Becoming a Member
A person becomes a member (shareholder) of a company by being entered in the internal register of members. The register must be kept by the company secretary at the registered office. The register is sometimes called the share register. It is not filed in the Companies Registration Office.
Any person may be a member of a company. This includes a person under 18 years of age. A minor may repudiate his membership on attaining that age. He will be deemed not to do so if he continues as a shareholder. Repudiation of the shareholding may be beneficial when there is are significant calls outstanding on the shares or in the case of an unlimited liability company. Shares may be transferred by a minor.
A person may become a member by taking a transfer of an existing shareholding or by applying for shares which are allotted by the company. The subscribers to the constitution of the company are the original members unless all the authorised share capital is allotted to others. Every other person who agrees to become a member and whose name is entered on the register of members is a member of the company. The original subscribers to the Memorandum of Association of pre-2014 Act companies became members in the same way.
A private company could have no more than fifty registered members under the 1963 Act. The maximum number of registered shareholders for a private limited company / LTD is now 149. There may be, in effect more that that number of members, when a registered shareholder is a nominee/ trustee on behalf of several beneficial owners.
The rights of members are presumed to be equal. This presumption of equality will apply to the interpretation of the constitution. However, companies may create different classes of shares with various preferential rights in relation to income, capital and voting. This may be reflected in the register of members.
A non-member may be deemed a member by being held out as such. If his name is on the register of members and a third party thereby acts in reliance on his being a registered member, both he and the company may be estopped from denying that he is a member, in some circumstances.
The former restrictions on a company acquiring its own shares have been greatly modified. A purchase may be financed from distributable profits. The former prohibition on holding shares in a company’s holding company has been removed. However, if a company acquires its own shares, it is to or hold them as treasury shares.
Register of Members I
A company must keep a register of members. The register may be kept as a book, as part of single combined company register or in electronic form. It shall include
- the names and address of each member;
- a statement of the shares held by each member;
- identify the relevant shares by number, if they have a number;
- set out the amount paid or agreed to be considered as paid for the share;
- the date on which the person was entered in the register;
- the date on the former member ceased to be a member.
The register of members and an index (in some cases) must be kept at the registered office. If it is to be kept elsewhere by a third party, that place must be registered, and it may be kept in that place. The CRO must be notified of any change in the place where the register is kept. The register must be kept in Ireland. The register must be open for inspection at least two hours a day.
Register of Members II
The register must be kept in the Ireland. This has the effect that the company’s shares are deemed situated in Ireland and subject to Irish capital acquisitions taxation in some cases. A company with more than a specified number of shareholders must keep an index of members.
Shareholders are entitled to inspect the register of members without charge. A member or other person can require a copy extract from the register.The register can be closed for up to 30 days a year. An advertisement must be put in a newspaper circulating in the area. When the register is closed, transfers can be prevented.
Where the register of members is permitted to be kept by some person other than the company concerned; and by reason of any default of that other person, there is a failure on the part of the company to comply with its obligations under the Act, as to the production of the register, amounting to the commission of an offence by the company, that other person shall also be guilty of an offence. He or it may be charged with and convicted of it whether or not proceedings for an offence are brought against the company.
Register of Members III
The share register must be written up within 28 days of a person becoming or ceasing to be a member.The entries required shall be made within 28 days after the date of conclusion of the agreement with the company to become a member or, in the case of a subscriber of the constitution, within 28 days after the date of registration of the company.
The entry required when the person concerned ceases otherwise than as a result of action by the company must be made within 28 days after the date of production to the company of evidence satisfactory to the company of the occurrence of the event whereby the person ceased to be a member.
Details of the shareholders appear on the annual returns. It may be necessary to look at a number of successive returns, at each need only show changes in membership. Annual returns can be accessed at the CRO or online at cro.ie.
Where the company has converted any of its shares into stock and given notice of the conversion to the CRO, the register shall show the amount of stock held by each member instead of the quantity and the particulars relating to shares specified.
Where a company makes default in complying with any of the above requirements, the company and any of its officers who are in default, are guilty of a category 3 offence.
Less Common Company Types
In the case of a company limited by guarantee, a person may become a member by falling within the definition of a member and having the same certified. The company secretary may certify that a particular person is a member because, for example, he owns a particular apartment, in the case of an owners’ management company.
