Shareholders are incredibly important in determining a company’s performance and direction in the complex world of corporate governance. Individuals or organizations that own shares on behalf of another person or organization are known as nominee shareholders. They serve as a bridge between the beneficial owner and the company; hence their role and duties go beyond simple ownership.

By owning shares on behalf of beneficial owners and supporting their involvement in decision-making processes, nominee shareholders play a significant role in corporate governance. Fiduciary obligation, proxy voting, communication, preserving shareholder rights, and observance of rules and regulations are among their duties. Nominee shareholders can support the efficient operation of the corporate governance structure and guarantee the protection of the interests of beneficial owners by rigorously carrying out their roles and responsibilities.

Roles of nominee shareholders:

Holding shares on behalf of beneficial owners:

One of the primary roles of nominee shareholders is to hold shares on behalf of the beneficial owners. The beneficial owners may be individuals, institutional investors, or other entities. Nominee shareholders provide a legal structure for holding shares, ensuring that ownership rights are protected while maintaining the anonymity or confidentiality of the beneficial owners.

Proxy voting:

Nominee shareholders have the responsibility of exercising proxy voting rights on behalf of the beneficial owners. Proxy voting allows shareholders to participate in decision-making processes, such as electing directors or voting on important resolutions, even if they are unable to attend meetings in person. Nominee shareholders must ensure that they vote in the best interests of the beneficial owners, following their instructions or exercising independent judgment when authorized to do so.

Communication and information flow:

Nominee shareholders serve as a vital link between the beneficial owners and the company. They are responsible for facilitating the flow of information between the company and the beneficial owners. This includes promptly disseminating corporate announcements, financial reports, and other relevant information to the beneficial owners. Similarly, they gather feedback, concerns, and instructions from beneficial owners and communicate them to the company when necessary.

Safeguarding shareholder rights:

Nominee shareholders play a crucial role in safeguarding the rights of beneficial owners. They ensure that the interests of beneficial owners are protected, particularly in situations where conflicts of interest may arise. Nominee shareholders should act diligently and ethically, avoiding any actions that may compromise the rights or financial interests of the beneficial owners.

Responsibilities of Nominee Shareholders:

Fiduciary duty:

Nominee shareholders owe a fiduciary duty to the beneficial owners. This duty requires them to act in the best interests of the beneficial owners and exercise their powers with utmost loyalty, care, and skill. They must avoid any conflicts of interest and make decisions that prioritize the long-term value and success of the company.

Compliance with laws and regulations:

Nominee shareholders are responsible for ensuring compliance with relevant laws, regulations, and corporate governance standards. They should be knowledgeable about the legal and regulatory framework governing shareholder rights and responsibilities. This includes adhering to reporting requirements, disclosing ownership information when necessary, and maintaining transparency in their dealings.

Record-keeping and accountability:

Nominee shareholders are responsible for maintaining accurate records of shareholdings, transactions, and correspondence with beneficial owners and the company. They must be able to provide clear and transparent records upon request and be accountable for their actions as representatives of the beneficial owners.