Is it risky to place your company shares in a trust?

One of the most common reasons people set up a trust is to protect their personal assets when becoming a director of a company.

Moving your personal assets into a trust is a way of separating the legal and beneficial ownership, which helps to protect your assets against potential claims from creditors. The trustees become the legal owner of the assets, and they hold those assets for the benefit of the beneficiaries.

A director’s personal assets, such as the family home, can be at risk of claims by creditors of the company if a director breaches their duties. You can read more about director duties here.  A trust can help directors to protect these assets from potential claims.

Shareholders do not have the same level of risk as directors as they are not responsible for the daily management of a Company.  A shareholder’s liability is limited to any unpaid share capital, which for many companies may only be a nominal amount.

Shareholders can benefit from placing their company shares into a trust as there are potential tax benefits that apply due to the ability to allocate dividend income between the trust’s beneficiaries.

It is common for people to think that placing their company shares in the same trust as their house or other assets might put those assets at risk. However, as shareholders are not liable for claims against the company, this is a misconception, and the risk to these assets is generally no greater than if the shares were personally owned.

If you are considering buying into a business, setting up a business, or becoming a director of a company, it is important to seek legal advice to understand what your options are and whether a trust might be appropriate for you.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.