well as the number and class of such shares on certain instances.
Registered Shareholder may be appointed because a Beneficial Shareholder does not wish to have the shares registered in his / her / its own name or even to ease the administration of buying and selling shares in the case of brokers.
Beneficial Shareholders can rest assured, as it will not be considered to be a disposal of an asset when shares are transferred from a Registered Shareholder to the Beneficial Shareholder or between Registered Shareholders. The Income Tax Act is as a rule not concerned with amounts received by a person in a nominee capacity, but with beneficial entitlement.