In today’s business world, not all shareholders are listed by name in a company’s records. Some shares are held in trust — by legal representatives, trustees, or custodians — on behalf of others. If you’re one of these beneficial owners, you may wonder:
“Do I actually have shareholder rights?”
The good news is — yes, you do!
Thanks to Section 86(2) of the Companies Act, No. 07 of 2007 (Sri Lanka), even if your name doesn’t appear directly in the company’s share register, you are still legally protected.
📘 What Is a Trust Shareholding?
In a trust shareholding arrangement:
- One person (the trustee) holds shares in a company.
- They do so on behalf of someone else (the beneficiary).
- This relationship must be noted in the company’s share register for legal recognition.
🧾 What the Law Says (Section 86):
If a trust is officially noted in the share register:
- The beneficiary (real owner) is deemed a shareholder.
- The beneficiary has all the same rights and responsibilities as a registered shareholder.
💬 Key line from Section 86(2):
“The person for whose benefit those shares are held in trust shall be deemed to be a shareholder in the company.”
👩🏫 Real-Life Example:
Meet Nimal, a father who buys shares in a private company for his young daughter, Sasha. To manage the investment while she’s a minor, he registers the shares in his name — but declares in the company’s share register that he is holding them in trust for Sasha.
✔ Nimal is listed, but
✔ Sasha is the real owner.
Because the trust is properly recorded:
- Sasha is considered a legal shareholder.
- She has the right to:
- Receive dividends
- Vote at meetings (through a guardian)
- Claim ownership if the company is sold or liquidated
- Access information and take legal action if necessary
🛡️ Why This Legal Protection Matters
Many people use trusts to hold shares for:
- Minors or family members
- Investors who prefer anonymity
- Businesses or funds acting through nominees
- Estate planning or succession purposes
Without Section 86(2), beneficiaries could be powerless if disputes arise. This law ensures the real owner — the person who invested the money or inherited the shares — is treated fairly and legally.
⚠️ But There’s a Catch…
This protection only applies if the trust relationship is officially recorded in the share register.
If the trust is informal or undocumented, the company isn’t required to recognize the beneficiary’s rights.
✅ Always make sure your trust or nominee arrangement is legally documented and properly recorded with the company.
📌 Broader Impact for Companies & Investors
🏢 For Companies:
- It’s essential to maintain a clear and updated share register.
- If notified of a trust, the company should record it properly.
- Recognizing beneficiaries ensures compliance with the Act and prevents legal disputes.
👤 For Shareholders & Investors:
- You don’t need your name on paper to have legal rights.
- You can safely invest through trustees without losing shareholder privileges — as long as the arrangement is transparent.
💬 Final Thoughts
Section 86(2) bridges the gap between legal ownership and beneficial ownership. It provides a safety net for those whose shares are held by someone else, ensuring they enjoy the full benefits and protections of a shareholder.
So, if you’re investing in a company through a trustee or legal representative — make sure it’s noted in the share register. Your rights, dividends, and vote may depend on it.
