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Red Alert – Register of Members, 17th July 2012

When we ask a company for its company books (statutory registers by another name) we’re often met with confusion and/or an admission that no company books exist or they cannot be found.

The recent decision (9thMarch 2012) in Glencoe Developments Limited v Sneddon should serve as a wake up call for companies, their officers and their members.

S112 Companies Act 2006 states that in order to become a member of a company a person must be entered into the company’s register of members. The register is the primary source of who the members are and how many shares they own.

Until the register of members is updated shares are not legally transferred to the prospective new shareholder.

Glencoe Developments Limited had two shareholders S and M. S sold one of her shares to H, creating, on the face of it, three shareholders. However, the transfer was not noted in the register of members. A general meeting was held to agree to sell a substantial property asset of the company. Only S and H were in attendance.

A resolution was supposedly passed to transfer the company’s right, title and interest in land to one of the directors of the company.

The resolution was then challenged by M on behalf of Glencoe Developments Limited who raised a court action. M’s action was successful as (amongst other defects) a quorum had not been achieved by the parties. It was ruled that the only properly registered shareholder present at the meeting was S. As a result the sale was ruled invalid.

It is crucial that up to date registers are maintained. The member’s register ensures no one other than a company member can vote on decisions which affect the company. The transfer of shares should only be recorded where a stock transfer form has been completed and the appropriate Stamp Duty has been paid.

Furthermore, by not keeping an up to date register of members a company is committing an offence under the Companies Act 2006. Both the company and its defaulting members may be liable for a fine up to £1000.

Whilst it may not be top of your list, it is fundamental to your company and its shareholders to ensure the register is updated every time shares are transferred.

This firm offers the full range of annual company secretarial services, including the formation and rectification of company books.

We are at your service should you wish to discuss.

Last updated: 9.41am, Tuesday 17th July 2012

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