RECTIFICATION OF THE REGISTER OF MEMBERS

Christine O'Herlihy 

Amendments to the register of members will fall under two categories, those which can be completed administratively and those which require court approval. Section 173(5) of the Companies Act 2014 (“the Act”) provides that a court application is not required where the rectification does not adversely affect any person or where the person has agreed to the rectification. In such instances a form B42a should be submitted to the Companies Registration Office (“CRO”) within 21 days of the rectification.

Previously where such an error or omission resulted in a reduction of the issued share capital the CRO refused to rectify the incorrect filing without a High Court order. Section 173(7) of the Act now clarifies that an error or omission in relation to the amount of the issued share capital can be rectified under Section 173(5) of the Act.

If the rectification does not fall into the above category an application can be made to the High Court by an aggrieved person, a member of the company or by the company itself. An application can be made where the name of any person is without sufficient cause entered or omitted from the register or in circumstances where the register has not been updated to record the fact that a member has ceased to be a member within the required time frame. It is important to highlight that the power of the court is discretionary and an order will not be made in all circumstances. The applicant must show that the entry or omission was made “without sufficient cause” however even in such instances it is at the courts discretion.

In Re Sussex Brick Co [1904] it was held “I have only to add this, that I do not mean for a moment to suggest that any one is entitled to such an order ex debito justitiae; it is a matter in the discretion of the judge, and there might be cases in which the judge, although he considered such an order essential to completely establishing the rights of the applicant, might refuse to do so because he thought it would work injustice to other members of the company”. In addition, where the directors of a company decline to register a transferee as a member of the company and in doing so have relied on the absolute discretion given to them under Section 95 of the Act, the court is unlikely to interfere unless the constitution of the company restricts that discretion or where it can be shown that such discretion was not exercised bond fide in the interests of the company as a whole.

The court also has the discretion to decide any question relating to the title of any party to the application. The extent of this discretion can be seen in Kings Court Trust Limited & Ors v Lancashire Cleaning Services Limited [2017] where the High Court ordered rectification to the register of members to replace a deceased member with his executors before a grant of probate had been obtained. The judge, Judge Hodge QC, acknowledged that in the normal course of events a company will not register an executor as a member of the company until a grant of probate is provided. However, as the deceased was the sole director and member of the company the failure of the company was imminent due to its inability to withdraw funds to pay employees and other creditors including HMRC. In light of the exceptional circumstances Judge Hodge considered it appropriate that the executor’s names be entered into the register of members.

Christine O'Herlihy ACIS, is a Manager at Grant Thornton, Dublin