Register of members: Why is it important?

A register of members might not top the priority list in a business, but it could prove crucial if issues are encountered further down the line. Our corporate & commercial experts explain what a register of members is and why it’s important.

Often, a business owner, when asked to provide us with a copy of their company’s statutory register, will look a little bemused as to what they are and why we need them.

Stashed away on a dusty shelf or in the back of an old filing cabinet – maybe, in certain cases, this document never even existed. However, statutory registers are important.

Statutory registers – or ‘company books’ as they are sometimes referred to – are a set of documents which record key information about a company, its shareholders and officers. Created on incorporation, they should be updated as and when there are changes to key aspects about the company (primarily regarding its officers and the shareholders).

They used to take the form of a blue or green folder that was prepared by the agent who formed the company, but – with the move towards a more digital approach – it is now common for statutory registers to be maintained electronically.

Despite the Companies Act 2006 placing the onus on a company’s directors and company secretary to prepare and maintain the statutory registers, the register of members (being the register which details the name of each shareholder and the number and class of shares that they hold) is a critical document for shareholders.

Although many people believe that a share certificate is the critical document proving that they own their shares in a company, a share certificate is only evidence of that ownership.

Someone only holds the legal title to shares if their name is entered in the register of members of the company as the holder of the shares in question. In fact, when a share is transferred, the legal title to that share only transfers when the company registers the transfer by writing the name of the person receiving the share in its register of members. Signing and dating a stock transfer form is only the start of the process of transferring share ownership.

The statutory register of members is therefore a key document in circumstances where there is a dispute over share ownership or where a shareholder wants to sell their shares. In each of these scenarios, the absence of a register of members – or a register which has not been updated – can prove problematic.

What does this mean for my business?

Firstly, try to locate your company’s statutory registers. You may want to check with the company’s accountant as they can sometimes hold these registers on behalf of the company.

If you do find them, make sure that they are up to date. In particular, you should focus on the register of members to ensure that its contents reflect both the existing share capital of the company and the existing shareholders.

If no statutory registers can be found, it would be advisable to create a new set of statutory registers – referred to as ‘reconstitution of the registers’ – particularly in light of the Court of Appeal stating earlier this year (Bland and Anor v Keegan) that the members of a company will be taken to be those shown on the register of members, “unless and until the register is rectified.”

It is essential that the reconstituted statutory registers accurately reflect the facts that are known and any temptation to fill gaps in the history with assumptions is resisted. These reconstituted registers must also be formally approved and adopted by the company’s board of directors.

If you have any questions regarding reconstitution of statutory registers, or any related matter, please get in touch with our highly rated team.

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