Chapter 3: The Members

Question 1

What two conditions must be met for a person to become a member?

Answer 1

They must agree to do so.

Their name must be entered into the register of members.

Question 2

How many members must a company have?

Answer 2

At least 1

Question 3

Who is entitled to become a member of a company?

Answer 3

Any person or legal entity.

Question 4

Why should a partnership, club or association not be accepted as a member?

Answer 4

Because it is not a legal entity.

Question 5

When were “share warrants to bearer” abolished?

Answer 5

May 2015

Question 6

Why share warrants to bearer abolished?

Answer 6

• companies like to know who holds shares

- transfer by delivery is not very secure against theft

Question 7

When does a person cease to be a member?

Answer 7

When they cease to be registered in the register of members.

Question 8

When would a member be removed from the register of members?

Answer 8

• voluntary share transfer (i.e. selling or giving)
• transmission of shares on death/bankruptcy/mental health
• compulsory transfer due to the articles

Question 9

Which model article for a public company provides for compulsory transfer of shares?

Answer 9

Article 60 - if a member’s shares are not fully paid up.

Question 10

Why should companies seek to understand the policies of their major shareholders?

Answer 10

In order to gain insight into how they are likely to vote at general meeting.

Question 11

What are the 8 main principles of the stewardship code?

Answer 11

1 Responsibility to make considered use of votes
2 Reasons for voting against a resolution or withholding a vote should be made know to the board ahead of time
3 Ensure voting intentions are being translated into practice.
4 Eliminate unnecessary deviation in the ways they apply their criteria to the companies they invest in.
5 Be ready to enter into dialogue with companies based on the mutual understanding of objectives
6 Take an interest in the board of directors
7 Make information on company votes available to clients
8 Attend AGMs where appropriate.

Question 12

What is a nominee shareholder?

Answer 12

Someone who is registered in the register of members of behalf of the beneficiary owner.

Question 13

When must the true beneficiary of shares be revealed? (2 scenarios)

Answer 13

1 On request of the company (s 793 CA)

2 Under the PSC regime.

Question 14

What is the usual limit on the number of joint holders of a single share?

Answer 14

4

Question 15

Who is the “senior joint holder” when shares are jointly held?

Answer 15

The person with their name entered first on the list of joint holders.

Question 16

What information rights do members have?

Answer 16

• inspect statutory books
• inspect directors service contracts
• inspect written terms and conditions of service contracts
• provided with a copy of memorandum and articles of association
• receive a copy of annual accounts at least 21 days before general meeting
• provided with copy of latest accounts
• receive notice of general meetings
• inspect minutes of general meetings
• attend general meetings and ask questions of directors

Question 17

Other than information rights, what rights do members have?

Answer 17

1 Unfair prejudice - can petition court (s994 CA)
2 Members’ application for winding up - can apply to court
3 Derivative claims - bring action against director (s260-269 CA)
4 General meetings - attend, vote, appoint proxy
5 Members’ audit report - can require audit if holding 10% nominal value
6 Compulsory acquisition - where shareholder holds 90%
7 Share certificates - receive certificate

Question 18

What duties do members have?

Answer 18

• disclose interest in shares of public company
• notify the company should they acquire an interest qualifying to be on the PSC register
• notify listed company when their interest reaches 3% or every subsequent 1%
• pay unpaid share amounts on winding up
• pay unpaid share amounts on request of company

Question 19

Where should the register of members be kept?

Answer 19

The registered address or SAIL

Question 20

What information must be contained in the register of members?

Answer 20

• name and addresses
• date became/ceased to be a member
• number, class, and amount paid up on shares

Question 21

What must be added to the register of members for single-member companies.

Answer 21

A note that the company only has one member, and the date that the transaction took place.

Question 22

Why should partnerships not be entered in the register of members?

Answer 22

They have no separate personality.