The "register of members" is a statutory register which Maltese companies are obliged to keep, but which is often times underestimated – most likely because there is no statutory obligation to file same with the relevant authorities. The register of members lists the shareholders of the particular company and their personal details whilst simultaneously reflecting the share transfer history of the particular company. Its importance from a Maltese company law point of view, cannot be overstated as it qualifies as prima facie evidence at least, of the members of the company at any given time.
The obligation to keep a register of members emanates from Article 123 of the Companies Act (Chapter 386 of the Laws of Malta) (the "Companies Act") which states that every company shall keep a register of members and shall enter therein, the following particulars:
- the names and addresses of the members and the shares held by each member, distinguishing each share by its number, so long as the share has a number, and of the amount paid or agreed to be considered as paid on the shares of each member;
- the date at which each person was entered in the register as a member; and
- the date at which any person ceased to be a member.
The law goes on to state that the register of members shall be kept at the registered office of the company or at such other place as may be specified in the memorandum or articles of association of the particular company. Notwithstanding this, a company can make arrangements to keep the register of its members in a dematerialised form i.e. in electronic format.
Article 119 of the Companies Act (Chapter 386 of the Laws of Malta) specifies that on the application of the transferor or the transferee of any share in a company, the company shall enter in its register of members, the name and address of the transferee.
If default is made in complying with these provisions or any one of them, every officer of the company who is in default shall be liable to a penalty and for every day in default, a further penalty.
In practice, the importance of the register of members emanates from the definition of "shareholder" in the Companies Act which is defined as "a person entered in the register of members of a company pursuant to article 123". In fact, for the purposes of Maltese law, a share transfer becomes effective the moment that the transferee (i.e. the person to whom the shares have been transferred) is recorded in the company's register of members as the new holder of the relevant shares. The register of members is then typically signed by a director or the company secretary of the company, as the officers of the company.
The necessity of maintaining an updated register of members and the reliance placed on this statutory document was most recently discussed in a case decided by the England and Wales Court of Appeal, in the names Bland v Keegan [2024] EWCA Civ 934 which has been named a "significant" judgment in this field. Since the Maltese company law system traditionally derives from that in the United Kingdom and moreover, the Maltese Courts still tend to rely on UK jurisprudence in the absence of Maltese law decisions on certain matters, it is surmised that the judgment could be a useful reference tool.
The facts of the Bland v Keegan Case were such that one out of two of the shareholders of a company (who were also directors of the company), fraudulently filed a share transfer form with Companies House which is the company registry in the UK purporting to transfer the shares belonging to the other shareholder, to herself. The question put to the Court in this case was whether a shareholder resolution passed by the one shareholder (who fraudulently transferred the other shareholder's shares, to herself) to appoint a liquidator of a company, was valid and effective in the circumstances.
The Court of Appeal decided that the identity of the company's shareholders for the purposes of determining the validity of the resolution, depended on the entries in the company's register of members at the date of the resolutions and that in this case, the register of members reflected the information submitted to the company registry, even though this was in fact a fraudulent share transfer. The Court held that the register of members is conclusive as to the identity of the members of a company at any particular point in time, so that a written resolution based on the content of the register, even if it records information based on a forged share transfer form, is valid and effective up until it is accordingly rectified whether by the persons involved or through a court order.
The Court held that the appropriate redress in cases of wrongly registered transfers would be to seek a court order for rectification of the register under a specific designated clause in the UK Companies Act 2006.
Although the judgment is a UK judgment, it is not difficult to envisage a similar situation arising in Maltese law terms and therefore the takeaway is that the register of members remains a crucial document which companies should consistently keep updated in their records. From a Maltese law point of view, it does not appear however that there is a specific designated clause under the Companies Act whereby one can request the Court to update the register of members or amend it in the case of a fraudulent or wrong entry made therein, as there seems to be under English law.
Maltese jurisprudence has shown that a request for an amendment to the register of members is typically framed within the "unfair prejudice action" in terms of Article 402 of the Companies Act but much of this jurisprudence relates to situations where directors of the company have refused to register share transfers for some reason or other and not where a shareholder who was also a director, tried to defraud another shareholder by purporting to transfer the shares to himself as in Bland v Keegan.
It is surmised that it is unclear whether a shareholder who has been wrongfully removed from the register of members has any remedy at all under the Companies Act since an Article 402 action can only be brought by any "member" of a company i.e. a shareholder and although the definition of "member" in Article 402 of the Companies Act is wider than the definition of "shareholder" specified above, this begs the question as to whether a person who has been fraudulently removed from the register of members, would actually be entitled to file the 402 action at that stage since he would not be at least prima facie, a "registered member" of the company. In such a case, the unlawfully removed shareholder would need to rely on remedies available in general civil law and which apply in cases of fraud and the consequent right to demand the recission of the contract (i.e. the recission of the unlawful share transfer), and the consequent amendment of the register of members to bring the company's shareholders back to the status quo ante.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.