Record-holders: Overview, definition, and example
What are record-holders?
Record-holders are the individuals or entities whose names are officially listed on a company’s books or shareholder register as the owners of securities, such as shares or bonds. They are the legal owners of the securities, even if the beneficial ownership (the person who actually enjoys the economic benefits) lies with someone else. Record-holders are typically the ones entitled to receive notices, dividends, and voting materials.
Why are record-holders important?
Record-holders are important because they are the parties the company legally recognizes for ownership rights, distributions, and corporate actions. This distinction becomes especially relevant when shares are held in "street name" (i.e., through a brokerage)—in which case the broker is the record-holder, and the client is the beneficial owner. Contracts, shareholder notices, and regulatory filings often distinguish between record-holders and beneficial owners to determine rights and responsibilities.
Understanding record-holders through an example
A shareholder meeting is scheduled, and voting materials are sent to all record-holders as of the record date. If an investor owns shares through a brokerage account, the brokerage is the record-holder, and the investor receives proxy voting instructions from the brokerage—not directly from the company.
Example of how a record-holders clause may appear in a contract
Here’s how a record-holders clause may appear in a shareholder agreement or corporate charter:
"Only record-holders of the Company’s Common Stock as reflected on the Company’s stock ledger as of the record date shall be entitled to receive notice of, and to vote at, any meeting of shareholders."
Conclusion
Record-holders are the legally recognized owners of securities, with formal rights under corporate law and governing documents. Understanding the role of record-holders is essential for managing shareholder communications, enforcing rights, and executing corporate actions like voting or dividend distributions. Contracts and governance documents often rely on this distinction to assign or limit certain entitlements.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.