Bland v Keegan [2024] EWCA Civ 934: forged stock transfer form and status of the register of members

In Bland v Keegan [2024] EWCA Civ 934, the Court of Appeal examined whether someone who was wrongly removed from a company’s register of members by way of the registration of a forged stock transfer form (“STF”), still had the right to vote on important company decisions.

Bland v Keegan underscores the significance of the register of members in determining membership and highlights how the register serves as a definitive record for establishing legal title to shareholdings.

Background

When JDK Construction Limited (the “Company”) was incorporated, the appellant was its only shareholder and director. The appellant then transferred half of the Company’s shares to her daughter-in-law (“J”), who became an additional director – both of these changes were reflected in subsequent filings made by the Company at Companies House.

After a family dispute, J executed a STF transferring the remaining shares (the “Disputed Shares”) held by the appellant to herself. Subsequent filings were made at Companies House which reflected the transfer and termination of the appellant’s directorship.

Purporting to act as the Company’s only member, J passed a special resolution to wind up the Company and passed an ordinary resolution to appoint liquidators (the “Written Resolution”), without the appellant’s involvement. The appellant argued that J had forged her signature on the STF, rendering the resolutions – and the liquidator’s appointment – invalid.

The liquidators sought a court ruling to confirm their appointment (the “IA Application”). Initially, the court postponed the case to allow the appellant to challenge the Company’s register of members. In spite of the appellant contesting, a settlement was reached where J agreed to return the Disputed Shares. The liquidators did not participate in this settlement and so they initiated the restoration of the IA Application.

The High Court upheld the liquidators’ appointment. The key issue was whether the appellant was still a member of the Company when J passed the Written Resolution. The court assumed that the Company’s records were accurate, and that J was listed as the sole shareholder at the time of the Written Resolution. Even if the STF in respect of the Disputed Shares was forged, the register of members was considered definitive as to who the members of the Company were which subsequently meant that J’s Written Resolution was valid.

The appellant appealed, arguing that the judge made a mistake in holding that the register of members is conclusive evidence of who the members of a company are, as section 127(1) of the Companies Act (the “Act”) specifies that the register is only prima facie evidence of membership, meaning it can be disproved.

The argument was that, in the absence of the appellant’s authority, the STF did not effectively transfer any right or entitlement to the Disputed Shares.

The Court of Appeal’s decision

The Court of Appeal dismissed the appeal, confirming that the members of a company are those persons names as such in the register of members.  Section 112 of the Act says that a person becomes a member of a company either by subscribing to the company’s memorandum or by agreeing to become a member and being entered on the register.

The appellant argued that their removal from the register of members was void because it was predicated upon a forged STF, however the entries on the register were presumptively valid and the members of the company were interpreted as shown on the register unless rectified.

And rectification requires a court order under section 125 of the Act.

Concluding thoughts

Bland v Keegan serves as a reminder that, in accordance with section 113 of the Act, companies are mandated to maintain a register of their members which serves as prima facie evidence of the information it is required to contain (section 127, the Act).

The Bland v Keegan decision affirms for those who regularly rely on a company’s register of members – such as insolvency practitioners and corporate administrators – that even if a transfer is forged, the entries in the register are considered valid for voting purposes. The members of a company are those listed on the register unless a court order rectifies it.

For those affected by incorrect transfers, the decision underscores that the first step is usually to seek a court order to correct the register.  If needed, the court can also issue additional orders to address any issues that arose while the register was inaccurate.

This piece was written by Sinead Cassidy. Do please reach out to a member of the team if you would like to discuss matters relating to company law generally.

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