North Sydney Commercial Lawyers

Companies holding shares in themselvesPrint This Post

Companies holding shares in themselves

A testator wanted to leave his portfolio of shares equally to three pre-existing trusts — one for each of his children. Some of the shares were in company ABC Pty Ltd. ABC Pty Ltd was also the trustee of each of the trusts. Can a company hold shares in itself as trustee for someone else?

No. But s 259A of the Corporations Act allows the shares to be held by someone else upon trust for the company. Go figure.

The leading case is Castiglione’s Will Trust [1958] 1 Ch 549. In that case a testator by will directed that certain shares in “CE and Co Pty Ltd” be given (on the death of the son) “to CE and CO Pty Ltd at the date of his death”. Was the gift valid?

The Court held that although a company could not be a member of itself (that is, it may not legally hold shares in itself) it can beneficially own shares in itself, by means of the shares being held by a person upon trust for the company.

So to help our testator, we suggested that he bequeath the non ABC shares to the 3 trusts and bequeath the shares of the ABC trustee company to the children directly and make them appointors under the will as well.