Registered Owner Vs. Beneficial Owner

As a shareholder of a public limited company,

A person may hold the shares:

- DIRECTLY: called Registered Owner (Name is registered in the register of member of the company)

- INDIRECTLY: Through a bank or broker-dealer called beneficial owner (enjoys the right of ownership of the shares irrespective of the title)

Generally, registered owner and beneficial owner are one and the same person but in some cases they may be different i.e. there may be a case where the person whose name is entered in the register of members of a particular Company is different and the person who actually enjoys the right of ownership is different.

One of the common examples of this case is the “Holding Company and Wholly Owned Subsidiary Company”. 

The Holding Company is a Company which holds 100% shareholding of the other Company which is known as Wholly Owned Subsidiary of the Holding Company.

In order to fulfill the requirement of the Act of minimum shareholder(s), the Holding Company is required to appoint one or more nominee(s) as the shareholder(s) of the Wholly Owned Subsidiary Company. The nominee(s) appointed by the Holding Company are the registered owner holds the shares of the Wholly Owned Subsidiary Company on its name for and on behalf of the Holding Company i.e. ultimate beneficiary of such shares is Holding Company.

The current Section 89 mandates registered owner and a beneficial owner of shares of a company to make disclosures as per the prescribed forms i.e., MGT-4 and MGT-5. Upon receiving the same, the company is required to make a note of such declaration in the concerned register and make proper entries therein.