FAQs: Can a Trust Hold Shares or Become a Company Member?

FAQs – Whether a Trust Can Hold Shares or Become a Member of a Company and the Rights of Trustees and Beneficial Owners

Summary: The supplied FAQ examines whether a trust can itself hold shares or become a registered member of a company, or whether shares forming part of trust property must be registered in the names of trustees. It explains the distinction between the registered/legal holder and beneficial owner of shares, referring to Sections 153 and 187C of the Companies Act, 1956 and Sections 88 and 89 of the Companies Act, 2013. The material discusses judicial decisions holding that a trust is not a separate juristic person and that trustees hold and administer trust property for beneficiaries. It also explains the treatment of trust interests in the Register of Members, the effect of Table F of Schedule I, disclosure of beneficial ownership under Section 89, and the rights of registered shareholders, including voting and receipt of dividends. The FAQ further considers situations in which registered and beneficial ownership differ, including nominee arrangements, and explains that disclosure under Section 89 does not by itself require corporate benefits to be paid directly to the beneficial owner.

Whether a Trust Can Hold Shares or Become a Member of a Company

Question: Whether a Trust can itself hold shares and be entered in the Register of Members, or whether the shares must be held in the names of its Trustees?

Answer: The issue was considered by the Bombay High Court in Stock Holding Corporation of India Ltd. v. Bharat Petroleum Corporation Ltd., [1998] 91 Comp Cas 862 (Bom), decided on 3 October 1996.

The dispute concerned 400 equity shares of Bharat Petroleum Corporation Ltd. (BPCL). The shares were initially purchased by LIC Mutual Fund, a trust, and were registered in the name of Stock Holding Corporation of India Ltd. (SHCIL), acting as trustee of LIC Mutual Fund.

Subsequently, LIC Mutual Fund transferred the shares to Morgan Stanley Growth Fund (MSGF), which was also a trust. SHCIL was the trustee of MSGF as well. Accordingly, SHCIL requested BPCL to register the transfer in the following manner:

“Stock Holding Corporation of India Ltd. (A/c. Morgan Stanley Growth Fund)”

The principal issue was whether such registration was permissible when the beneficial owner was a trust, or whether the trust itself could be regarded as the holder/member of the company.

The Bombay High Court noted that there was no dispute that LIC Mutual Fund and Morgan Stanley Growth Fund were trusts and were not legal entities capable of holding the shares in their own names. SHCIL, as trustee, was the person legally entitled to hold the shares.

The Court considered the provisions of Sections 153 and 187C of the Companies Act, 1956, particularly the distinction between the registered/legal holder of shares and the beneficial owner.

Finding of the Court

The decision establishes an important distinction between the trust as beneficial owner and the trustee as the legal/registered holder. A trust, in the circumstances considered in the case, does not itself become the registered member merely because it is the beneficial owner of the shares. The shares are legally held by the trustee(s), who are entered as the registered holders/member(s) of the company.

Accordingly: The trust is not the legal holder of the shares; the trustee is the legal/registered holder, while the trust may be the beneficial owner.
A trust, being incapable of holding shares in its own name in the circumstances considered in the case, cannot itself be entered as the registered member of the company. The shares have to be held and registered in the name of the trustee(s), in their capacity as trustees.

Important qualification: The judgment must, however, be read in the context of the Companies Act, 1956 and the specific statutory framework applicable at that time, particularly Sections 153 and 187C. For determining the position under the Companies Act, 2013, the provisions of Sections 88 and 89, and the present/proposed amendment to Section 153, should also be examined separately.

Registration of Shares Held as Trust Property

Question: Can shares belonging to a trust be held in the names of the trustees without mentioning their capacity as trustees?

Answer: Yes. As per the Press Notes dated 12 June and 25 June 1957, issued by the Government of India, Ministry of Company Law Administration, shares in a company which constitute the property of a trust may be held in the names of the trustees without adding any statement or description indicating that they are trustees.

