8 - Membership

Question 1

Are all shareholders in a company also members of that company?

Answer 1

Being a member and being a shareholder are two different things (in practice almost all shareholders will be members). There may be occasions where a person will acquire shares in a company, but the company should not accept that person as a member (e.g. an unincorporated body should not be accepted as a member).

Question 2

What are the two ways by which a person can become a member under s. 112 of CA2006?

Answer 2

Section 112 of CA2006 provides that there are two methods by which a person can become a member:

• the subscribers of a company’s memorandum are deemed to have agreed to become members of the company: upon the company’s registration, they become members and their names must be entered as such in the register of members (s. 112(2)); or
• every other person who agrees to become a member of the company and whose name is entered in its register of members is a member of the company (s. 112(2)).

Question 3

Does a person need to have their name entered into the register of members in order to become a member?

Answer 3

When the company is first incorporated, the subscribers to the memorandum are deemed to have agreed to become members even if their names are not entered into the register of members (although the company is required to enter their names into the register of members).

Question 4

Provide an example of a situation where the directors should refuse to enter someone’s name into the register of members.

Answer 4

It is the directors who decide whether a person’s name should be entered into the register of members, and there are several instances where the directors may validly decide to refuse to enter a person’s name into the register.

• unincorporated associations (such as partnerships) have no legal personality and so they should not be accepted as members. In the case of a sole proprietorship, the name of the sole proprietor should be entered into the register. In the case of an ordinary partnership, the names of the partners stickers instead be entered into the register.
• companies are generally able to become members of other companies, but there are limits to this. E.g. a company cannot generally be a member of itself (TREVOR v WHITWORTH (1887)).

Question 5

What information must be included in the register of members?

Answer 5

Section 113(2) and (3) provides that the information that must be included in the register includes:

• the names and addresses of each member;
• the date on which each person was registered as a member;
• the date on which any person ceased to be a member;
• if the company has a share capital, then the register must contain a statement of the shares of each member, setting out (i) the number of shares the member holds and, if applicable, the class of shares and (ii) the amount paid or agreed to be considered as paid on the shares; and
• if the company does not have a share capital, but it does have more than one class of member, then the register must identify to which class each member belongs.

Question 6

Can the company rectify an error in the register of members?

Answer 6

The company cannot rectify an error in the register (GARDINER v VICTORIA ESTATES CO LTS (1885)). The company must apply to the court for a rectification order.

Question 7

Who has the right to inspect the register of members, and what procedure must they follow?

Answer 7

Any member of the company has a right to inspect the register of members free of charge and anyone else may inspect the register upon paying a fee (s. 116(1)). The process for inspecting the register is that the person wishing to inspect the register must send a request to the company to inspect the register, in which they must provide certain information (including their name and address) and must state their reason for wanting to inspect the register. The company will either comply with the request, or it may apply to the court for an order refusing the request on the ground that the request was not made for a proper purpose. If the court makes such an order, the company will be directed not to comply with the request.

Question 8

What is a nominee?

Answer 8

When a person buys shares in a company, the can have those shares registered in the register of members in the name of someone else. This other person is known as the nominee.

Question 9

What information is found in the register of interests disclosed?

Answer 9

The register of interests disclosed contains information disclosed to the company under s. 793 (namely information relating to a person’s interest in the company’s shares).

Question 10

What is a person with significant control?

Answer 10

Schedule 1A, Part 1 of CA2006 provides that a person will have significant control is any one of the following conditions are satisfied:

• a person holds, directly or indirectly, more than 25% of the company’s shares or voting rights;
• a person holds the right, directly or indirectly, to appoint or remove a majority of the company’s directors;
• a person has the right to exercise, or actually exercises, significant influence or control over the company; or
• the trustees of a trust or the members of the firm that is not a legal person (i) meet any of the conditions above in relation to the company or would do so if they were individuals; and (ii) have the right to exercise, or actually exercise significant influence or control over the activities of that trust or firm.