Speaking under parliamentary privilege on Thursday night, Senator Sinodinos also admitted he had been prompted to update his pecuniary interests register following media inquiries.
"I apologise unreservedly to the Senate for these oversights," he said in his adjournment debate speech.
"What you think is an innocent oversight can be looked on perhaps not as favourably by others."
Senator Sinodinos confirmed reports he had abandoned a claim to a 5 per cent shareholding in Australian Water Holdings (AWH).
"I can not recollect when I first became aware of the involvement of Eddie Obeid Junior ... but it was not before I joined the company," he told the chamber.
"I had no reason to regard his presence in the company as signifying some greater involvement by the Obeid family in AWH and I had very limited dealings with him."
He told the chamber he became a non-executive chairman of AWH on November 3, 2010.
"I was not aware around this time the CEO of the company had negotiated what has been reported as a personal loan agreement with members of the Obeid family secured against shares in AWH," Senator Sinodinos said.
"Obviously I was shocked and disappointed that a company, whose mission I believed in and was passionate about, was financially linked to the Obeid family."
He explained the circumstances surrounding his shareholding.
"I characterised this publicly as a gentleman's agreement," he said.
Senator Sinodinos said the shares had never been issued to him and he won't be pursuing them.
On Tuesday, his lawyers wrote to AWH renouncing this interest and Senator Sinodinos tabled the letter in the Senate.
Senator Sinodinos said on entering the Senate he should have declared several unpaid directorships, including a start-up health care company Move to Live Pty Ltd and Firestick Pty Ltd.
He has resigned from these entities.
He also declared his directorship of three entities related to the NSW Liberal Party which are used to employ staff and hold assets, directorships of the Sir Paul Hasluck Foundation and Austin Foundation.