Every company must maintain certain statutory registers, of which one of the most important is the register of members. For companies with shares, which are the main focus of this article, this is also known as the register of shareholders. There are other requirements for a company limited by guarantee, which we’ll explore another time.
Historically, companies kept their statutory registers within a loose-leaf binder or a single bound book. Many still buy a hard copy register when they form a company and make updates manually. However, an electronic record is just as acceptable (so long as the electronic register of members is capable of being printed in hard copy form) and often a lot easier to maintain.
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The register of shareholders includes details of the shareholders who own the company and the shares they hold. The members register must include the following details:
- The name of each shareholder
- The contact address for each shareholder
- The number and class(es) or type(s) of share held by each shareholder
- The amount paid or agreed to be paid on each share
- The date that each shareholder became a member of the company
- The date each shareholder ceased to be a member of the company (if applicable)
Some companies choose to record other information alongside the members register, like a shareholder’s email address or dividend mandate instructions. While it’s good to keep accurate information about shareholders, care must be taken here. While any shareholder and others can request to view the register of members, it would not be appropriate for them to be able to see this additional information as part of the shareholders register.
A template members register, which can be produced for free using Inform Direct’s online company secretarial software, is shown below.
Who should be listed as a shareholder on the register of members?
Usually it will be obvious who should be listed as the registered holder of shares, and most shareholders will either be an individual person or a corporate body. However, there are some rules around who can and should be listed as a member:
- When shares are held in a nominee account, the register should show the name of the nominee company rather than the name of the underlying beneficial owner.
- Trusts or settlements should not be registered as holders of shares as they have no legal capacity. Instead, it’s usual – both for pension schemes and other trusts – for some or all of the trustees to be listed as the registered holders.
- For the same reason, partnerships should not be listed as shareholders. However, a limited liability partnership has its own legal identity and so can be a registered shareholder.
- Joint holders of shares can be recorded. In this case, the register of members should state the name of each joint holder, but only one address need be shown.
- Holders of an office can be registered, as long as it is a public office (for example, the Official Receiver).
- If a company holds its own shares as treasury shares, it should be included in the register of members.
- Unexercised share options should not be listed on the register of shareholders.
One member or over 50 members?
There are particular requirements for companies with one or many members.
If a company has a single member, the members register must include a note stating that fact. The note should also be updated whenever a company ceases to have only one member and, for a company with multiple members, when it becomes a single member company.
If a company has more than 50 members, an index of the names of the members of the company must also be maintained. However, a separate index is not required if the register itself is in an indexed form – for example, an electronic system where shareholders are listed alphabetically by name.
The register of members is typically held at the company’s registered office address, and unless they are informed otherwise it is here that Companies House will assume the register is available. However, it is possible instead to make the members register available for inspection at a Single Alternative Inspection Location (SAIL).
Who must maintain the company’s register of shareholders?
The company’s officers – the directors and, where one exists, the company secretary – have responsibility for maintaining the shareholder register. In a company with few shareholders, the register is likely to be updated infrequently or may even never need to be updated.
For a company with a lot of shareholders, particularly if shares are transferred frequently, updating the shareholder register can be more demanding, although software like Inform Direct can ease the burden significantly. Some companies may consider appointing a specialist company to act as registrar, thereby outsourcing shareholder administration, but this usually comes at significant cost and the administration standards of registrars are, let’s say, “mixed”.
The members register itself does not need to be sent to Companies House.
When should the register of members be updated?
The initial entries in the company’s register of members should be made when the company is successfully incorporated, including the names of the subscriber shareholders and the shares they have taken.
Thereafter, the register should be updated promptly when:
- New shares are issued (whether to a new or existing shareholder)
- The company’s shares are reorganised – for example, on a share split, share consolidation, share redemption, cancellation of shares, conversion of shares etc.
- When shares pass from one person to another, whether by a normal share transfer or transmission when a shareholder dies
- A shareholder changes their name on marriage, by deed poll etc.
- A shareholder changes their address
If someone ceases to be a shareholder, they remain listed on the register of members alongside the date they stopped being a member. An entry for a former member can, however, be removed from the register of members after 10 years following the date on which they ceased to be a shareholder.
Updates to the shareholders register itself do not have to be reported to Companies House, although transactions like share allotments, share splits and share consolidations require a form to be filed at Companies House as well as an update to the register of members. While share transfers don’t require a form to be filed at Companies House, many of the details recorded in the members register will need to be included in the company’s next confirmation statement.
it provides the primary (“prima facie”) evidence of who the shareholders of the company are
For a number of reasons, it is vital that the register of members is kept up to date. This is a requirement of the Companies Act 2006, and failure to keep the register updated means the company and its officers may be fined. Shareholders and others can request sight of the members register, and if they do so any inaccuracies will at the very least make the company look disorganised.
The members register is particularly important as, ahead of share certificates or other documents, it provides the primary (“prima facie”) evidence of who the shareholders of the company are and how many shares they hold. This has a few important consequences.
Firstly, a person only becomes a shareholder, and benefits from shareholders’ rights, when their name is entered into the register of shareholders. A prospective shareholder may have arranged to buy shares from someone else, paid for the shares and settled any stamp duty due, lodged a stock transfer form and received a share certificate from the company, but without his name being added to the register of members he is not yet a shareholder.
In the legal case of Glencoe Developments Ltd v. Sneddon (2012), the Court of Appeal held that the purported vote of a prospective shareholder to pass a resolution was invalid, because his name had not been entered into the register of shareholders. Without an entry in the register of members, a person is not legally a shareholder of the company.
Secondly, if incorrect entries are made in the register of members they can be difficult to correct, often requiring a Court Order. For that reason, it’s especially important to check the details of a transfer of shares are valid before updating the members register.
Shareholders have the right to inspect the members register, while others can make a request to view it. We’ll cover how the request must be made, the timescales that apply and the reasons why a company can reject an inspection request in another article.