Presumption** of disclosure of beneficial share ownership

Recent View posts have considered a number of aspects of the ASIC requirement that the beneficial ownership of shares in a private company be disclosed.

 
One potential difficulty in relation to ASIC’s requirements in this regard involves situations where the legal owner holds the share on an undisclosed trust for another party or entity.

 
In this type of situation reading of the relevant ASIC provisions suggests that the company report should disclose the fact that the legal owner holds the share non beneficially.

 
This said, in a true undisclosed trust situation most advisers will recommend that the ASIC records in fact are completed in a way that shows the legal owner is also the beneficial owner.

 
If this approach is adopted then full supporting documentation should be retained by the legal owner to rebut the presumption created by the way in which the ASIC records are completed.

** For the trainspotters, ‘presumption’ is a key word from Midnight Oil’s song from 1998, ‘Blot’ see here:

(Stripped) Bare** trust share ownership

Recent View posts have looked at the various issues in relation to notifying the ASIC of the beneficial ownership of shareholdings in a private company.

 
One aspect of this style of situation that arises relatively regularly relates to companies that were incorporated prior to 1997. Before this date, every private company was required to have at least two shareholders.

 
In order to provide a practical solution where a person was wanting to be the sole shareholder a practice developed whereby a second party would be listed as a legal shareholder, however they would simply hold that share on a bare trust for the intended sole shareholder.

 
Where such a structure exists, assuming that the articles of association or constitution have now been updated, it is generally possible to vest (or bring to an end) the bare trust arrangement and have the ASIC records updated to simply list the sole shareholder.

** For the trainspotters, ‘stripped bare’ is a line from the U2 song from 1983 ‘October’ see hear (sic):

Updating ASIC records – Simple (Simon)**

Last week’s post touched on some of the issues in relation to disclosure of beneficial ownership of shares on ASIC records.

In situations where the beneficial ownership is incorrectly recorded there are three broad alternatives available, namely:

1. Leaving the ASIC records unchanged. From a compliance perspective while this approach is possible, it is not recommended.
2. Simply lodging an annual return or ASIC form 484 that updates the ASIC records from that date. In many cases this approach will be pragmatically appropriate and is certainly the easiest and most cost effective approach. There is a risk however that there may be adverse revenue consequences or challenges from a third party (for example a trustee in bankruptcy).
3. The final approach involves effectively rectifying ASIC records from the date the error first occurred and then arranging for the annual returns for every subsequent year to also be amended. Obviously, this approach can be a significant exercise and is generally only adopted where there are concerns from a tax, stamp duty or asset protection perspective.

** For the trainspotters, the title today is riffed from INXS’ first ever single, from 1980, watch here: