It’s no secret that every investor’s biggest desire is to maximise their investments.
There are a plethora of strategies that they can consider to reach that goal. For some, this could involve collaborating with other individuals or businesses to take advantage of the benefits that come with shared stock ownership.
Being a part of joint ownership of shares fundamentally differs from being a single-share owner for a few key reasons. For one, it involves the decisions, funds, and presence of an entity besides yourself, which makes for a more collaborative experience.
Secondly, the presence of another entity creates a whole new dimension to your investment strategy. From acquiring board consensus to determining voting rights, there’s an added layer of complexity when two or more people are involved in a joint shareholding agreement.
This makes legal assistance a critical tool for people to protect themselves while ensuring profitability from their shareholdings. But that’s not all there is to it. Let’s get into closer detail about the concept of co-ownership of shares.
What Is Joint Ownership of Shares?
A joint ownership of shares is when two or more owners collectively own the same set of shares. Unlike sole shareholders, these shareholders are in a joint agreement wherein they have a shared stake in their gains and losses from their respective arrangements.
The ownership can be divided equally or structured so that one party holds a larger share.
When two (or more) individuals are in a restructured joint ownership, you must show proof of the reason behind the divided ownership, like a share certificate showcasing the initial capital investment of each owner. This will help protect both parties from future disputes and promote transparency regarding who owns the share.
Individuals who enter joint ownership agreements may be spouses, parents and children or business partners. These agreements help simplify estate planning and combine each owner’s resources to increase their chances of reaping a larger investment, regardless of the relationship.
That said, it should be said that children can’t be fully recognised as joint owners. Their parents (or custodians) bear the name of the shareholder unless the child is the beneficial owner (i.g. From an estate planning arrangement). Be sure to keep that in mind before applying for a joint ownership agreement.
What Rights Do Joint Share Owners Have?
Joint owners have similar rights to sole shareholders, however, the kicker is that both parties must be in agreement before any major decision can be made.
Furthermore, the senior holder, or the first name listed in a contractual agreement to own shares of a stock, has a higher privilege than the other co-owners.
Here are some of the rights and responsibilities a co-owner of a share may possess:
- The right to attend and speak in executive meetings
- The right to vote on company activities and projects
- The right to retrieve data pertaining to the company, such as a share certificate
- The right to acquire from dividends of stock holdings
In short, both owners carry the risks and rewards of the stock, whether it rises or falls in price. Ownership is shared (the degree to which can vary), but regardless, the right to make decisions falls on both individuals and consensus must be reached before action can be taken, whether it’s to liquidate or buy more of the stock.
That said, as mentioned earlier, the senior holder holds reign over the share in some cases. This is especially true if they also own a larger portion of the share due to having a higher investment.
In such cases, they may have a higher share of profits, higher decision-making authority, and the ability to transfer shares in the event of their untimely death to a designated probate without going through legal affairs.
However, for everyone’s case, joint owners are also responsible for complying with making accurate tax reports and filing them appropriately.
If you need legal aid, don’t hesitate to contact legal professionals to help you fully understand the inner workings of joint share ownership in greater detail.
What Certifies an Individual as a Joint Owner?
A share certificate is the main document that clearly outlines the owners of a particular shareholding agreement.
This legal document is binding proof of ownership for all joint owners. It lists their full names, the number of shares held per person, and any relevant details about the ownership structure.
For joint ownership, the share certificate lists all co-owners, confirming their equal or proportionate stake in the shares.
Besides a share certificate, joint owners can also create supporting documents that detail the terms of their profit distribution and voting process setup. The shareholder’s agreement also contains how they’d like to divide shares, provisions for separate ownership, and dispute resolution processes.
With this supplementary information, all members will be made aware of their rights in relation to their joint ownership process. This makes it easier for everyone to know their involvement in their role and can also be used as comprehensive legal proof when necessary.
How to Sell Shares Held By Joint Owners
If you want to sell jointly owned shares to a co-owner or another party, you have to follow a rigid process to ensure that it’s legally compliant for the protection of all individuals involved.
Here’s how you sell a piece of a joint share ownership:
- Look at the ownership agreement: If nothing is preventing you from selling shares, then you may proceed with the process.
- Ask for consent from co-owners: You need to gain approval from your co-owners before selling your share. After all, it’s divided among you both.
- Provide documentation: Get documents such as the share certificate, copies of resolutions and previous board meetings, dividend vouchers, and an offer to exercise pre-emptive rights on the allotted transfer of shares.
- Contact a broker: Find a broker who is willing to facilitate the transfer. There are usually plenty of them online that can help you out.
- Complete transfer forms: Provide personal and business details. Answer the form questions such as who owns the share, how much to transfer, to whom the share will be transferred, your location, and other relevant questions.
- Get verified alongside other owners: Go through an extra step of verification to ensure that you and your co-owners are truly in agreement with this transfer. ID verification is required.
- Submit the form: Submit the filled-up form and wait for word on it. It may come in a few days.
- Wait for approval: Once approved, the transfer will be reflected in the records. Success!
We hope this article has helped you understand stock ownership and the joint ownership of shares in a better light. Happy trading!