In the case of a public limited company, the shares are commonly held through nominees, depositories or deposit agents. The share registers are often managed by a professional registrar in the case of quoted companies.
The nominee may be the person entered as a member. The shares may be dealt with through the intermediation of the nominee, who remains the registered legal owner at all times. The beneficial ownership is recorded separately in the books of the nominee.
There is a procedure for rectification of the register of members. An application for rectification of the register may be made by a person who is entitled to be a member or claims he has ceased to be a member. The court may order rectification or may award compensation if a loss has been suffered in consequence of the error.
The company may rectify an error without a court order. It can correct the error provided that it has the consent of the person affected. It may, without application to the court, at any time rectify any error or omission in the register, provided that such rectification does not adversely affect any person. If a party’s interests are adversely affected, a court order would be prudent. The rectification must be notified to the Companies Registration Office. The rectification must be filed in the CRO within 21 days.
If the name of a person is without sufficient cause entered on the register or omitted from it or if a default is made in an entry on the register, the person aggrieved may apply to the court for an order for rectification of the register. The court may decide any question necessary or expedient in that regard.
The court may decide any question relating to the title of any person who is a party to the application to have his or her name entered in or omitted from the register. This is so, whether the question arises between members or alleged members or with the company.
The court may either refuse the application or make an order of rectification of the register. It may order the payment by the company of compensation for any loss sustained by any party aggrieved. The company must notify the rectification of register to the CRO within 21 days.
No Trusts on Register
The general principle is that a trust may not be entered on the register of members. No notice of any trust, express, implied or constructive may be entered on the register of members or be received by CRO. The register of members is presumptive/ prima facie evidence of any matters directed or authorised to be inserted in it, under the Companies Act.
The person who appears to be registered as a member may not be the beneficial or “real” owner. He may be a nominee only. The company may be controlled by persons whose names are not on the register. Generally, there is no means of knowing who is the beneficial owner of particular shares.
The company is generally entitled to deal with the person entered on the register, irrespective of whether he might hold the share as trustee or nominee for somebody else. This does not affect the provisions by which the beneficial interests in shares must be disclosed in certain cases. Disclosures must be made in relation to shareholdings by the directors and others.
Restraining Notice I
A person who is a beneficial owner may register a notice which he may block the transfer by the nominee of an interest in particular shares, without notice being first given to him. Any person claiming to be interested in any stock (or shares) of a company may file an affidavit in the High Court Central Office with a notice in the prescribed form and on procuring an attested copy of the affidavit and duplicate with the seal of the High Court, serve the attested copy and duplicate notice on the company.
The notice is deemed to have been duly sent if sent through the post by a prepaid letter directed to that person at the address so stated, or at any such substituted address as from now on mentioned, whether the person to whom the notice is sent be living or not. From and after the service of the attested copy of the affidavit and notice, it is not lawful for the company to permit the stock specified in the notice to be transferred, nor, if the notice is expressed to stop the receipt of dividends, to pay the dividends on the stock so specified, so long as the notice shall remain operative.
A notice filed may be withdrawn by the person by whom or on whose behalf it was given on his written request. It may cease to have effect by a court order, obtained by motion on notice duly served by any other person claiming to be interested in the stock sought to be affected by the notice.
If, while a notice continues in force, the company receives from the person in whose name the stock specified in the notice is registered or his representative, a request to permit the stock to be transferred or to pay the dividends thereon, the company shall not in consequence of the service of the notice, be authorised without a court order, to refuse to permit the transfer to be made or to withhold the payment of the dividends for more than eight days after the date of the request.
The liability of a contributory (a member/ shareholder) of a limited company is limited to any unpaid calls on his shares. Calls are the sums due to the company on the initial allotment of the shares. In the vast majority of cases, all sums have been paid in full on its allotment, so that the shareholder has no further liability to the company.
The liability for unpaid calls on shares is a debt due to the company by the shareholder. An action may be taken on the debt by the company. It may be taken not later than 12 years after the date on which the right to bring it accrued.
If a company is wound up, every present and past member is liable to contribute to the assets of the company in an amount sufficient to meet the debts and liabilities, costs, charges and expenses on winding up, subject to the adjustment of rights of the contributories as between themselves. Contributories are not required to pay any more than the amount unpaid on their shares, for which they are liable as a present or past member.
