Membership Of A Company

Question 1

What are the 2 ways a person becomes a member?
Who decides whether a person’s name should be entered on a register?
When may they validly refuse to enter a person’s name? (2)

Answer 1

• S.112 CA2006 = 2 ways a person can become a member:
1. Subscribers to the memorandum become members upon the company’s incorporation and their names must be entered on the register of members
• Subscribers to the memorandum are deemed to have agreed to become members
• Will be members even if name not entered on the register
2. Every other person who agrees to become a member and whose name is entered of the register of members
• The prospective member must assent to becoming a member
• Not a member unless name is entered on the register

• Directors decide whether a person’s name should be on the register
• May validly refuse for
1. Unincorporated associations (e.g. partnerships) have no legal personality so not members
2. A company cannot generally be a member of itself so should not enter own name on register

Question 2

Which companies are required to keep a register of members and where should it be kept?
What information should be included? (5)
Can a company rectify errors?
Who can inspect the register?

Answer 2

• S.113 CA2006 = every company must keep a register of members
• Failure = criminal offence
• Must be kept at RO or SAIL or private companies on central CH register

• S.113 CA2006 = information that must be included:

1. Name and address of each members
2. Date person was registered as a member
3. Date of cessation
4. Statement of shares for each member - no. of shares held, class of shares, amount paid or agreed to be considered (if company has share capital)
5. Member class (if no share capital but more than 1 class of members)

• Company cannot rectify errors and must apply to the court for a rectification order

• Any member has the right to inspect the register free of charge
• Anyone else must pay a fee and make a request to the company to inspect
○ Request includes person’s name, address, purpose for which the information will be used, and whether info will be disclosed to others
• Company has 5 days to either allow the request or apply to the court for a ‘no access order’ if request was made for an improper purpose

Question 3

What is a nominee?
Who is the beneficial owner?
What are the 2 methods company law makes corporate control more transparent?

Answer 3

• When a person buys shares they can have those shares registered in the name of someone else = a nominee
• Nominee = the member and legal owner
• Person who actually controls the shares = the beneficial owner

• 2 methods company law makes corporate control more transparent:

1. Register of Interests Disclosed
2. Register of persons with significant control

Question 4

What does s.793 CA2006 allow a company to do?
What interests are included?
Who can require a s.793 notice be issued?
What are the 2 restrictions on the use?
What must the company do with the information disclosed to it?
Who can inspect the register?

Answer 4

• S.793 CA2006 = a company (A) can issue a notice to another person (B) requiring B to confirm if they do have an interest in A’s shares, and if so, provide further information regarding that interest
• S.820 CA2006 = interest includes an interest of any kind whatsoever in the shares

s.803 CA2006 = members holding at least 10% of A’s paid-up capital can require A to issue a s.793 notice

• 2 restrictions on use of s.793:

1. Can only be used by a public company
2. Public company must know, or have reasonable cause to believe that a person is interested, or has been in the last 3 years, in its shares before it can issue a s.793 notice

• Failure to comply with a s.793 notice or providing false information is a criminal offence
• S.808 CA2006 = must keep a register of information that is disclosed to it under s.793 and update it within 3 days of any new information received
○ Failure to keep = criminal offence
• Information must then be kept on the register for at least 6 years

• Anyone can inspect the register free of charge

Question 5

Which companies must maintain a register of persons with significant control?
What must companies do under S.790D CA2006?
When will a person have significant control? (5)
What information about a PSC must be on the register? (6)
Who can inspect the PSC register?

Answer 5

• Small Business, Enterprise and Employment Act 2015 inserted Part 21A CA2006 = companies must maintain a register of persons with significant control
○ Except companies that are subject to chapter 5 of the DTRs or excluded by regulations
○ Private companies can keep PSC information on central CH register
○ Failure = criminal offence

• S.790D CA2006 = companies must take reasonable steps to identify a registerable person/entity in the company and then must also identify them
○ Registrable persons are also under a duty to notify the company if they are registrable

• Schedule 1A, Part 1 CA2006 = a person will have significant control and be deemed registerable if any of the following conditions apply:

1. They hold directly or indirectly more than 25% of the shares in the company;
2. They hold directly or indirectly more than 25% of the voting rights in the company;
3. They hold directly or indirectly the right to appoint or remove a majority of the company’s directors;
4. They have the right to exercise, or actually exercise, significant influence or control over the company; or
5. The trustees of a trust of the members of the firm that is not a legal person meets any of the above conditions, and has the right to exercise, or actually exercise, significant influence or control over the trust or firm

• S.790K CA2006 = The PSC register must contain the person’s:

1. Name
2. Address
3. Country of residence
4. Nationality
5. Date they became a registerable PSC
6. Nature of control they have over the company

Anyone can inspect the register free of charge

Question 6

When is membership terminated?

What are 6 examples when this may happen?

Answer 6

• Membership is terminated when name is removed from the register of members
• May be because:

1. The member dies
2. The member transfers, transmits, or gifts his shares to someone else and that person’s name is entered onto the register instead
3. The member’s shares are forfeited or surrendered
4. Where the contract to sell the shares is rescinded of declared void
5. Where an event occurs that the articles state causes membership to cease
6. Where member is declared bankrupt and his shares are registered in the name of his trustee