The term “beneficiary” (from French “benefice”, meaning “income”) has several definitions. All businessmen, especially those engaged in foreign trade activities, should be familiar with such.
Those who wish to open an offshore company or who already own such it often faces the concept of a “beneficiary”. However, not everyone knows what does it mean.
In the area of offshore business, the term “beneficiary” stands for a real owner of the company, who actually owns and manages it, and who receives profits from a company. However, from the legal perspective, all the property rights may belong to another person. This person, if assigned, is called the nominal owner of the business and is included in all the incorporation documents. Thus, the beneficiary secures himself his privacy.
A beneficiary can perform various functions depending on the type of banking transaction. When issuing bank letters of credit, the term “beneficiary” stands for the person who opens the letter of credit.
From the perspective of bank guarantees, the term “beneficiary” is applied to a creditor that receives money under the agreement. When performing such banking transaction as a collection of payments, the beneficiary is the person who receives money when buying property. In the context of bank certificates, the beneficiary acts as the recipient of money after the end of the validity period of the certificate.
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In addition to the abovementioned cases, the term “beneficiary” is encountered in the insurance sector, inheritance law, property deals, share ownership, trusts.
In the insurance sector, a beneficiary is the reimbursement recipient. If the person who was issued the policy deceases before the end of the validity period of the policy, the rights of the beneficiary are transferred to another person. In the context of property insurance, the person in whose favour the property was insured may become the beneficiary.
With respect to the trust, the beneficiary is the person who gets the financial benefit. The beneficiary is also a person who gains financial profits from his assets. For example, by means of renting out of immovable property.
In the case of holding shares that were transferred in trust, the beneficiary holder possesses numerous rights. In particular he is entitled to transfer ownership rights, is eligible to vote at the meetings of shareholders and may be directly involved in the activities of the company as well as in the election of its executives.
The term “beneficiary” is also encountered in the inheritance law. In this case, the beneficiary is the heir that is specified in the testament.
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