A past member is not liable to contribute if he has ceased to be a member for more than one year before winding up commences. A past member is not liable to contribute in respect of debts or liabilities contracted after he has ceased to be a member. He is not liable to contribute unless it appears to the court that the existing members are unable to satisfy the contributions required from them.
Any sum due to a member, whether as a member, such as by way of dividends, profits or otherwise, is deemed not to be a debt of the company payable to him, in the case of competition with a creditor who is not a member of the company. Any such sum shall be taken into account for the purpose of the final adjustment of the rights of contributories as between themselves.
Settling Lists of Contributories
In the event of a company being wound up, the liquidator is to settle a list of contributories. The court may rectify the register of members in this context, on foot of an application made to it. Where it appears to the liquidator that it is not necessary to make calls or to adjust the rights of contributories, the liquidator may dispense with the settlement of a list of contributories.
In settling the list of contributories, the liquidator is to distinguish between persons who are contributories in their own right and those who are contributories as representatives of or as being otherwise liable for the debts of others.
The liquidator may make calls on any contributory on the list of contributories, to make payments considered necessary to satisfy the debts and liabilities of the company, the expenses of the winding up and for the adjustment of rights of the contributories as between themselves.
The court may order the payment of calls to the extent of the contributory’s liability, for payment of the amount considered necessary. The court may take into account that some contributories may not pay in full or at all. The court may make an order requiring contributories, on the list to pay, any other money due by him to the company. When the creditors have been paid in full, any amount due to a contributory may be allowed as a set-off against any subsequent call.
Death or Insolvency of Contributory
If a contributory dies, either before or after he has been placed on the list of contributories, his personal representative is liable in due course of administration to contribute to the assets of the company in discharge of the liability on the calls. Proceedings may be taken for the administration of deceased’s estate in default of payment of the sum due.
If a contributory becomes bankrupt, either before or after he has been placed on the list of contributories, the assignee in bankruptcy shall represent the bankrupt. He may be called upon to admit to proof, sums due from the bankrupt’s estate, in respect of his liability to contribute to the company or its assets. There may be proved against the estate of the bankrupt, the estimated value of his liability on future calls, as well as calls already made.
Equivalent provisions apply in respect of the winding up of a company which is a contributory. The liquidator represents the company. He may be called on to admit to proof in the contributory company’s winding up or otherwise, money due in respect of liability to contribute to the assets of the company. There may be proved the estimated value of future calls as well as calls already made.
References and Sources
Companies Act 2014 S.94 – S.101, S,169- S.174 (Irish Statute Book)
Companies Act 2014: An Annotation (2015) Conroy
Law of Companies 4th Ed. (2016) Ch.8 Courtney
Keane on Company Law 5th Ed. (2016) Ch.17Hutchinson
Other Irish Sources
Tables of Origins & Destinations Companies Act 2014 (2016) Bloomsbury
Introduction to Irish Company Law 4th Ed. (2015) Callanan
Bloomsbury’s Guide to the Companies Act 2015 Courtney & Ors
Company Law in Ireland 2nd Ed. (2015) Thuillier
Pre-2014 Legislation Editions
Modern Irish Company Law 2nd Ed. (2001) Ellis
Cases & Materials Company Law 2nd Ed. (1998) Forde
Company Law 4th Ed. (2008) Forde & Kennedy
Corporations & Partnerships in Ireland (2010) Lynch-Fannon & Cuddihy
Companies Acts 1963-2012 (2012) MacCann & Courtney
Constitutional Rights of Companies (2007) O’Neill
Court Applications Under the Companies Act (2013) Samad
Company Law – Nutshell 3rd Ed. (2013) McConville
Questions & Answers on Company Law (2008) McGrath, N & Murphy
Make That Grade Irish Company Law 5th Ed. (2015) Murphy
Company Law BELR Series (2015) O’Mahony
Companies Act 2006 (UK) (Legilsation.gov.uk)
Statute books Blackstone’s statutes on company law (OUP)
Gower Principles of Modern Company Law 10th Ed. (2016) P. and S. Worthington
Company Law in Context 2nd Ed. (2012) D Kershaw
Company Law (9th Ed.) OUP (2016) J Lowry and A Dignam
Cases and Materials in Company law 11th Ed (2016) Sealy and Worthington
UK Practitioners Services
Tolley’s Company Law Handbook
Palmer’s Company Law