For purposes of this question, “corporate trustee” means a legal entity rather than an individual exercising the powers of a trustee in a trust arrangement.
If a reporting company’s ownership interests are owned or controlled through a trust arrangement with a corporate trustee, the reporting company should determine whether any of the corporate trustee’s individual beneficial owners indirectly own or control at least 25 percent of the ownership interests of the reporting company through their ownership interests in the corporate trustee.
- For example, if an individual owns 60 percent of the corporate trustee of a trust, and that trust holds 50 percent of a reporting company’s ownership interests, then the individual owns or controls 30 percent (60 percent × 50 percent = 30 percent) of the reporting company’s ownership interests and is therefore a beneficial owner of the reporting company.
- By contrast, if the same trust only holds 30 percent of the reporting company’s ownership interests, the same individual corporate trustee owner only owns or controls 18 percent (60 percent × 30 percent = 18 percent) of the reporting company, and thus is not a beneficial owner of the reporting company by virtue of ownership or control of ownership interests.
The reporting company may, but is not required to, report the name of the corporate trustee in lieu of information about an individual beneficial owner only if all of the following three conditions are met:
- the corporate trustee is an entity that is exempt from the reporting requirements;
- the individual beneficial owner owns or controls at least 25 percent of ownership interests in the reporting company only by virtue of ownership interests in the corporate trustee; and
- the individual beneficial owner does not exercise substantial control over the reporting company.
In addition to considering whether the beneficial owners of a corporate trustee own or control the ownership interests of a reporting company whose ownership interests are held in trust, it may be necessary to consider whether any owners of, or individuals employed or engaged by, the corporate trustee exercise substantial control over a reporting company. The factors for determining substantial control by an individual connected with a corporate trustee are the same as for any beneficial owner.