What is the difference between a shareholder and the beneficial owner?

In Cyprus, the names and addresses of the shareholders of all Cyprus private companies are filed with the Companies Registry, and thus part of the public record. Consequently, the shareholder of a Cyprus company is the person in whose name the shares in a particular company are registered, as per the official records in the Registry of Companies. That shareholder can be a private individual or another corporate body.

However, the shareholder may not always be the ultimate beneficial owner. A distinction can be made between “holding” the shares and actually owning them. While the shareholder may hold shares in his own name, he may at the same time hold those shares on behalf of another person on a contractual basis. Accordingly, that other person would be the actual, ultimate beneficial owner of those shares. Such arrangement is called nominee shareholding. Effectively, then, a nominee shareholder acts as a stand-in for the beneficial owner, preventing general public from seeing who is the real owner of the company.

The signal distinction between the nominee shareholder and the ultimate beneficial owner is that the nominee would only be entitled to a contractual fee for its service, while the beneficial owner retains the full economic interest (and risk) in the underlying business.