Can a Trust Own Shares? A Practical Guide For Australian Startups

If you’re building a business in Australia, it’s common to start thinking about how you’ll structure ownership early - especially if you’re planning to bring in investors, protect key assets, or set up something that can grow with you.

One question we hear a lot from founders and small business owners is whether a trust can own shares in a company.

In most cases, yes - a trust structure can hold shares. But the practical “how” matters just as much as the “can”. You’ll need to get the trust set up properly, understand who really controls decisions, and make sure you’re not creating issues with future fundraising, tax outcomes, or governance.

This article is general information only and isn’t legal or tax advice. Trust and tax rules can be highly fact-specific, so it’s worth getting advice for your situation before you set (or change) your structure.

Below, we’ll walk you through how it works in plain English, what you need to watch out for, and which legal documents usually sit around a trust-shareholding structure.

Can a Trust Own Shares in Australia?

Yes, generally speaking, shares in an Australian company can be held on trust.

In Australian company law terms, a “member” (shareholder) can include an individual or another entity. A trust itself usually isn’t a separate legal “person” like a company, so the shares are held by the trustee.

So when people say “the trust owns the shares”, what’s usually happening is:

• the trustee is recorded on the company’s share register as the legal owner of the shares; and
• the trustee holds those shares on trust for the beneficiaries of the trust, under the trust deed.

This distinction is important because it affects things like signing documents, voting on shareholder decisions, receiving dividends, and dealing with future investors.

Also, while trust ownership is generally permitted, it can still be constrained by the documents and rules that apply to your situation - for example, the trust deed, the company’s constitution (if any), any shareholders agreement, and (for some companies) external rules such as funding terms or shareholder eligibility requirements.

Why Would a Business Use a Trust to Hold Shares?

Trusts are commonly used by small businesses and startups for a mix of commercial, tax, and risk-management reasons (but what’s “best” really depends on your specific situation).

Some common reasons include:

• Asset separation: shares may be held outside an individual’s personal name, which can form part of a broader risk-management plan (but it isn’t a guarantee of “asset protection” and depends heavily on the facts, the trust deed, and other laws)
• Family business planning: ownership can be managed for family groups and future succession
• Flexibility of distributions: depending on the trust type, there may be flexibility in how trust income is distributed to beneficiaries (this is a tax and accounting discussion you should have with your adviser)
• Simplifying ownership across a group: a trust can act as a central “holding” vehicle for shares in one or more companies

That said, trust shareholding can also create complexity - especially if you’re aiming for venture capital investment, employee equity, or a clean cap table.

How Does a Trust Actually Hold Shares? (Trustee, Beneficiaries And Control)

To understand whether a trust owning shares will work for your business, you need to understand the moving parts.

The Trust Is Not The Shareholder - The Trustee Is

A trust is a relationship where a trustee holds assets for beneficiaries under a trust deed.

Because a trust isn’t typically a separate legal entity, the company’s records will usually show something like:

• “ABC Pty Ltd as trustee for the XYZ Family Trust” (corporate trustee); or
• “Jane Citizen as trustee for the XYZ Family Trust” (individual trustee).

In day-to-day business, that means the trustee is the one who signs shareholder resolutions, receives dividend payments (as trustee), and exercises shareholder rights - but they must do so in line with the trust deed and trustee duties.

Beneficiaries Don’t Automatically “Control” The Shares

Beneficiaries generally benefit from the trust assets, but they don’t usually have automatic power to vote shares or manage the company just because they’re beneficiaries.

Control depends on things like:

• who is the trustee
• who can appoint/remove the trustee (often the appointor role in the trust deed)
• what the trust deed says about decision-making and distributions
• who are the directors of a corporate trustee (if the trustee is a company)

For founders, this matters because “control” is often what investors, co-founders, and banks care about - not just who is named on paper.

Corporate Trustee vs Individual Trustee (Practical Business View)

Many business owners prefer a corporate trustee for commercial structures, because it can help with continuity and administration (for example, if an individual trustee changes, it can create extra paperwork around asset ownership).

Whatever you choose, make sure the structure aligns with your wider setup (including your company’s governance documents like a Company Constitution if you’re using one), and check whether any document restricts who can hold shares or how shares can be dealt with.

What Types of Trusts Can Own Shares?

In Australia, several trust types may hold shares, and each comes with different practical and tax considerations.

Here are a few common ones you’ll see in small business and startup contexts:

Discretionary (Family) Trust

A discretionary trust (often called a “family trust”) is common for small businesses.

It can be used to hold shares where:

• the trustee is the shareholder; and
• trust income (like dividends) may be distributed at the trustee’s discretion among beneficiaries (subject to the deed and tax rules).

This flexibility can be useful, but it may also raise questions for investors or for co-founder arrangements if the trust isn’t fully understood by everyone involved.

Unit Trust

A unit trust is more like “fixed ownership” - beneficiaries hold “units”, and entitlements are generally tied to those units.

This can feel more familiar in a commercial setting, especially where multiple parties want clearer proportional ownership (though there’s still complexity compared to straightforward individual/company shareholding).

Bare Trust (Including Some Custody Arrangements)

A bare trust typically means the trustee holds the asset on behalf of a beneficiary who has the absolute entitlement to it.

This can sometimes appear in specific structuring situations, but it’s usually less common for everyday small business ownership unless there’s a specific legal or administrative reason.

