Sometimes a major shareholder may transfer indirect shares under nominee account into direct account or take a reversal transfer. what is his purpose?
Great question. When a major shareholder transfers shares between nominee accounts and direct ownership, or reverses that transfer, it typically doesn't change the total number of shares they own—but it can reflect strategic, legal, or administrative motives.
Here’s a breakdown of the main purposes for such transfers:
1. Transparency and Disclosure Management
Direct Ownership = More Visible: Shares held directly by the individual must be publicly disclosed in most jurisdictions (e.g., in insider filings).
Nominee Ownership = More Discreet: Holding shares through a nominee (e.g., a brokerage or trust) may offer some privacy or delayed visibility, depending on the rules of the local exchange/regulator.
Purpose: A shareholder may move shares to a direct account when they want to signal confidence or prepare for a formal declaration (e.g., during a takeover or rights issue). Reversing the move may restore privacy after a key event has passed.
2. Preparation for Corporate Actions
Voting Rights or Dividend Rights: Some corporate actions (like voting in AGMs, rights issues, or dividend entitlements) may require shares to be held in the shareholder's name.
Custodian Limitations: Nominee accounts might not automatically provide voting rights unless instructed.
Purpose: Moving shares to a direct account ensures full shareholder rights in upcoming decisions.
3. Regulatory Compliance
Thresholds & Reporting: In some jurisdictions, crossing certain ownership thresholds (e.g., 5%, 10%, etc.) requires public disclosure.
Avoiding Misinterpretation: Transferring to a nominee account might avoid triggering unintended regulatory flags, especially if the shareholder is consolidating holdings from different entities.
Purpose: The shareholder may manage how and when ownership is reported or aggregated.
4. Estate or Tax Planning
Nominee Structures for Trusts or SPVs: Nominee accounts can be part of tax-efficient estate planning or corporate structuring.
Direct Ownership for Clarity or Simplicity: Especially in preparation for estate disclosure, litigation, or personal finance matters.
Purpose: Strategic legal or tax positioning.
5. Signal to the Market (or Avoiding One)
Moving to Direct Ownership: May be intended as a signal of commitment or control, especially in volatile markets.
Reversal to Nominee: Could be to de-emphasize visibility, especially if no major event is pending.
Purpose: Control optics, particularly during sensitive periods (e.g., M&A talks, insider lock-up expiration).
Important Note:
While these transfers do not change the economic interest of the shareholder, they can:
