Can a Company’s Statutory Registers be Rectified on the Death of a Sole Director?

In the case of Kings Court Trust Limited and other v Lancashire Cleaning Services Limited [2017] EWHC 1096, the court considered whether it had the power to rectify a Company’s statutory registers under section 125 of the Companies Act 2006, following the death of the Company’s sole director and shareholder, before probate had been granted.

Background

Every UK Company is obliged to maintain statutory books and registers and keep the information contained in them up to date.

These include a register of members (shareholders), a register of directors and their residential addresses, a register of secretaries and a register of persons with significant control. Older companies may also have a register of charges and debenture holders and/or register of applications and allotments, albeit there is no requirement under the Companies Act 2006 for those registers to still be maintained.

In certain circumstances the court has power to rectify the information contained in the register under Section 125 of the Companies Act 2006, but this is usually limited to circumstances where a shareholder’s name has been entered in or omitted from the register of members without sufficient cause or with unnecessary delay.

This case therefore addressed the position where a company’s sole director and shareholder died and the company was unable to operate without a replacement director being appointed.

About the Case

Following the death of a sole shareholder and director, his shares passed to his executors by transmission and the company continued to trade under their instructions, but the company’s bank account was then frozen, as the deceased had not been replaced on the company’s registers, preventing the executors from paying employees and other creditors.

Whereas the Model Articles to the Companies Act 2006 para. 17(2) permit a deceased shareholder’s personal representatives to appoint a new director in circumstances where the Company is left without a surviving director or shareholder, in this case, the Company’s Articles did not.  The executors could therefore not update the register of members with their names and could not appoint a director and the Company was left with no directors or shareholders.

As they were the owners of the shares, automatically by transmission, the executors argued that using the power in section 125 of the Companies Act 2006, their names should replace the name of the deceased, and there should be no need to wait for the grant of probate and that once they were named, they could then appoint a director.

Decision

The Judge held that the circumstances of this case were exceptional as the sole director and shareholder of the company had died.  The normal practice would be to wait for the grant of probate before amending the register of members.  However, in order to ensure the company’s survival, these executors needed to rectify the register prior to receiving the grant of probate.

When dealing with older companies that don’t adopt the Model Articles, it is therefore important to ensure that a provision similar to Article 17(2) is included, particularly where there is a sole director and shareholder.

If you require assistance in relation to your company’s statutory registers or the contents of its Articles of Association, please get in touch with Farleys’ corporate solicitors on 0845 287 0939 or contact us by email.