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Is your Register of Shareholders fully up to date?

Maintaining an up to date Register of Shareholders is something often overlooked by private companies.

However, a recent case has illustrated the serious consequences of failing to do so – and the importance of keeping your register in good order.

What is the Register of Shareholders for?

The Register of Shareholders is the document which lists all shareholders in a company.

Under Company Law, all those listed on the Register are shareholders, even if they are dead or, in the case of a company, dissolved and the Register has not been updated to reflect that.

Certain matters in Company Law can only be decided by the shareholders, such as changing the company’s name, altering the Articles and many more.

Such approval should be by way of written resolutions signed by the shareholders or a formal shareholder meeting. Again in private companies, this is something often overlooked.

To help deal with the usual lack of formality, the English courts have allowed such matters to be validly undertaken if it is in fact clear all shareholders agreed.

However, if the Register of Shareholders is incorrect or out of date, this can lead to serious issues, as happened in a recent Court of Appeal case.

What happened in the case?

In this case, the company in question had operated as if there had been a change to its Articles, but no formal resolution had been passed and one registered shareholder, a company, had been dissolved.

The Court of Appeal therefore decided that the Articles could not have been changed by the unanimous consent of all the shareholders, as the company which had been dissolved was still on the register of shareholders, and so could not have consented.

This posed a major problem for the company as it meant that it had been operating in breach of its Articles and so a key matter had been dealt with in breach of legal requirements.

What does this mean for me?

The lessons from this case for companies are as follows:

  • Keep the Register of Shareholders up to date with who in reality are the shareholders.
  • When wishing to do something which needs shareholder consent, follow the rules in the Companies Act and the Company’s Articles.
  • If the Articles no longer reflect how the company is operated, ensure that they are updated and that this is done properly.
  • If in any doubt consult your lawyers.

How can Ward Hadaway help?

For further information on the issues raised by this update, please get in touch.

Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.

This page may contain links that direct you to third party websites. We have no control over and are not responsible for the content, use by you or availability of those third party websites, for any products or services you buy through those sites or for the treatment of any personal information you provide to the third party.

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