Trusts and Shareholding in Companies: Legal Position, Beneficial Ownership and Practical FAQs

The interface between trust law and company law raises recurring questions in practice:
Can a trust hold shares in its own name? Who should be entered in the Register of Members? What is the effect of Section 89 disclosures on voting rights and dividends? This article reorganises and explains the legal framework, judicial precedents and practical implications in a structured FAQ format.

1. Can a Trust Be a Member of a Company or Hold Shares Directly?

1.1 Judicial view on trust as shareholder

In Stock Holding Corporation of India Ltd. v. Bharat Petroleum Corporation Ltd., [1998] 91 Comp Cas 862 (Bom), decided on 3 October 1996, the Bombay High Court examined whether a trust can itself be treated as a member of a company.

The facts involved 400 equity shares of Bharat Petroleum Corporation Ltd. (BPCL). These were originally acquired by LIC Mutual Fund, a trust, and registered in the name of Stock Holding Corporation of India Ltd. (SHCIL) as trustee. Later, LIC Mutual Fund transferred the shares to Morgan Stanley Growth Fund (MSGF), also a trust, with SHCIL acting as trustee for MSGF as well. SHCIL requested BPCL to register the shares as:

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

The question was whether such a description could be recognised so as to treat the trust as member, or whether only the trustee could be so treated.

The Court, analysing Section 153 and Section 187C of the Companies Act, 1956, emphasised the distinction between:

  • The registered/legal holder of shares (trustee), and
  • The beneficial owner (the trust/beneficiaries).

1.2 Core finding of the Court

From the decision, the following legal propositions emerge:

  • A trust is not the legal holder of shares;
  • The trustee is the registered/legal owner whose name can be entered in the Register of Members;
  • A trust, in the circumstances considered, cannot be entered as member in its own name;
  • Shares forming part of trust property must be held and registered in the name of trustee(s).

Important: The ruling was rendered in the context of the Companies Act, 1956. For the current regime, one must read it along with Section 88 and Section 89 of the Companies Act, 2013 and the absence of an express equivalent of Section 153 in the new Act, while noting the role of Table F of Schedule I.

2. Registration of Trust-Owned Shares in the Names of Trustees

2.1 Is it mandatory to describe trustees “as trustees” in the Register of Members?

No such description is mandatory.

The Government of India, Ministry of Company Law Administration, through Press Notes dated 12 June 1957 and 25 June 1957, clarified that:

  • Shares that are part of trust property may be registered in the names of trustees;
  • There is no obligation to add words like “as trustee” or to refer to the trust in the Register of Members.

Thus, if three individuals are trustees, the company may simply register them as ordinary joint holders without reciting their fiduciary capacity.

2.2 Is it necessary to mention the trust name in the Register of Members?

Again, the answer is No.

In connection with Stock Holding Corporation of India Ltd. v. Bharat Petroleum Corporation Ltd., the Department of Company Affairs, vide Letter No. 10/28/87-CL.V, Vol. IV, dated 16 February 1993, confirmed that:

  • Shares forming part of trust property may be registered only in the names of trustees,
  • Without any disclosure in the register such as “A/c. LIC Mutual Fund” or similar wording.

Accordingly, the Register of Members is not required to reflect the existence of the trust or the nature of the holding as trust property.

3. Can a Private Trust Be Entered as a Member of a Company?

3.1 Position under the Companies Act, 1956

Under the Companies Act, 1956, the Ministry/Department of Company Affairs issued Circular No. 12 of 1975 dated 7 June 1975, clarifying that:

  • A private trust is not a separate legal or corporate person;
  • It cannot itself be registered as holder/member in respect of company shares;
  • Where shares form part of the trust estate, trustees must hold the shares and be recorded in the company’s Register of Members.

This was consistent with Section 153 of the 1956 Act, which barred entering notice of any express, implied or constructive trust in the Register of Members.

3.2 Practical implication

  • The trust has beneficial interest,
  • The trustees are the registered members;
  • Membership rights (voting, dividend, notices) are exercised by registered trustees, not the trust as a separate entity.

4.1 Supreme Court view on nature of a trust

In **Sankar Padam Thapa v.