A nominated shareholder agreement is a legally binding agreement between a shareholder and a nominated person, also known as a nominee. This agreement specifies that the nominee will hold shares on behalf of the shareholder. In simple terms, the nominee is the owner of the shares, but the shareholder is entitled to the benefits that come with owning those shares.
This type of agreement is commonly used in situations where a shareholder wants to keep their identity confidential, or where they are unable to hold shares in their own name due to legal or regulatory restrictions. Nominated shareholder agreements are often used by high net worth individuals, family trusts, and offshore companies to hold investments in a more private manner.
The nominated shareholder agreement outlines the roles and responsibilities of both the shareholder and the nominee. It typically includes details such as the number of shares being held, the duration of the agreement, and any restrictions on the nominee`s ability to vote or sell the shares. The agreement may also include provisions for the payment of dividends and any other benefits associated with the shares.
It is important to note that while the nominee is the legal owner of the shares, they have a fiduciary duty to act in the best interests of the shareholder. This means that they must follow the instructions of the shareholder and make decisions that benefit them.
Nominated shareholder agreements can be a useful tool for protecting the privacy of shareholders, but they can also be used for nefarious purposes such as money laundering or tax evasion. For this reason, many countries have strict regulations around the use of nominees and may require them to be registered or licensed.
In conclusion, a nominated shareholder agreement is a legal arrangement that allows a shareholder to hold shares through a nominee. The agreement details the roles and responsibilities of both parties and is often used for privacy or regulatory reasons. However, it is important to comply with local regulations and ensure that the arrangement is not being used for illegal purposes.