Relationships of share ownership** and the ASIC

Happy New Year!

Up until the early 2000’s, the ASIC required only very basic information in relation to the share ownership in companies.

From around 2002, the ASIC began requiring that all private companies disclose the basis on which shares were owned, in particular whether shares were owned beneficially or non beneficially.

Broadly the distinction is as follows:

1. If a share is owned beneficially this means that the legal owner listed in the ASIC records also has full beneficial ownership.
2. If a share is owned non beneficially then the legal owner holds the share subject to the terms of some form of trust arrangement (often this trust will be a standard discretionary trust).

Unfortunately the disclosure of beneficial ownership is an area of significant confusion and often the confusion does not arise until resolution of the issue is time sensitive (for example in lead up to a sale transaction or as part of an asset protection audit).

Some of the issues that arise in this regard include:

1. anecdotally, it appears that when ASIC was first imputing this data following the change of approach, many companies had their notifications reversed during the data entry process (that is shares that were owned beneficially were noted on ASIC records as being owned non beneficially);
2. similarly many companies were confused about the distinction and therefore provided incorrect notification to ASIC; and
3.  in some instances a full search of all company records was not performed (for example all aspects of the company register) so the company provided incorrect information to ASIC.

Next week’s post will consider the three main alternatives for rectification where the beneficial ownership of shares is incorrectly recorded on ASIC records.

** For the trainspotters, ‘relationships of ownership’ is a line from the Bob Dylan song from ‘Gates of Eden’ listen hear (sic):

(When) advisers** act as fiduciaries

One issue that arises fairly regularly for advisers is whether they will act in fiduciary roles for their clients, for example, as trustees or executors of a will or as an attorney under some form of enduring power of attorney document.

At law, there is no reason that an adviser is automatically prohibited from accepting this type of role.

There are however a number of rules that need to be understood and complied with, not least of which the duty to avoid a conflict of interest.

Practically however, many financial and risk advisers are prohibited from taking on these roles, unless they are able to obtain the prior written consent of their licensee.

** for the trainspotters, the title today is riffed from the Bob Dylan song ‘Queen Jane Approximately’. Listen hear (sic):