A share register (also referred to as a members register or company register) is a record of all transactions relating to a company’s shares. All private companies will have share capital. The Corporations Act 2001 requires all private companies to maintain an up-to-date copy of their share register. You must update your company’s share register when there are changes to a company’s members, their members shareholding and the shares on issue. This article explains why you need a share register.
What is a Member?
A member (also called a shareholder) is an individual or entity that holds shares in a company. Consequently, they have the rights that come from owning shares (e.g. the right to vote and the right to dividends flowing from ordinary shares). This is different to an optionholder which is an individual or entity who holds options in the company with the potential of becoming a shareholder if they are able to exercise their options.
What Details Must I Include in the Share Register?
At a minimum, you must include the following details (in no particular order) in the members register as required by the Corporations Act:
- date on which every allotment of shares takes place;
- number of shares in each allotment;
- hares held by each member;
- class of shares;
- share numbers (if any) or share certificate numbers (if any) of the shares;
- amount paid on the shares;
- whether or not the shares are fully paid; and
- amount unpaid on the shares (if any).
You must also include the following details about each member on the members register:
- the member’s name and address (which includes email addresses if email is nominated as the official means of communication with that member);
- the date on which the entry of the member’s name in the register is made (and the date on which they cease being a shareholder, if applicable); and
- whether the member does not hold their shares beneficially.
Updating ASIC
A company’s source of truth and the first point of reference for determining current shareholding details is the members register. While your company needs to update ASIC about certain company changes, it is important to note that the ASIC register is separate from your members register. The latter is an internal document for your company.
Additionally, whenever there is a change to the members register or a member’s details, you must usually update ASIC with the relevant form within 28 days of the change. Otherwise, late lodgement fees will apply. This lodgement period can be shorter depending on the type of change. It is crucial to lodge any required forms with ASIC as soon as possible to avoid any financial penalties. These changes can be due to a share issue, cancellation or changes to the company’s share structure (such as a share conversion, split or subdivision).
Where a private company has more than 20 members, ASIC only requires information on the amendments to those of the top 20 members of each share class.
Why Must I Keep My Share Register Up to Date?
Keeping an up-to-date share register is a legal requirement. Otherwise, you risk receiving a range of financial and criminal penalties. It is also important to update your share register immediately after any changes occur to maintain good corporate governance and record keeping. This is especially important in the context of raising capital.
Other Company Registers
The members register is not the only register a company is required to keep up to date. A company must also keep and maintain the following registers:
- Register of Directors;
- Optionholders Register;
- Debentures Register; and
- Noteholder Register.
50 Shareholder Limit
It is important to control the number of non-employee shareholders you have on your register at any point in time. This is due to the fact that private companies can only have a maximum of 50 non-employee shareholders listed on their members register. Once a private company exceeds the 50 non-employee shareholder limit, ASIC may require the company to convert to a public company.
If you possess more than 50 shareholders (regardless of the type of shareholder), the company will also be subject to takeover rules.
If you are approaching the 50-shareholder limit, you may want to consider setting up a nominee trust arrangement where a trustee will hold certain members’ shares on trust. This will have the effect of reducing the number of members that are listed on your members register and assist in avoiding triggering the public company conversion or the application of the takeover rules.
I Don’t Have a Members Register. What Do I Do?
You will need to construct your company’s members register as soon as possible to ensure you are complying with your legal obligations. Having a members register also ensures good corporate governance processes are in place.
Constructing your members register can either be a simple or daunting task depending on how many changes there have been in the company’s share capital and members shareholdings. Remember that you must record every single transaction involving shares.
This Board Reporting Toolkit can help you meet your compliance needs, by explaining your obligations as a director and providing you with a series of tools and templates to ensure you can correctly undertake your key obligations.
Key Takeaways
Under the Corporations Act 2001, it is a legal requirement for a private company to keep and maintain an up-to-date members register. Failure to keep an up-to-date register is a criminal offence. Typical situations where a company would need to update its members register include where a shareholder transfers their shares to another individual or shareholder or the company issues new shares.
If you do not have a share register in place, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
A members register (or share register or company register) is a record of all transactions relating to a company’s shares.
Under the Corporations Act 2001, it is a legal requirement for a private company to keep and maintain an up-to-date members register. Failure to keep an up-to-date register is a criminal offence.
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