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Simple English definitions for legal terms
beneficial ownership
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A quick definition of beneficial ownership:
Beneficial ownership refers to a situation where someone owns something, like a stock or property, but it's held in someone else's name for safety or convenience. The person who actually owns it still gets to make decisions about it and benefit from it. In some cases, it's important to know who the real owner is, especially to prevent crimes like money laundering or terrorism financing.
A more thorough explanation:
Beneficial ownership refers to a situation where a person has the right to vote and make decisions about a security, even though the security is held in the name of someone else, such as a broker. This arrangement is often used for safety or convenience reasons.
In international commercial law, beneficial ownership refers to the natural person who is behind a legal entity or arrangement. This information is important for preserving the integrity of tax systems and for fighting financial crimes such as corruption, money laundering, and terrorist financing.
One example of beneficial ownership is when a person invests in a stock through a broker. The stock is held in the broker's name, but the investor has the right to vote on company decisions and receive any benefits from the stock, such as dividends.
Another example is when a company is owned by a trust. The trust is the legal owner of the company, but the beneficiaries of the trust have the right to make decisions about the company and receive any profits.
These examples illustrate how beneficial ownership allows a person to have control and benefit from a security or company, even if they are not the legal owner.