How does a trust own shares or units? . . . Who can own shares or units? Or maybe what can own shares or units? (Because “a trust” can’t own them . . . )

Christopher Balmford, MD

The only “things” that can own shares in a company — or units in a Unit Trust or a Hybrid Trust — are humans or companies. The humans or companies can own the shares or units by themselves or as part of a group. (When thinking about the word “company”, remember that it refers to any type of corporate entity — for example: a “Pty Ltd” company, a “Limited” company, and a corporate entity created by statute.)

So because only humans or companies can own shares or units, it means that:

• a dog, can’t own shares — nor can an elephant, a brick, a hockey stick, or a glass of wine; and
• if shares are going to be “owned on trust”, then they are to be owned by the trustee(s). The point is that the shares aren’t owned by the trust, they’re held (that is owned) on trust by the trustee(s).

This is true for any sort of trust, for example: a Discretionary (Family) Trust, a Hybrid Trust, a Unit Trust, a Bare Trust, a Declaration of Custody Trust (for SMSF Borrowing) and even for an SMSF.

Confusion around this issue troubles many people when they are ordering documents online from Cleardocs.

For example: Someone might be ordering a new company registration from us and they know that some of the shares are going to be held on trust. But on the Cleardocs interface, they can see that we offer them the choice of shares being owned:

• by one of the directors — who has to be a human;
• by a human who is not a director;
• by an organisation;
• by a joint holding — of humans or companies or both.

The customer is puzzled because they think the shares should be owned by the trust . . .

Solution The solution to this apparent puzzle is for the customer to remember that the shares are held by the trustee(s) — and the trustee(s) are always one or more humans or companies. The position is exactly the same if units in a Unit Trust or a Hybrid Trust are themselves held on trust for another trust.

When someone using Cleardocs remembers that the shares (or units) are held by the trustee(s), then they can make the appropriate choice from the list of types of shareholder the Cleardocs interface offers. When they’ve done that, the interface then asks if the shares are to be held by the trustee(s) on trust.

It’s easy really, as long as you remember the shares — or units — aren’t held by the trust, they’re held on trust by the trustee(s).