Accordingly, the shares may be registered in the individual names of the trustees, without the words such as “as trustee” or any other reference to the trust being required to be incorporated in the Register of Members.

Question: Can shares forming part of trust property be held in the names of trustees without mentioning the trust in the Register of Members?

Answer: Yes. In the matter of Stock Holding Corporation of India Ltd. v. Bharat Petroleum Corporation Ltd., the Department of Company Affairs, vide its Letter No. 10/28/87-CL.V, Vol. IV, dated 16 February 1993, confirmed that shares in a company forming part of the property of a trust may be held in the names of the trustees without adding any statement indicating the trust, such as “A/c. LIC Mutual Fund.”

Whether a Private Trust Can Become a Registered Member

Question: Can a private trust itself hold shares or become a member of a company?

Answer: As clarified by Circular No. 12 of 1975 dated 7 June 1975, issued by the Ministry/Department of Company Affairs, under the Companies Act, 1956, a private trust, not being a separate legal or corporate entity, could not itself be registered as the holder/member in respect of shares of a company.

Where shares were held as part of the trust property, the trustees of the private trust were required to hold the shares, and their names were entered in the company’s Register of Members as the registered holders.

Thus, the legal position was that the trust itself was not the registered member; rather, the trustees were the registered members/holders of the shares, while the beneficial interest in the shares was held for the benefit of the beneficiaries of the trust.

This position is consistent with the principle reflected in the erstwhile Section 153 of the Companies Act, 1956, which provided that no notice of any express, implied or constructive trust could be entered in the Register of Members.

Legal Status of a Trust and Its Capacity to Hold Property

Question: Whether a trust is a legal entity or juristic person capable of holding property in its own name?

Answer: The Supreme Court in Sankar Padam Thapa v. Vijaykumar Dineshchandra Agarwal, 2025 INSC 1210, decided on 9 October 2025, expressly considered the legal status of a trust.

The Supreme Court held that a trust is not a legal entity or juristic person and cannot be equated with a body corporate having a legal existence of its own. A trust operates through its trustees, who hold and administer the trust property in accordance with the terms of the trust.

The Court also referred to the definition of “trust” under Section 3 of the Indian Trusts Act, 1882, under which a trust is an obligation annexed to the ownership of property, arising out of confidence reposed in and accepted by the trustee for the benefit of another. The trustee is the person who accepts the confidence and holds/administers the trust property for the benefit of the beneficiaries.

Thus, the legal character of a trust is fundamentally different from that of a company or other incorporated body corporate. A company has an independent legal personality and can own property in its own name, whereas a private trust, as such, does not have an independent juristic personality separate from its trustees.

Whether a Trust Can Hold Property in Its Own Name

Question: Whether a trust is a legal entity capable of holding property in its own name?

Answer: No. The legal status of a trust has been consistently explained by various judicial pronouncements. A trust, as such, is not a separate legal or juristic entity having an independent legal existence. It is the trustee who is the legal holder of the trust property and who acts on behalf of the trust.

1. Duli Chand v. Mahabir Pershad Trilok Chand, AIR 1984 Delhi 144

The Delhi High Court observed:

“It is well-known that a Trust is not a legal entity as such…. It is not like a Corporation which has a legal existence of its own…”

The Court further observed that the trustees are the legal entities.

2. Kansara Abdulrehman Sadruddin v. Trustees of the Maniar Jamat, [1968] 9 GLR 64

The Gujarat High Court explained that when we speak of a trust, we are essentially referring to the obligation created in respect of property. The trust itself is not a legal entity and cannot own property.

The Court observed, in substance, that the property is owned by the trustee, who is a separate legal person from the trust, and that it is the trustee who can hold property, sue and be sued.

3. V. Chandrasekaran v. Venkatanaicker Trust, S.A. No. 220 of 2011, decided on 29 November 2016

The Court reiterated the principle that:

“A trust is not a legal entity as such…. It is not like a Corporation which has a legal existence of its own…”

The Court further recognised that the trustees are the legal entities through whom the trust operates.

