a legal question please

maumau

maumau

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Company A is owned by Trust B and Trust C. 49% each with 2% belonging to a sleeping partner. The beneficiary of Trust B is Trust D and the beneficiary of Trust C is Trust E. True story.

Does anybody know if the beneficiaries of Trusts D and E are shareholders of company A. Also are the managers of company A answerable to the trustees of Trusts B and C?

Speculation on the pecking order is welcome.

Thanks to anybody who comments.
 
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Haha you're correct and I tried so hard:-)

Fixed.
 
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Not sure what you mean. Shareholders and beneficiaries are different things. The owners (by way of shares) of Company A are the two trusts and the sleeping partner. You've already said they are the shareholders, and 100% of the shares are accounted for. By your own account, there are no other owners. Trustees are not the trust, and neither are the beneficiaries.
 
The beneficiaries of D & E are not automatically shareholders of A. The managers of A would not be answerable to the trustees of B & C but owing to their majority shareholding they would be able to appoint directors to A and the managers would be answerable to them.



The directors of A appointed by trusts B & C does not have to be trustees of B & C.
 
And what Arthur says. Trustee, shareholders and beneficiaries are not necessarily the same people.
 
Thank you Arthur, but how can a trust own shares? I'm thinking a shareholder has a say in the way a company is being run.
 
I'm liking what signate says. Trustees of B and C can appoint directors. What if the company has two directors, one of whom is a slacker.
 
maumau said:
Thank you Arthur, but how can a trust own shares? I'm thinking a shareholder has a say in the way a company is being run.
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A trust is a legal entity and can own assets. The trustees would represent the trust and make decisions for it. The trustees would appoint a director as they have enough ownership.



Being a shareholder does not entitled you to have a say in how the company is run. It would depend on the percentage owned. I own a few FNB shares. No way will they allow me to have a say in how the company is run. I can attend their AGM and give an opinion.
 
signates said:
.... I own a few FNB shares. No way will they allow me to have a say in how the company is run. I can attend their AGM and give an opinion.
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Excellent example Signates.

Sadly the shareholder and beneficiaries' positions are not the ones i was hoping for; happily the trustees appointment of a director will make all the troubles go away.

Thank you Havoc, Arthur and Signates.
 
No...only the immediate party holding the actual shares is a "shareholder".

However someone further up the stream might still have "control" (Various definitions exist...see Companies Act and IFRS).

Simplified it means that:

Ultimate Parent has 60% ownership of Mid Parent and Mid Parent has 70% ownership of Subsidiary.

In that case Mid Parent can force any kind of decision they like on Subsidiary side. They effectively control Subsidiary since they can push a shareholder vote any way they like. Similarly Ultimate Parent can force Mid Parent to do whatever they like (due to majority) so Ultimate Parent has full control of Subsidiary even though they don't have any direct shareholding. i.e. it forms a chain of control so to speak.

Thats a little simplified though. e.g. The Co Act gives the minority shareholder (your sleeping partner) quite a bit of power to protest when they feel unfairly treated.
 
Aw Havoc? I tried to simplify the gobbledygook and now you've made it Chinese gobbledygook:-)

What i understand from your explanation is those high on the pyramid of power have the most influence. Right now the company MD is top dog. Very little money is passed from the company to either of the shareholding trusts or from there to beneficiaries. From this thread it seems the trustees can intervene if they deem it necessary.

Glad to hear your point about minority shareholders. I like it, I like it a lot.
 
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It means that if X controls Y and Y controls Z then by extension X controls Z too.

Can't really simplify it beyond that.

>>Also are the managers of company A answerable to the trustees of Trusts B and C?

Oh yes. Since B and C both only hold 49% their individual influence is limited. If they unite on any issue and vote together though they control 98% of the votes which gives them +- unlimited power.

>>Right now the company MD is top dog.

The MD answers to the shareholders so the two trusts can get rid of the MD if they work together so no he isn't top dog. Taking down an MD is not something trivial though (they tend to be reasonably clued up) so I'd advise you to consult a lawyer rather than a forum. ;) MDs tend to be a lot more powerful in real life than on paper so anything like that might backfire hard.
 
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You have to look to the deeds of the trust to determine how the Trustees are obligated to behave. A trust is not a legal person (except for the purposes of tax by virtue of statute) and are an estate collection of property and obligations which must be administered by one or more trustees in accordance with the instrument that created the trust.

As a general rule the Trustees of the trust holding the shares exercise shareholder powers. The beneficiaries are entirely irrelevant to the exercise.

However as this involves trusts and companies unless you are doing an assignment for your studies you should be having a chat with a trusty attorney (mind the pun :))
 
Paul Hjul said:
As a general rule the Trustees of the trust holding the shares exercise shareholder powers......

However as this involves trusts and companies unless you are doing an assignment for your studies you should be having a chat with a trusty attorney (mind the pun :))
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:-) no assignment, it's real life but fortunately none of the people involved are willing to ruin their lives or the lives of others over money, certainly not at this stage.

Appreciate your input Havoc you've been very patient, this time i grasp the concept (explained in words of one syllable). It makes sense that the MD is answerable to the trustees and if that's the law chances are he knows it and he won't push further than he's allowed to by tacit agreement of everybody concerned. I hear what you say about managing directors being clued up. The guy in question certainly is and the reason I'm curious about all this is word on the street is that he's very busy studying the Companies Act you mentioned above.

Thank you Paul for pointing me in the direction of the trustees of the shareholding Trust exercising shareholders powers. That's hugely pertinent in this company. I could not understand who the shareholders are :-)

I feel good after chatting to you guys, I appreciate the advice, tks.
 
Mein gott Paul is that the sort of book you read? I'd happily throw the money but it'd be wasted. Thanks for the suggestion though.

Is there an idiot's guide version? :-)
 
maumau said:
Mein gott Paul is that the sort of book you read? I'd happily throw the money but it'd be wasted. Thanks for the suggestion though.

Is there an idiot's guide version? :-)
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Its one of the books on my Christmas list :)
Haven't read the whole book but have used it as a reference book a few times
 
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