A “share fiduciary agreement” is a contractual arrangement that outlines the responsibilities and duties of a person, company or other entity in handling property owned by another party. Specifically, in the context of shares of a corporation, a share fiduciary agreement sets out the rights and obligations of a stockholder, who holds shares on behalf of another individual or entity.
The concept of fiduciary duty comes from the legal principle that requires a person in a position of trust to act in the best interest of the beneficiary. In the context of share ownership, the fiduciary duty is owed by the shareholder to the beneficial owner of the shares. Therefore, a share fiduciary agreement is crucial in ensuring that the rights and interests of the beneficial owner are protected.
A share fiduciary agreement typically defines the roles and responsibilities of both parties, the shareholder and the beneficial owner, and outlines the specific terms and conditions under which the shares will be held. The agreement may specify the duration of the arrangement, the rights of the beneficial owner to receive dividends and other benefits, and the process for transfer of the shares from the shareholder to the beneficiary.
A well-drafted share fiduciary agreement also provides for dispute resolution mechanisms and procedures for termination of the agreement if either party fails to comply with its provisions. This ensures that both parties are held accountable for their actions and that the interests of the beneficial owner are protected at all times.
The importance of a share fiduciary agreement cannot be understated, especially in situations where the beneficial owner is not actively involved in the management of the shares. Without such an agreement, the shareholder may be tempted to act in their own self-interest, to the detriment of the beneficial owner.
In summary, a share fiduciary agreement is a vital document that ensures that the rights and interests of the beneficial owner of shares in a corporation are protected. It is, therefore, crucial for both the shareholder and the beneficiary to enter into such an agreement to ensure that their interests are protected, and their rights are enforced in the event of a dispute.