Shareholder being a unregistered trust

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Jigar Dhabalia (Querist)
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21 February 2014 Dear all,

can a unregistered trust be a shareholder in a private limited company ??

further , if yes , whether the Trust can gift the shares to the Trustee of that trust through Gift Deed ??

SHAKTI JINDAL

SHAKTI JINDAL (Expert)
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21 February 2014 An unregistered trust can of course hold shares in a private limited company. However, the trust can hold the shares in the name of the trustees which may be individuals, corporations, companies or societies registered under the Societies Registration Act.

Further, the corpus of the trust is to be disposed/utilized/distributed in accordance with the terms of the trust deed and for the benefit of beneficiaries defined therein. Trustees have a fiduciary duty towards the trust property.

Jigar Dhabalia

Jigar Dhabalia (Querist)
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21 February 2014 Dear Shakti ,

Whether the trust can hold the shares in its own name...?? and not on behalf ??

and can it transfer the shares in name of its trustee, who is already a shareholder in that private limited company ??

Aashok Kumar Sharma online

Aashok Kumar Sharma online

(Expert)
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25 July 2025 This is a nuanced question involving **unregistered trusts**, **shareholding**, and **gift transfers**. Here's a detailed legal perspective:

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### ✅ Can an Unregistered Trust Be a Shareholder in a Private Limited Company?

* **Technically, no** — an unregistered trust **cannot hold shares in its own name** because it **does not have a separate legal personality** under Indian law (unlike a company or LLP).
* However, the **trustees** of such a trust **can hold shares on behalf of the trust**.
* So the **shares are held in the name of the trustee(s)**, **not in the name of the trust**.

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### ✅ How Does a Trust Hold Shares?

* Shares must be registered in the name of **trustees**, with a **declaration** that they hold them **in their capacity as trustees** of a specific trust.

* For example:
“Mr. X, Trustee of ABC Charitable Trust.”

* The company’s register of members will show the **trustee as the shareholder**, but the **beneficial interest lies with the trust**.

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### ❌ Can the Trust Gift Shares to the Trustee?

* Legally, **a trust cannot "gift" shares to its trustee** because:

* A trust doesn't have legal ownership (the **trustees do**).
* A gift requires **a transfer of ownership**, but the trustee already holds the shares **on behalf of the trust**.

* If a trustee wants to hold the shares **in their personal capacity** (and not as a trustee), it requires:

* A **valid transfer**, not a gift.
* Compliance with the terms of the trust deed.
* Consent from all co-trustees (if any) and possibly from the beneficiaries.

* Also, **self-dealing by a trustee** (i.e., acquiring trust property for oneself) is generally **prohibited under fiduciary duty principles**, unless explicitly permitted by the trust deed and all beneficiaries consent.

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### ✅ Can the Shares Be Transferred from Trustee to Another Trustee?

* Yes, but it should be:

* **Properly documented** (via share transfer form or board resolution),
* In accordance with the **trust deed**, and
* Compliant with the **Companies Act provisions** for transfer.

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### Summary Table

| Question | Answer |
| ------------------------------------------------------ | ------------------------------------------------------------------- |
| Can an unregistered trust hold shares in its own name? | ❌ No, it must hold through trustee(s) |
| Can trust gift shares to a trustee? | ❌ Not in their personal name — only as part of trust administration |
| Can trustee hold shares on behalf of trust? | ✅ Yes, with clear declaration |
| Can shares be transferred to another trustee? | ✅ Yes, as per trust deed and legal process |

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### Recommendation:

To avoid regulatory and legal complications:

* Always hold shares in the **name of trustees**, not the trust.
* Avoid gifts between trust and trustees — use **proper transfer mechanisms** if needed.
* Consult a legal expert before transferring trust property, especially when it involves potential **conflict of interest**.

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Would you like a **sample declaration format** for holding shares as trustee?

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