Position Emerging from the Judicial Decisions

a. A trust, as such, does not have an independent legal personality and ordinarily cannot hold property in its own name or sue or be sued in its own name merely by virtue of being a trust.

b. The trust property is legally held by the trustee(s) for the benefit of the beneficiaries and in accordance with the terms of the trust.

c. The trustee is the legal holder of the trust property and acts in a fiduciary capacity for the beneficiaries.

d. A trust is essentially an obligation attached to the ownership of property and does not, merely by its creation, acquire an independent juristic personality comparable to that of a company or other body corporate.

Trusts, Beneficiaries and the Register of Members

Question: Can a trust or the beneficiary of a trust be entered in the Register of Members of a company?

Answer: Under Section 153 of the Companies Act, 1956, no notice of any trust, express, implied or constructive, could be entered in the Register of Members or the Register of Debenture-holders of a company.

Accordingly, where shares were held by a person as a trustee for the benefit of another person, the company was not permitted to make an entry in its Register of Members showing that the registered holder was acting as a trustee or that another person was the beneficiary.

The purpose of Section 153 was primarily two-fold:

1. To relieve the company from the obligation of recognising equitable or beneficial interests: The company was not required to investigate or recognise any equitable interest of a third party in shares registered in the name of a member. The company was entitled to deal with the person whose name appeared in the Register of Members as the registered holder.

2. To prevent the company from being treated as a trustee: A person claiming an equitable or beneficial interest in shares could not, merely on that basis, treat the company as a trustee in respect of those shares or impose upon the company obligations arising from the alleged trust.

Therefore, a beneficiary whose name was not entered in the Register of Members did not have a direct membership relationship with the company merely because he was the beneficiary of a trust in respect of the shares. The statutory rights attached to membership, such as receiving notices, attending general meetings, voting and receiving dividends, ordinarily belonged to the registered member.

However, Section 153 did not necessarily prevent the company from knowing about or recognising the existence of a trust in fact. The prohibition was against entering notice of the trust in the statutory register and treating the beneficiary as a member on that basis.

Section 153 of the Companies Act, 1956 and the Companies Act, 2013

Question: Whether the prohibition contained in Section 153 of the Companies Act, 1956 has been provided for in any corresponding provision of the Companies Act, 2013?

Answer: No. The prohibition contained in Section 153 of the Companies Act, 1956, which expressly provided that “no notice of any trust, express, implied or constructive, shall be entered on the register of members or of debenture-holders,” was not carried forward as a corresponding provision in the Companies Act, 2013.

However, a similar principle is contained in Table F of Schedule I to the Companies Act, 2013. Table F provides:

Except as required by law, no person shall be recognised by the company as holding any share upon any trust, and the company shall not be bound by, or be complied in any way to recognize (even when having notice thereof) any equitable, contingent, future or partial interest in any share, or any interest in any fractional part of a share, or (except only as by these regulations or by law otherwise provided) any other rights in respect of any share except an absolute right to the entirely thereof in the registered holder.

Thus, although the express statutory prohibition contained in the erstwhile Section 153 of the Companies Act, 1956 was not reenacted in the Companies Act, 2013, Table F contains a substantially similar principle by providing that, except where required by law, the company is not required to recognise a trust or any equitable, contingent, future or partial interest in shares.

This provision reinforces the principle that, for the purpose of the company’s relationship with its members, the person whose name is entered in the Register of Members is the person recognised as having the rights attached to the shares, unless the Companies Act, the Articles or any other applicable law provides otherwise.

Section 187C of the Companies Act, 1956 and Section 89 of the Companies Act, 2013

Question: What was the object of Section 187C of the Companies Act, 1956, and what is its corresponding provision under the Companies Act, 2013?

Answer: Section 187C was inserted in the Companies Act, 1956 by the Companies (Amendment) Act, 1974, with the object of ensuring disclosure of beneficial/benami holdings of shares by both the registered holder (benamidar) and the beneficial owner.

