{"id":176983,"date":"2022-10-12T12:58:56","date_gmt":"2022-10-12T11:58:56","guid":{"rendered":"https:\/\/legalvision.co.uk\/?p=176983"},"modified":"2025-07-02T00:38:42","modified_gmt":"2025-07-01T23:38:42","slug":"purchase-shares-trust","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/corporations\/purchase-shares-trust\/","title":{"rendered":"How Do I Purchase Shares From a Trust in England?"},"content":{"rendered":"\n

As a business person, you may sometimes purchase shares from other companies. When buying company shares, you may have to purchase them from a trustee. Purchasing shares from a trust is primarily the same as purchasing shares from a non-trustee, though you may run into specific barriers due to the legal status of trusts. This article will explain the practical difficulties you may face when you purchase shares from a trust and evaluate some ways to avoid these.\u00a0<\/span><\/p>\n\n\n\n

Legal Overview of Trusts <\/span><\/h2>\n\n\n\n

A trust describes a legal relationship where trustees own legal title to a piece of property (company shares) on behalf of one or more beneficiaries.<\/span><\/p>\n\n\n\n

A trustee has the legal title to the shares, which means they can sell them as if they owned them. However, they do not own the shares, so they must always <\/span>act in the beneficiaries’ interest<\/span><\/a>.<\/span><\/p>\n\n\n\n

The beneficiaries benefit from the trust through regular dividend payments but cannot sell the shares themselves because they do not own the legal title. <\/span><\/p>\n\n\n\n

Trustee Shareholders<\/span><\/h2>\n\n\n\n

Mom & Pop Co Ltd <\/span><\/h3>\n\n\n\n

Mom & Pop Co Ltd is a fictional family business. It used to be owned by its founder, Mr Marks, who has since passed away. In Mr Marks\u2019 will, he stated he wanted to create a trust over all of his shares on behalf of his five living adult children: Rosa, Joseph, Frederic, Emma, and Leon. Mr Marks\u2019 has appointed two younger business associates as trustees: Mr Smith and Mr Menger. <\/span><\/p>\n\n\n\n

Each child is entitled to income from the shares for the rest of their life. When they die, their portion of shares in Mom & Pop Co Ltd goes to their children. If they are 18, then they own the shares. If they are not, the trust holds the shares for Mr Mark’s grandchildren until they turn 18. <\/span><\/p>\n\n\n\n

For this article, imagine you wish to buy 25% of Mom & Pop Co Ltd shares.<\/span><\/p>\n\n\n\n

Practical Considerations <\/span><\/h3>\n\n\n\n

Where someone owns shares which are not in trust, your position as a buyer is straightforward. As long as they have the legal right to sell the shares, you can purchase them without any problem. To prove that they have the legal right, they just need to prove their name is on the title to the shares. If their name is on the share certificates, then in nearly all cases, you can be confident they have the right to sell them.\u00a0<\/span><\/p>\n\n\n\n

But where there is a trust, your position as a buyer can become more uncertain. When you buy the shares in Mom & Pop Co Ltd, you purchase shares from a trust<\/span> but you want to be sure that the trustees have the power to sell them. This power is not the same as the legal right to sell shares. One of the trustees\u2019 names will be on the shares, but just because they can legally sell them does not mean that, if they do, it is a lawful sale. <\/span><\/p>\n\n\n\n

For instance, imagine your proposed purchase price substantially undervalues the shares\u2019 actual price, and as Mr Smith and Mr Menger acted with wicked intentions, which you are unaware of, they sell them to you at that price. As a general rule of trust law, trustees cannot sell trust property at an undervalue, so this would be an unlawful sale.<\/span><\/p>\n\n\n\n

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Your Position In an Unlawful Share Sale <\/span><\/h3>\n\n\n\n

If trustees sell you shares as an unlawful sale, the court is unlikely to try and unwind the transaction. The beneficiaries will have to claim against the trustees in their personal capacity. Also, you will not face any personal liability unless you know they acted contrary to their duties. <\/span><\/p>\n\n\n\n

However, the trust\u2019s beneficiaries could initiate costly legal proceedings against the trustees. If the trustees act as directors for the company, the company itself could become a party to any dispute, which may diminish <\/span>the value of the shares in the company<\/span><\/a>. <\/span><\/p>\n\n\n\n

The beneficiaries could claim you knew that the trustees agreed to an unlawful purchase and claim against you at a significant expense. <\/span><\/p>\n\n\n\n

Therefore, you want to ensure that trustees have the power to transact with you as soon as possible in the transaction process. <\/span><\/p>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n

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