Tip: The “best” trust structure depends on what you’re trying to achieve (risk management, family planning, investment readiness, employee incentives). It’s worth speaking with both legal and tax advisers early so you’re not forced to restructure later - and so you can confirm the trust deed actually allows the trustee to acquire, hold, and deal with shares the way you expect.

Key Legal And Commercial Issues When a Trust Owns Shares

Even though the answer is usually yes, the bigger question for a business owner is: should you use a trust - and if so, how do you do it without creating problems down the track?

Here are the big issues we recommend you think through.

1. Cap Table Complexity And Future Investment

If you plan to raise funds, issue shares to investors, or implement an employee equity plan, a trust shareholder can add complexity.

Investors may ask:

• Who actually controls the trust?
• Can the trustee be replaced easily?
• Are there any restrictions in the trust deed that affect share transfers or voting?
• Will distributions or beneficiary changes create unexpected outcomes?

This doesn’t mean you can’t raise capital with a trust shareholder - but it does mean you’ll want your governance and documentation to be very clear from the start.

2. Shareholder Decision-Making And Deadlocks

Shareholders vote on key company decisions (depending on the issue and your company documents). When a trust holds shares, the trustee votes - and the trustee’s decision-making is governed by the trust deed and trustee duties.

If you have multiple founders, you’ll usually want a Shareholders Agreement that clearly covers:

• decision-making thresholds
• reserved matters (what requires unanimous consent)
• how disputes are handled
• what happens if someone wants to exit
• share transfer restrictions

This becomes even more important if one founder’s shares are held via a trust and another founder holds shares personally.

3. Dividend Payments And Distribution Flow

When a company pays dividends to a trust shareholder, it will generally pay the dividend to the trustee (as shareholder).

Then, separately, the trustee decides (in accordance with the trust deed and tax rules) how trust income is distributed to beneficiaries.

From a practical business perspective, this can affect:

• how cash actually ends up in the hands of the people you expect
• record-keeping and annual administration
• how other shareholders understand the economics of the business

Your accountant will usually help heavily here, but the legal structure still needs to support the intended outcome - and trust tax outcomes (including the handling of franking credits and distribution resolutions) can be complex.

4. Restrictions On Transferring Shares (And Who Can Sign)

If the company later needs to transfer shares (for example, bringing in an investor or restructuring), the trustee will be the one signing transfer documents.

You’ll also need to check:

• your company constitution (if you have one) and any transfer restrictions
• any pre-emptive rights in your shareholders agreement
• any limitations under the trust deed (including whether the trustee needs consent from an appointor or another party)

If you’re ever unsure who can sign on behalf of an entity, it’s worth clarifying execution rules early - including scenarios where someone signs on behalf of someone else (for example, under delegated authority).

5. Director And Trustee Duties (Governance Still Matters)

If your trustee is a company, it will have directors - and those directors have duties under the Corporations Act.

Separately, trustees have duties under trust law to act properly under the trust deed and for the benefit of beneficiaries.

This can create overlapping responsibilities. It’s manageable, but it’s another reason why it’s important to set things up properly and keep good records from day one.

What Documents Do You Need When a Trust Owns Shares?

If a trust will hold shares in your company, the right documentation helps avoid confusion, disputes, and expensive clean-ups later.

Here are the key documents to consider.

• Trust deed: the core document setting out how the trust operates, who controls it, who benefits from it, and what the trustee can do. It should be checked to confirm the trustee has the power to acquire, hold, vote and transfer shares, and whether any consents are required.
• Company Constitution: sets out internal governance rules for the company (especially relevant where you want rules around share transfers, meetings, and director powers). Many companies adopt a Company Constitution to make governance clearer, and it may include restrictions that affect how shares can be held or transferred.
• Shareholders Agreement: crucial where there are multiple shareholders (including where one is a trustee), because it sets expectations and rules on decisions, exits, funding, and disputes. A tailored Shareholders Agreement can help prevent misunderstandings about control and economics.
• Directors’ resolutions and share issue/transfer documents: whenever shares are issued or transferred, the company should document approvals properly (and keep its share register up to date).
• Privacy Policy (if you collect personal information): if your business operates online, markets to customers, or collects leads, you’ll likely need a Privacy Policy so you’re clear about how personal information is handled.
• Website Terms and customer terms (if you sell online): if you sell products or services through a website, having clear Website Terms and Conditions can help set expectations around orders, payments, liability limits, and acceptable use.
• Employment agreements (if you hire staff): if your company is growing and you’re hiring, properly drafted Employment Contracts help clarify pay, duties, confidentiality, and IP ownership.

Not every business needs every document from day one. But if you’re using a trust to hold shares, it’s usually a sign you’re thinking long-term - so it’s worth aligning the documents early to avoid messy restructuring later.

Key Takeaways

• Can a trust own shares? Usually, yes - in Australia, shares can be held by a trustee on trust for beneficiaries, and the trustee is recorded as the shareholder.
• A trust holding shares can be useful for structuring and family/business planning, but it can also add complexity for fundraising, governance and administration.
• Understanding control is essential: the trustee signs and votes, while beneficiaries don’t automatically control the shares just because they’re beneficiaries.
• The type of trust matters (discretionary trusts, unit trusts, and other structures can have very different practical and tax outcomes).
• Strong documentation (especially a Shareholders Agreement and clear company governance documents) helps prevent confusion, disputes, and problems during investment or exits - and you should check the trust deed, constitution and any shareholders agreement for restrictions on holding or transferring shares.

If you’d like a consultation on whether a trust shareholding structure makes sense for your small business or startup, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.