The provision was intended, inter alia, to prevent possible evasion of the provisions relating to takeovers and acquisition of shares and to bring transparency regarding the actual beneficial ownership of shares.

Under the Companies Act, 2013, Section 89 came into force with effect from 1 April 2014 and broadly corresponds to Section 187C of the Companies Act, 1956.

Section 89 continues the statutory requirement of disclosure in cases where the person whose name is entered in the Register of Members as the registered owner is different from the person who holds the beneficial interest in the shares.

Thus, the statutory scheme recognises a distinction between the registered owner and the beneficial owner, and requires appropriate declarations to ensure transparency regarding beneficial ownership of shares.

Registered Owner and Beneficial Owner of Shares

Question: Is the person whose name appears in the Register of Members presumed to be the beneficial owner of the shares?

Answer: Generally, a person whose name appears in the Register of Members of a company is regarded as the registered holder of the shares and is ordinarily presumed to have the beneficial interest in those shares as well.

However, in certain circumstances, the person whose name appears in the Register of Members may hold the shares on behalf of or for the benefit of another person. In such cases, the beneficial interest in the shares may vest in such other person, while the person whose name appears in the Register remains the registered owner.

Accordingly, there may be a distinction between the registered ownership and the beneficial ownership of shares. Section 89 of the Companies Act, 2013 specifically provides for disclosure of such beneficial interest where the registered owner and beneficial owner are different persons.

Rights of the Registered Holder of Shares

Question: What rights does a registered holder of shares have in a company?

Answer: A person in whose name the shares of a company are registered and who is the registered holder thereof is entitled to exercise the statutory and membership rights attached to such shares. These rights include:

1. Right to receive notices of the Annual General Meeting (AGM) and Extraordinary General Meeting (EGM);

2. Right to attend and participate in general meetings of the company;

3. Right to vote on matters placed before the members, subject to the provisions of the Companies Act, 2013 and the Articles of Association;

4. Right to receive dividends declared by the company; and

5. Right to receive other benefits and rights attached to the shares.

Thus, for the purposes of the company’s relationship with its members, the person whose name appears in the Register of Members is the registered member and is ordinarily entitled to exercise the rights attached to the shares.

Effect of Section 89 on Dividend Payment

Question: Does Section 89 of the Companies Act, 2013 affect the company’s obligation to pay dividend to the registered member?

Answer: No. Section 89 of the Companies Act, 2013 does not prejudice or affect the obligation of a company to pay dividend to the member whose name is entered in the Register of Members maintained in accordance with the provisions of the Companies Act, 2013.

The company’s obligation to pay the dividend is generally discharged upon payment of the dividend to the registered holder of the shares, subject to the applicable provisions of the Act. Therefore, even where the registered owner and the beneficial owner are different persons, the company is ordinarily required to deal with the registered member for the purpose of payment of dividend. The declaration of beneficial interest under Section 89, by itself, does not alter the company’s obligation to pay dividend to the registered holder.

Accordingly, the beneficial owner cannot, merely by virtue of the declaration under Section 89, require the company to pay the dividend directly to him instead of the registered holder, unless otherwise provided by law or by the applicable arrangement governing the shares.

Two Types of Interests Recognised Under Section 89

Question: What are the two types of interests in shares recognised under Section 89 of the Companies Act, 2013?
Answer: Section 89 of the Companies Act, 2013 recognises two distinct types of interests in shares:

1. Legal or registered interest: This interest is vested in the person whose name is entered in the Register of Members. Such person is the registered holder or ostensible member of the company and is recognised by the company as its member.

2. Beneficial interest: This interest is vested in the person who is the beneficial owner of the shares and is entitled to the beneficial enjoyment or economic benefit arising from those shares.

