Beneficial ownership and trust disputes in corporate litigation

What happens when the company register does not tell the full story?

In corporate disputes, ownership is often assumed to be straightforward. The register of members identifies the shareholder and Companies House records identify those with control.

In practice, however, legal ownership and beneficial ownership do not always align.

A person may appear on the register as shareholder, but hold the shares for someone else. A director may acquire an asset in their own name, but be required to account for it to the company. A founder may claim that shares were registered in another person’s name only as a temporary arrangement.

When relationships break down, those issues frequently become the subject of complex and high-value litigation.

Why corporate transparency matters in 2026

Corporate transparency remains a major area of reform, with Companies House identity verification now a legal requirement for directors and people with significant control. However, transparency does not necessarily resolve disputes concerning beneficial ownership.

A public register may identify the legal owner of shares. It does not always identify whether that person holds the shares for their own benefit or as nominee or trustee for someone else.

That distinction frequently becomes the battleground in shareholder disputes, director disputes, insolvency litigation and claims concerning business assets. You can read more about this in our article ‘Why shareholder disputes are now high value litigation risks’.

The register is the starting point

Under English company law, the person named in the register of members is generally treated as the member of the company.

In Farstad Supply A/S v Enviroco Ltd (2011), the Supreme Court reaffirmed the importance of the register in determining membership for company law purposes.

However, section 126 of the Companies Act 2006 provides that no notice of any trust, whether express, implied or constructive, may be entered on the register of members.

The register may therefore correctly identify the legal owner whilst revealing nothing about any beneficial ownership arrangement sitting behind the shares.

In short, the register may tell you who owns the shares legally. It may not tell you who owns them beneficially.

Beneficial ownership and common trust disputes

Trust disputes commonly arise where ownership structures have been poorly documented or where parties relied on informal arrangements.

A nominee shareholding will typically involve one person holding legal title to shares for the benefit of another. The nominee appears on the register, but the beneficial owner claims the economic benefit.

Resulting trust arguments may arise where one party provided the purchase money for shares or assets, but legal title was placed in another person’s name.

Constructive trust arguments may arise where it would be unconscionable for the legal owner to deny another party’s interest.

Common examples include:

• Shares held by a nominee for an investor
• Two founders agree that one will hold shares temporarily whilst the business is established but later disagree over who owns the shares beneficially
• A shareholder claims they were promised an ownership interest in return for providing capital, introductions or expertise, but that arrangement was never formally documented
• Company funds being used to acquire property, investments or intellectual property in a director’s name
• A director diverting a business opportunity into a separate company and retaining the profits personally
• A dispute over the proceeds of a business sale where one party alleges the proceeds are held on trust for another

These disputes are rarely just about ownership. They often become disputes about control, valuation and recovery.

The Court will focus heavily on contemporaneous evidence. Bank transfers, emails, WhatsApp messages, board minutes, accounting records and tax filings will often carry more weight than witness evidence prepared after the dispute has arisen.

The practical lesson is straightforward: if beneficial ownership is intended to differ from legal ownership, it should be documented clearly from the outset.

Directors, diverted opportunities and fiduciary duties

Trust principles are also powerful where directors are accused of diverting assets, opportunities or profits away from the company.

Directors owe statutory duties under sections 171 to 177 of the Companies Act 2006. These include duties to act within powers, promote the success of the company, avoid conflicts of interest and not accept benefits from third parties.

Where a director breaches those duties, the remedy is not always limited to damages.

In FHR European Ventures LLP v Cedar Capital Partners LLC (2014), the Supreme Court confirmed that benefits obtained in breach of fiduciary duty can be held on constructive trust for the principal. That gives rise to a proprietary claim rather than merely a personal claim for compensation.

More recently, in Rukhadze v Recovery Partners GP Ltd (2025), the Supreme Court reaffirmed the strict nature of the fiduciary profit rule. A fiduciary who exploits an opportunity arising from their position cannot generally avoid liability by arguing that they would have made the same profit anyway.

