Trusts as a vehicle for holding company shares
Produced in partnership with Marilyn McKeever, Partner at New Quadrant Partners
Trusts as a vehicle for holding company shares

The following Private Client practice note produced in partnership with Marilyn McKeever, Partner at New Quadrant Partners provides comprehensive and up to date legal information covering:

  • Trusts as a vehicle for holding company shares
  • Introduction
  • Voting trusts
  • Non-charitable purpose trusts
  • Unit trusts
  • Employee benefit trusts
  • Pension trusts
  • Taxation
  • Income tax
  • Capital gains tax
  • More...

Introduction

Many trusts own shares as part of a portfolio of investments. This Practice Note looks at situations where trustees own shares in order to achieve some other commercial purpose.

Such trusts fall into two main categories:

  1. where the intention is to centralise management and possibly voting rights in the shares while maintaining the economic rights of the beneficiaries. These trusts will usually be bare trusts, and

  2. trusts where the aim is to hold shares in order to benefit beneficiaries at some future time and possibly on a discretionary basis. Such trusts will generally be ‘settlements’ for tax purposes.

Voting trusts

A voting trust will often be used in conjunction with a shareholders' agreement so that the arrangement is part trust and part contractual.

The trust/contract can operate in a number of different ways.

For example, in Booth v Ellard, a number of family members placed their shares in the family company into a trust before the anticipated disposal of the company.

Initially, a family member could instruct the trustees as to how the voting rights on ‘his’ percentage of the shares were to be exercised and the trustees were bound to follow those instructions. However, if there was an offer for sale/float and shareholders entitled to at least three quarters of the shares wished to go ahead then the trustees were empowered to dispose of the share to the best

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