Every limited company must have a register of members and ensure it is kept up-to-date at all times. In this blog, we will take a look at the basics of how the register of members works, what must be included, and when to update it.
What is a register of members?
As per section 113 of the Companies Act 2006, every limited company is obliged to keep a register of all its shareholders, also known as members, in a document called a register of members. This forms one of a set of different company registers which all need to be maintained.
The register of members is arguably the most important statutory register which companies limited by shares are required to keep. It contains information on past and present shareholders*, providing a continuous record of ownership since the company’s incorporation.
A person is not legally considered to be a company shareholder until their name is entered into the register of members. Although a share certificate is an important document to record share ownership, it is actually the register of members which serves as evidence of a member’s shareholdings.
* Guarantors, in a company limited by guarantee
What information needs to be kept in the register of members?
The following details must be stored and regularly updated in a company’s register of members:
- names and addresses of all the members
- the date on which each person was registered as a member
- the date at which any person ceased to be a member
In the case of a company having a share capital, there must be entered in the register, with the names and addresses of the members, a statement of:
- the shares held by each member, distinguishing each share –
- by its number (so long as the share has a number), and
- where the company has more than one class of issued shares, by its class, and
- the amount paid or agreed to be considered as paid on the shares of each member.
Other details which must be recorded in this document include:
- If the company has converted any of its shares into stock, and given notice of the conversion to Companies House, the amount and class of stock held by each member instead of the amount of shares and the particulars relating to shares.
- In the case of joint holders of shares or stock in a company, the company’s register of members must state the names of each joint holder. However, only the address of one of these joint holders needs to be recorded.
- In the case of a company that does not have a share capital but has more than one class of members, with the names and addresses of the members, a statement of the class to which each member belongs.
- Details of any transfer of shares.
- Details of allotments of new shares.
- Details of any shares held in treasury.
Any changes to the information set out above must be reflected in the register of members.
How should the register of members be maintained?
The register of members takes the form of a written or electronic document. Under section 1135 of the Companies Act 2006, statutory registers “may be kept in hard copy or electronic form [capable of being reproduced in hard copy form]”.
Traditionally, the register of members had to be available for inspection at the company’s registered office, or a single alternative inspection location (SAIL). But since June 2016, private companies have been allowed to choose to send information usually kept in their own certain statutory registers, to the registrar of companies, to be kept on the public register at Companies House.
Who can inspect the register of members?
Under section 116 of the Companies Act 2006, any person may ask a company to inspect its register of members, as well as ask for a copy. This not only includes other members of the company but also the general public.
Members should be allowed to see the register of members without any fee. But the company is allowed to charge non-members an administration fee.
Anyone who requests to inspect the register of members must provide the following information as part of their request:
- in the case of an individual, their name and address
- in the case of an organisation, the name, and address of an individual responsible for making the request on behalf of the organisation, such as a company director
- the purpose for which the information being requested is to be used
- whether the information will be disclosed to any other person, and if so:
- where that person is an individual, his name and address,
- where that person is an organisation, the name and address of an individual responsible for receiving the information on its behalf, and
- the purpose for which the information is to be used by that person.
Within five working days of receiving a request under section 116, the company must either comply or, if it believes the request is not made for a ‘proper purpose’, apply to a court to refuse the request.
Note: The register of members is sometimes used by auditors or as part of a due diligence process, to confirm details of the shareholders, or as part of a wider investigation.
When is it necessary to update the register of members?
It is good practice to regularly update the register of members. In particular, it should be amended when:
- A shareholder officially changes their name by marriage or deed poll. Evidence of the name change should be obtained before amending a name.
- A shareholder changes their primary address.
- New shares are issued to either new or existing members.
- Shares are transferred to a new shareholder, e.g. if they are sold or inherited.
- There is a reorganisation of company shares, e.g. consolidation or subdivision, etc.
It should be updated as soon as possible after the company directors are made aware of the relevant changes.
Do I need to inform Companies House when I update the register of members?
For companies that maintain their own register of members, there is no requirement to immediately update company information held by Companies House. But if there is a change to the register of members, this should be reflected in the annual confirmation statement.
If the register of members is being maintained by Companies House, then this needs to be updated as soon as possible.
What happens if the register of members is not maintained?
Failure to maintain the register of members will result in an offence having been committed by the company and each officer (i.e. directors and the company secretary).
Breach of the requirement to maintain statutory registers can result in fines of up to £5,000. Additionally, there is a risk of the officers being found to have breached their duties, and further penalties being imposed.