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Owning shares in a company can be a great source of income and a valuable asset. As with any area of commerce, there are risks around maintaining such an asset. So, it is essential to find ways to protect your interests. A common practice is to hold your shares in a trust. This means you would give your shares to a trustee to hold and maintain for the benefit of the beneficiaries. Depending on the structure, you can name yourself beneficiary or trustee, or both. You can tailor it to your specific needs, in a wide range of ways. This article will cover how you hold shares in a trust and some benefits of doing so.

How Does Holding Shares in a Trust Work?

When you own a share of a company, that means you own a part of the company as your property. So, you have rights to a portion of its income. The company distributes your portion of its profits to you in the form of dividends. As a shareholder, you are only liable for any money you have owing on the share, and if you use the share as part of a guarantee to lenders or creditors. As a shareholder, depending on how many shares you have, you will have voting rights attached to your shares.

In New Zealand, shareholders can be an individual person, another NZ company, or any other legal entity. An unincorporated trust does not qualify as a separate legal entity, so this means that the trustees have to be registered as joint owners of the shares in question. They hold and manage the shares for the trust, to distribute income for the benefit of the beneficiaries. Trustees are also the ones who hold the voting interests attached to the shares. You need to inform the company that this is the case and provide the trust deed. As joint shareholders, each trustee will need to provide the company with:

  • their full legal name; and
  • a residential address.

The company will then give this information to the Companies Office as part of the mandatory reporting requirements for shareholders.

Benefits of Holding Shares in a Trust

Asset Protection

When you hold shares in a trust, you are not the legal owner of the shares, the trustees are. So, if you have set it up to be the beneficiary receiving the income from share dividends, the shares are not in your name. 

There is a separation between your personal assets and the trust assets. This means that the trust assets may be better protected against claims by creditors, and cannot be drawn from to pay back your debt. This is especially true if you have used a corporate trustee, which is a company that has the sole purpose of being a trustee for your trust.

Tax Efficiency

If you own the shares personally, you pay tax on any income you receive based on your personal tax code. But, if you place the shares in a trust and the trustees have the discretion to distribute the income to beneficiaries, then the tax is determined based on the tax code of each individual beneficiary. 

This is useful if you have set up shares in a family trust, and the beneficiaries are your family members who may have different tax rates, because it allows for income tax efficiencies.

Ease of Succession

When selling shares, there is a lengthy process that changes depending on the rules of the company and your personal circumstances.

However, if you hold the shares in a trust, you can simplify this process. The trust retains the shares as its assets, so they are not changing hands. This means that you can change who controls the shares when you change trustees. This is different from selling the shares. You will still receive the long term benefits of those shares, as long as the trust is still running.

Key Considerations

While there are benefits to holding your shares in a trust, it is important to note that running one is not an easy process. There are many administrative and financial considerations, and you would usually need to hire an accountant to manage it correctly and in accordance with the law. This means keeping up to date records of how the shares operate in the trust, as well as more general concerns. 

Key Takeaways

Holding your shares in a trust can be a good way to protect your valuable assets, particularly against creditors making claims against you personally. This business structure offers a separate avenue of control of your shares, while you can still reap the benefits. There are also potential tax benefits, and succession planning for the management of your shares is a lot easier. But, maintaining a trust is not an easy job, and there are strict requirements now for how you should run a trust. If you would like more information or help with holding your shares in a trust, contact LegalVision’s business lawyers on 0800 005 570 or fill out the form on this page.


What is a trust?

A trust is a legal relationship that forms when a settlor gives assets (such as real estate, or shares in a company) to a trustee to hold and maintain for the benefit of the trust’s beneficiaries. The trustee has to make good business decisions about the assets, to make sure that they are available for the benefit of the beneficiaries.

What is a shareholder?

A shareholder is an individual person, a company, or other legal entity that owns shares in your company. This means they are entitled to a portion of the profits of your company and have some voting rights on decisions that concern their interests.

How do I own shares through a trust?

You own shares through a trust by naming your trustees as joint shareholders of your shares. They have to provide the details of the trust to the company and provide their contact details. They then distribute the income from the shares to the beneficiaries of your trust.

What are the benefits of holding my shares in a trust?

Shares held in a trust are better protected against claims by creditors wanting to repay any debts you owe them because you do not own the shares personally. There are also some tax advantages to holding shares in a trust.

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