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Can dividends be paid directly to the beneficial owner?
Published on: 15 September 2022
Can dividends payable to the registered holder of shares in a private limited company be paid directly to the beneficial owner of the shares?
It is possible for the equitable title to shares to be held by one person and for the legal title to those shares to be held by another.
The legal title to shares in a company is held by the person who, having agreed to become a shareholder, has their name entered into the company's register of members (sections 112 and 113 of the Companies Act 2006 (CA 2006)). The register of members of a company is prima facie (but not conclusive) evidence of any matters directed or authorised to be inserted into it (CA 2006, s 127).
The holder of the legal title to shares is a constructive trustee of those shares (sometimes referred to as a nominee) for the holder of the equitable title (who is their beneficial owner). Such a trust arrangement will be governed by common law principles (eg these provide that it is the holder of the legal title to the shares — being the
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Jurisdiction(s):
United Kingdom
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