Register Of Members Of A Company – Role In Passing Resolutions And A Winding Up? It is the official register of a company’s members and it is a very important company record because it is intended to show who owns the company.
It is therefore no trivial document.
This normally arid arena of company records was given airtime by the Court of Appeal. More about what the Court of Appeal broadcasted later.
For more information on company records generally please refer to our guide What Records Must A Company Keep?.
When the writer and a handful of other aspiring Chartered Accountants joined a firm in a Fitzroy Square townhouse from University, we threw ourselves eagerly into the tasks we were set to hoover up the knowledge we badly needed to consume. The then staff partner highlighted with alacrity when allocating the statutory books audits that within a company’s statutory books was the register of members that recorded the company’s owners. Needless to say, a not insignificant feature. At least not to the relevant members themselves.
Before we (the naive newbies) had the luxury of doing an audit from top to bottom we had to get our craniums around the statutory books of a company as part of its records.
Before we grapple with the register of members we must first identify what is a company’s member.
What Is A Member Of A Company?
A members of a company are defined in Section 112 of the Companies Act 2006. It is the subscribers and other persons whose names have been entered into the register of members:
The subscribers of a company’s memorandum are deemed to have agreed to become members of the company, and on its registration become members and must be entered as such in its register of members.
Every other person who agrees to become a member of a company, and whose name is entered in its register of members, is a member of the company.
Members are therefore either subscribers or someone who has agreed to become a member. The Supreme Court in Enviroco Limited v Farstad Supply A/S [2011] UKSC 16, [2011] 1 WLR 921 (“Enviroco v Farstad“) defined a company member as:
The starting point is that the definition of “member” in what is now section 112 of the [Companies Act 2006] … reflects a fundamental principle of United Kingdom company law, namely that, except where express provision is made to the contrary, the person on the register of the members is the member to the exclusion of any other person, unless and until the register is rectified: in re Sussex Brick Co [1904] 1 Ch 598 (retrospective rectification of register did not invalidate notices).
Subscribers will be members without being entered on the register. However, the need for consent is a necessary ingredient when entering a member on the register.
To keep matters simple in this article the members are the shareholders. The majority of companies have share capital. However, it applies to a company that has no share capital. If a company is limited by guarantee there are no shares; members are not shareholders.
What Is The Register Of Members?
The register of members is the record that details a company’s members.
Under Section 113 of the Companies Act 2006, all companies must have a register of members that details the names, addresses, appointment dates, cessation dates and shareholding (number and class), total paid (or to be paid) on each share, date registered (added to the register of members).
The register of members itself does not need to be filed at Companies House.
When updating the register of members the following is required: when shares are transferred, new shares issued by the company, shareholder name and address changes and cessation dates for old members.
Where Is The Register Of Members To Be Kept?
The register of members should be retained at the company’s registered office or an alternative inspection location (SAIL) if one has been recorded.
Who Can Inspect The Register Of Members?
Under Section 116 of the Companies Act 2006 inspection of the register of members is open to the company’s members and the public subject to payment of a fee under Regulation 2 The Companies (Fees for Inspection and Copying of Company Records) Regulations 2007 of £3.50 per hour.
How Important Is The Register Of Members?
Well, it is rather important given it sets out who the owners of a company are.
Section 127 of the Companies Act 2006 says the register of members is:
The register of members is prima facie evidence of any matters which are by this Act directed or authorised to be inserted in it…
Errors on the register of members can be rectified upon application to the court under Section 125 of the Companies Act 2006.
However, it is not unknown for company directors in owners managed businesses to adopt a somewhat informal approach to company record keeping notwithstanding the strict requirements set out in Section 386 of the Companies Act 2006. It is also not unheard of for directors to conflate a confirmation statement filed at Companies House with the register of members. The confirmation statement should reflect the register of members; it is not the register of members itself.
Role Of The Register Of Members In Liquidation
Since abandoning auditing after qualification around 25 years ago, the writer since then has focused on the end of a company’s lifecycle. Through the liquidation of hundreds of companies the writer has had to consider the all important matter of a company’s ownership. Without a company resolution passed by 75% or more of voting members as required by Section 283 of the Companies Act 2006, a company cannot validly go into voluntary liquidation.
Without a company going legitimately into liquidation, the members cannot appoint a liquidator so it is rather important to identify the owners of such a company.
Register Of Members And Appointment Of Liquidator
This point was fleshed out by the Court of Appeal in the case of Bland & Anor v Keegan [2024] EWCA Civ 934 (“Bland v Keegan”) which was a case which considered the role of the register of members to determine the validity of a written resolution (Section 288 Companies Act 2006) appointing liquidators.
If a liquidator has been validly appointed then a transfer of shares under Section 88 of the Insolvency Act 1986 is void without sanction of the liquidator. Any alteration in the status of members is also void after the commencement of voluntary liquidation.
The question in Bland v Keegan was whether a written resolution passed for liquidation was valid even notwithstanding a question mark over the status of a member who had voted on a written resolution for winding up because of an invalid transfer of shares involving a stock transfer form.
The judge of first instance said that the register of members was conclusive as to the identity of the company’s members at a given point in time, even notably when a stock transfer form could have involved forgery. He said the appointment of the liquidator was valid notwithstanding an invalid transfer of shares and that rectification of the register under Section 125 supported the position.
The Court of Appeal agreed and so it said:
In my judgment, in the absence of such authority, the general principle explained by Lord Collins in Enviroco at [37] should apply for the purposes of determining the validity of members’ resolutions, even in a case where a member’s name has been wrongly removed from the register as a result of forgery or fraud. The law does not simply disregard the entries on the register. Instead, the entries on the register of members are presumptively valid and the members of a company are taken to be those shown on the register “unless and until the register is rectified“
…
As I see it, the power of the court to make consequential orders dealing with events that have occurred whilst the register was not in the correct state (Bahia), coupled with the power to order rectification with retrospective effect (Sussex Brick), provide the answer to Mr. Fennell’s contention that to treat the entries on the register as determinative of the membership of a company for voting purposes would open the door to fraudsters and forgers. In short, the court has the power when making an order for rectification of the register of members, so far as legally possible, to undo the effects of such misconduct, to order compensation to be paid, or to determine how losses should be fairly allocated between innocent parties.
