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LSDefine
Simple English definitions for legal terms
beneficial owner
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A quick definition of beneficial owner:
Beneficial owner: A person or group that owns or controls something, like a company or property. They may not be the official owner on paper, but they have the power to make decisions about it. For example, if someone owns more than 5% of a company's stock, they must tell the government. This helps people know who really has control over important things.
A more thorough explanation:
Beneficial owner refers to a person or entity that ultimately owns or controls an interest in a legal entity, such as a security, property, or interest in a trust.
For example, if you own shares in a company through a broker, you are the beneficial owner of those shares, even though the broker is the registered owner. In the securities context, individuals who are beneficial owners of more than 5% of any class of a public company’s stock must file a Schedule 13D or Schedule 13G.
According to Securities Act Rule 13d-3, a beneficial owner is "any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (1) Voting power which includes the power to vote, or to direct the voting of, such security; and/or, (2) Investment power which includes the power to dispose, or to direct the disposition of, such security."
For instance, if a person owns 10% of a company's stock and has the power to vote on important decisions, they are considered a beneficial owner. Similarly, if a trust owns a property and a person has the power to make decisions about that property, they are also a beneficial owner.