For businesses, these authorities underline an important point. Where value has been diverted from a company, the issue is not always what loss the company has suffered. It may be what profit the wrongdoer has gained and whether that profit should properly belong to the company.

Which proceedings are commonly brought?

One of the most common misconceptions in ownership disputes is that a share certificate or company register will resolve the issue. Frequently, it does not.

For substantial trust and beneficial ownership disputes involving companies, proceedings will commonly be brought in the Business and Property Courts, particularly the Chancery Division.

Where ownership of shares is disputed, a claimant may seek:

• A declaration of beneficial ownership
• Transfer of shares
• Rectification of the register of members under section 125 of the Companies Act 2006
• Recovery of dividends or sale proceeds
• Injunctive relief preventing disposal of shares pending trial

Section 125 allows the Court to rectify the register where it contains information it should not contain, or omits information it should contain. The Court may also determine questions of title where necessary for rectification.

However, rectification is a remedy, not a shortcut. Where there is a substantial ownership dispute, the Court may first need to determine the underlying title to the shares.

Unfair prejudice and standing

Beneficial ownership disputes often overlap with unfair prejudice petitions under sections 994 and 996 of the Companies Act 2006.

This requires careful consideration because a beneficial owner behind a nominee is not automatically entitled to bring an unfair prejudice petition directly.

Where the beneficial owner is not the registered member, the Court may first need to consider whether the nominee should bring the petition, whether rectification is required, or whether another procedural route is more appropriate.

This can become a gateway issue. Before the Court considers whether there has been unfair prejudice, it may first need to determine who owns the shares and who has standing to complain.

The Supreme Court’s decision in THG plc v Zedra Trust Company (Jersey) Ltd (2026) is also important. The Court held that unfair prejudice petitions under section 994 are not subject to the statutory limitation periods contained in the Limitation Act 1980.

That does not mean delay is irrelevant. Delay may still affect the Court’s discretion and the practical strength of the claim.

Proprietary claims and injunctions

Where money or assets have already been transferred, proprietary remedies can become important.

Tracing is not a claim or a remedy in itself. It is the process by which a claimant seeks to identify property, or substitute property, in which it claims a continuing interest.

Depending on the circumstances, a claimant may seek to:

• Trace funds into bank accounts
• Trace assets into replacement property
• Recover sale proceeds
• Assert ownership over identifiable assets
• Seek an account of profits

Where there is a risk that assets may be dissipated before judgment, interim relief may be critical. The Court may grant freezing injunctions, proprietary injunctions and other preservation orders to protect assets pending trial.

In many cases, obtaining interim protection is what preserves the practical value of the claim.

Practical steps for businesses

The best protection is clarity before value becomes contentious.

Businesses should:

• Document nominee arrangements properly
• Use declarations of trust where appropriate
• Record whether funds are loans, investments or capital contributions
• Ensure company records reflect the intended ownership structure
• Keep clear accounting records
• Preserve key communications and documents
• Seek legal advice promptly if ownership becomes disputed

The most expensive disputes are often those that begin with informal arrangements and incomplete paperwork.

In summary

Trust principles can determine who truly owns shares, who is entitled to sale proceeds, whether company assets have been misused and whether directors must account for profits obtained in breach of duty.

For businesses, the lesson is straightforward: document ownership clearly, maintain proper records and treat informal arrangements as potential litigation risks.

For those already in dispute, the critical question is often not whether a wrong has occurred, but who actually owns the value in dispute.

The answer may determine the claim, the remedy and ultimately the outcome of the litigation.

How Morr & Co can help?

If you have any questions or would like any further information on the content of this article, please do not hesitate to contact our Dispute Resolution team on 0333 038 9100 or email info@morrlaw.com.

Disclaimer
Although correct at the time of publication, the contents of this newsletter/blog are intended for general information purposes only and shall not be deemed to be, or constitute, legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article. Please contact us for the latest legal position.