Setting up a trust is a popular asset protection strategy, especially for business owners and company directors. At Core Legal, based in Masterton and Wellington, we regularly advise clients on whether placing company shares in a trust is a smart move—or a risky one.

So, is it risky to hold company shares in a trust? Let’s break it down.

✅ Why Put Shares in a Trust?

One of the main reasons people place assets in a family trust is to protect personal property, such as their home or investments, from business-related risks. This is particularly relevant for company directors, who can be held personally liable if they breach their duties under the Companies Act.

By transferring assets—such as company shares—into a trust, you separate legal ownership (held by trustees) from beneficial ownership (enjoyed by beneficiaries). This means that, in the event of financial difficulty or legal claims against you, those trust-held assets are generally not considered your personal property.

???? What About Shareholder Risk?

It’s important to understand the difference between a shareholder and a director:

• A director is involved in the day-to-day operations of a business and carries legal responsibilities.

• A shareholder, on the other hand, is typically only liable for any unpaid share capital.

This means that holding shares doesn’t usually expose you to the same legal risks as being a director. In most private companies, where shares are fully paid up, the liability is minimal.

So, does putting your shares in the same trust as your family home increase the risk to your home? No—this is a common misconception. Since shareholders aren’t personally liable for company debts, holding shares in your trust won’t increase risk to other trust assets.

???? Trusts and Tax Planning

Another benefit of holding company shares in a trust is flexibility in distributing dividend income. Trusts can allocate income among multiple beneficiaries, which can provide tax efficiencies for families or business partners.

⚖️ Get Legal Advice First

If you’re planning to:

• Buy into a business

• Set up your own company

• Become a director

…it’s vital to speak with a commercial or trust lawyer first. A properly structured trust can provide valuable protection, but poor execution can expose you to unnecessary risks or tax complications.

At Core Legal, we offer fixed-price initial consultations to help you make informed, cost-effective decisions.

Contact Core Legal in Masterton or Wellington today to find out if placing your company shares in a trust is the right move for your business and personal protection strategy.