Beneficial ownership is a form of ownership in which someone retains the benefits and responsibilities of ownership, but not the actual title. It comes up in a number of different contexts. The law surrounding beneficial ownership varies, and in arrangements which deviate from standard practices, it can be wise to consult a lawyer for advice. A lawyer can also assist with drawing up a contract which clearly defines the relationships of all parties involved.
In a simple example of beneficial ownership, when people make arrangements with a brokerage firm, the firm becomes the beneficial owner of the stocks and securities of the customer. It is allowed to execute trades on behalf of the customer, to buy and sell, and to make other decisions related to the securities. However, the firm does not hold the title to the securities, with the title resting in the hands of the client.
Likewise, the owner of a copyright could assign some of the rights to a beneficial owner by arrangement. There are many cases in which this is done in both express and implied agreements. The copyright holder still owns the copyright, but the beneficial owner can use it like his or her own, and may make decisions involving how and where the copyright is utilized.
In the financial world, beneficial owners may be required to report their status. The term “beneficial owner” can also refer to people with a voting or controlling share in something, including groups of people who share ownership. They are required to report that they are beneficial owners in the interests of full transparency, so that other people understand how decisions are made and who can be involved in decisionmaking. When there is a change in beneficial ownership, this must be reported as well.
Beneficial ownership involves an implied duty as a trustee. The beneficial owner does not hold the title to the property, but is expected to treat it responsibly, and to handle it as though it were his or her own. Failure to care for the property properly can result in legal and financial penalties, as the nominal or official order can argue that the beneficial owner abused his or her position. People who are not clear about their ownership relationship to something should discuss the situation with a lawyer to make sure that they discharge any responsibilities properly, and to avoid being held legally liable for failure to perform.
Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.