Background
P1 Pit Stop Limited was incorporated in 2014 but never maintained a register of members, contrary to the Companies Act 2006. Its Companies House filings contained inconsistent share numbers, nominal values and ownership information. The parties agreed that, by November 2015, founders John Palmer and Howard Forland each held 250 fully paid ordinary shares of £0.10.
The dispute concerned later filings that recorded 500 additional shares in the name of Magna Secretaries Limited and subsequently showed those shares distributed among Forland and members of his family. Palmer contended that Magna held its shares on trust solely for him, while Forland maintained that the 2018 confirmation statement correctly recorded Palmer with 24% and Forland’s side with 76%. The parties also disputed an apparent transfer of ten of Palmer’s shares to Forland.
The Court’s Holding
The court held that section 125 of the Companies Act 2006 empowers it to create a register of members from scratch where a company has never maintained one. It also concluded that the factual and title issues could be resolved within these proceedings, which had been transferred from Part 8 to Part 7 and case-managed for trial.
No contract of allotment had been made with Magna: Magna had not agreed to become a member, agreed to pay the subscription price or paid for the shares. The 500 shares attributed to it in Companies House filings therefore were never allotted and could not be registered. The court also found no proper instrument transferring ten shares from Palmer to Forland, meaning Palmer retained legal title to all 250 of his shares.
The court ordered the register to record Palmer with 250 shares from incorporation, Howard Forland with 200 shares from incorporation and Elaina Forland with 50 shares from 6 March 2016. Each share is a fully paid ordinary share of £0.10. The resulting 500-share register restores equal ownership between Palmer’s 250 shares and the aggregate 250 shares held by Howard and Elaina Forland, and notice of the rectification must be given to Companies House.
Key Takeaways
- A court may use section 125 to create a company’s register of members even when no register has ever existed.
- A Companies House filing does not establish that shares were validly allotted; allotment requires an agreement under which the incoming shareholder acquires an unconditional right to registration.
- Shareholder wrongdoing does not, without a legal or contractual basis, permit another shareholder, director or company to confiscate that shareholder’s shares.
Why It Matters
The decision illustrates the serious evidential and governance problems caused by failing to maintain a statutory register of members. Annual returns and confirmation statements may provide evidence, but they do not replace the register or cure defects in an allotment or transfer.
It also emphasizes that rectification turns on legal title. Neither disputed business conduct nor an inaccurate ownership filing can substitute for the contractual steps required to allot shares or the proper instrument required to transfer them.