Thus, Section 89 distinguishes between registered/legal ownership and beneficial ownership of shares. The registered holder is the person whose name appears in the Register of Members and who is recognised by the company as its member, whereas the beneficial owner is the person in whom the beneficial interest in the shares actually vests, where the registered and beneficial ownership are held by different persons.
Accordingly, registration of shares in the name of one person does not necessarily mean that the same person is the beneficial owner. Section 89 provides the statutory mechanism for declaring and disclosing such separation between registered ownership and beneficial interest.

Situations in Which Section 89 May Apply

Question: In what situations can Section 89 of the Companies Act, 2013 become applicable?

Answer: Section 89 of the Companies Act, 2013 becomes relevant where there is a difference between the registered holder of shares and the person in whom the beneficial interest in the shares is vested. Some important instances are as follows:

1. Where an entity cannot hold shares directly in its own name

Section 89 may become relevant where an entity is not legally capable of holding shares directly in its own name. For example, where shares are held for or on behalf of a Hindu Undivided Family (HUF) or a partnership firm, the shares may be registered in the name of the Karta, partner or another person acting on behalf of the underlying entity, as the case may be.

In such circumstances, the person whose name appears in the Register of Members is the registered holder, while the beneficial interest in the shares may belong to the HUF, partnership firm or other person/entity for whose benefit the shares are held.

Accordingly, Section 89 provides a statutory mechanism for disclosure where the registered holder and the beneficial owner are different persons.

2. Where shares are held through a nominee to satisfy the minimum number of members
Section 89 may also become relevant where shares are held in the name of a nominee to satisfy the statutory requirement relating to the minimum number of members.

The first proviso to Section 187 of the Companies Act, 2013 permits a holding company to hold shares in its subsidiary in the name of a nominee or nominees, where such holding is necessary to ensure that the number of members of the subsidiary does not fall below the statutory minimum.

In such a case, the nominee whose name appears in the Register of Members is the registered holder, whereas the beneficial interest in the shares remains with the holding company. This creates a distinction between the registered ownership and beneficial ownership, thereby attracting the provisions of Section 89 relating to declaration of beneficial interest.

Effect of Section 89 Disclosure on Corporate Benefits

Question: Does disclosure of beneficial interest under Section 89 of the Companies Act, 2013 require the company to provide dividends, bonus shares, rights shares or other benefits directly to the beneficial owner?

Answer: No. It should be noted that merely because a declaration of beneficial interest has been made under Section 89 of the Companies Act, 2013, the company is not thereby required to pay or transfer the benefits attached to the shares—such as dividend, bonus shares, rights shares or other corporate benefits—directly to the beneficial owner.

The disclosure under Section 89 brings the beneficial ownership arrangement to the notice of the company, but it does not, by itself, operate as a direction to the company to deal directly with the beneficial owner or to disregard the registered holder.

The disclosure of beneficial interest also does not take away or diminish the rights of the registered shareholder. The person whose name appears in the Register of Members continues to be the registered member and is entitled to exercise the rights attached to the shares, subject to the Companies Act, 2013 and the Articles of Association of the company.
This position is reinforced by Section 89(9) of the Companies Act, 2013, which provides that:

“Nothing contained in this section shall be deemed to prejudice the obligation of a company to pay dividend to its members, and the said obligation, on payment of dividend, shall stand discharged.”

Accordingly, where the registered holder and beneficial owner are different persons, the company’s statutory obligation to pay dividend is ordinarily to the registered member, and payment to such registered member discharges the company’s obligation.

A declaration under Section 89 is essentially a disclosure of the beneficial interest and is not, by itself, a direction to the company to pay or transfer corporate benefits directly to the beneficial owner. The registered shareholder continues to enjoy the rights attached to the shares vis-à-vis the company, and the company’s obligation to pay dividend to its registered member remains unaffected by the declaration of beneficial interest.

Thus, Section 89 creates transparency regarding beneficial ownership but does not, by itself, alter the company’s relationship with or obligations towards the registered member.

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Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the author whatsoever and the content is to be used strictly for informational and educational purposes. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. the author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon.