Why you need to maintain an accurate Shareholder Register
As an owner and director of a small business, it’s always important to stay on top of your company administration to comply with your legal obligations and keep your house in order. One very important aspect of this is your Shareholder Register.
Ashley Gurr is one of the many expert business lawyers at LawBite. In this article, he’ll be discussing the Shareholder Register in more depth so you’ll understand its importance and why keeping the register up to date is vital.
What is a Shareholder Register?
It’s a legal requirement under the Companies Act 2006 for every company to have a Shareholder Register (officially known as a ‘Register of Members’). Put very simply, the purpose of the register is to show who the shareholders are and what shares they hold.
What must be included in the Shareholder Register?
The Shareholder Register must show an entry for each shareholder. The entry must display the following details:
- Name and address of each shareholder
- The date on which the shareholder became a registered shareholder
- The date the shareholder ceased to be a registered shareholder
- The class and the number of shares in the ownership of the shareholder
- Where the shares have distinct identifying numbers, those identifying numbers must be stated
- The amount of money paid (or agreed to be considered as paid) on the shares
On the last point, it’s taken that this requires a statement of the amount paid on the share regarding its nominal value, plus any share premium (if any is paid). Of course, this will likely differ from the actual price paid on a share transfer between a buyer and a seller under the terms of a share purchase agreement.
When must the register be updated?
The company must update the Shareholder Register as soon as practicable following an allotment of shares. Generally, this must always be within two months. Likewise, regarding a transfer of shares, the register must be updated as soon as practicable (unless the share transfer is refused) and always within two months of the date of the transfer.
Please note that different timing rules apply when a private limited company has elected to join the Central Register of Members, a public register maintained by the registrar under the Companies Act 2006.
You can remove entries for former shareholders after ten years since they ceased to be shareholders.
Where must the register be located?
The Shareholder Register must be housed at the company’s registered office and made available for inspection. Alternatively, the company may use a single alternative inspection location (SAIL), which must be located in the same part of the United Kingdom (i.e. England, Wales, Scotland or Northern Ireland) as the registered office is.
Who may inspect the register?
Anybody may inspect the Shareholder Register and have a copy, provided they pay the required fee and review the register for a ‘proper purpose’.
The proper purpose isn’t defined by law, and the courts will decide in the event of a dispute. When requesting the right to inspect, the person must provide the following information:
- Name and address
- The purpose of how they’ll use the information
- Confirmation as to whether the information will be provided to any other person, and if so, the above information also in respect of that person
What are the penalties for failing to keep or update the register?
It’s an offence not to comply with the Companies Act 2006 requirements regarding the register. Each person guilty can be fined £1000 in addition to the company itself, and an additional fine can accrue daily until the register is corrected.
If you need help and support setting up or updating your Shareholder Register or require general legal advice in this area, you should reach out to a corporate solicitor with appropriate expertise.
Appointing an expert to assist with your Shareholder Register, such as LawBite experts, frees you up to spend your time focussing on your strengths, which is growing your business. Your solicitor will also be able to help you with other aspects of corporate law and with your Companies House filings.