Clients often ask – why do we need a share register if we already have our Companies Office website records?
We understand that this seems like double-work. On face value the share register and Companies Office website records serve the same purpose. But scratch a little deeper and there are some compelling reasons why a company should put in place, and maintain, a share register.
Every company needs a share register because:
NZ law requires every company to keep an up-to-date share register that ticks the boxes required under the Companies Act 1993. The Companies Office website records don’t tick the relevant boxes. It’s as simple as that.
Under NZ law, the share register is conclusive evidence that a person owns shares in a company. The Companies Office website records reflect the information in the share register, but are not themselves evidence of legal title to shares. Registering an issue of new shares, or a transfer of shares, to someone on the Companies Office website carries no weight unless that issue or transfer is also recorded in the company’s share register. If a share transfer, for example, was registered on the Companies Office website but not also recorded in the share register, the transferor remains the legal owner of the shares.
It’s for this reason that you’ll usually find a share purchase agreement, or an investment agreement, requires the company to deliver a copy of the updated share register on completion of the relevant transaction. An investor or purchaser wouldn’t be pleased to find out they didn’t own shares they’d paid for because of an administrative oversight.
Companies Office website records don’t (and can’t) differentiate between ordinary, non-voting, preference, or any other classes of shares. Your share register can (and should). Without an accurate share register, it’s easy to lose track of who owns what.
This obviously isn’t an issue for a company for so long as it only has ordinary shares on issue. It can become a sticky issue when you have more than one class of shares – particularly when it comes time to pass a shareholders’ resolution, distribute a dividend, or liquidate the company.
Putting together a share register should be straightforward, and is likely to be something you can take care of yourself. Check out our share register template if you need or want to give it a go.
This is part of a series of simple stuff blogs in which we’ll cover some of the day-to-day questions that come up. Feel free to get in touch if there’s something you’d like us to cover in a future blog.
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