CR-2022-BRS-000101 - [2025] EWHC 2291 (Ch)

Section 994 of the 2006 Act relevantly provides:

“(1)

A member of a company may apply to the court by petition for an order under this Part on the ground—

(a)

that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or

(b)

that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.

[ … ]

(2)

The provisions of this Part apply to a person who is not a member of a company but to whom shares in the company have been transferred or transmitted by operation of law as they apply to a member of a company.”

The concept of a “member of a company” is created by section 112, which relevantly provides:

“(1)

The subscribers of a company's memorandum are deemed to have agreed to become members of the company, and on its registration become members and must be entered as such in its register of members.

(2)

Every other person who agrees to become a member of a company, and whose name is entered in its register of members, is a member of the company.”

As to the concept of a share in a company, section 540 relevantly provides:

“(1)

In the Companies Acts ‘share’, in relation to a company, means share in the company's share capital.”

And section 544 relevantly provides:

“(1)

The shares or other interest of any member in a company are transferable in accordance with the company's articles.”

Section 768 relevantly provides:

“(1)

In the case of a company registered in England and Wales or Northern Ireland, a certificate under the common seal of the company specifying any shares held by a member is prima facie evidence of his title to the shares.”

Section 770 relevantly provides:

“(1)

A company may not register a transfer of shares in or debentures of the company unless—

(a)

a proper instrument of transfer has been delivered to it, or

(b)

the transfer—

(i)

is an exempt transfer within the Stock Transfer Act 1982 (c. 41), or

(ii)

is in accordance with regulations under Chapter 2 of this Part.”

Section 771 relevantly provides:

“(1)

When a transfer of shares in or debentures of a company has been lodged with the company, the company must either—

(a)

register the transfer, or

(b)

give the transferee notice of refusal to register the transfer, together with its reasons for the refusal,

as soon as practicable and in any event within two months after the date on which the transfer is lodged with it.”

Section 773 provides:

“An instrument of transfer of the share or other interest of a deceased member of a company—

(a)

may be made by his personal representative although the personal representative is not himself a member of the company, and

(b)

is as effective as if the personal representative had been such a member at the time of the execution of the instrument.”

Section 776 relevantly provides:

“(1)

A company must, within two months after the date on which a transfer of any of its shares, debentures or debenture stock is lodged with the company, complete and have ready for delivery—

(a)

the certificates of the shares transferred,

(b)

the debentures transferred, or

(c)

the certificates of the debenture stock transferred.

Section 994 creates a statutory cause of action. Only those who fall within the section may rely on it in bringing legal proceedings. There are two classes of person who qualify. First, there are members of the company, under sub-s (1). Second there are persons who are not members of the company, but to whom “shares in the company” have been transferred by operation of law, under sub-s (2). The notion of a member is dealt with by section 112. It will be noted that this refers to two classes of person. First, there are “subscribers of a company's memorandum”, under sub-s (1). Second, there are persons who agree to become members of a company, and whose names are entered in its register of members, under sub-s (2). In general terms, the first are the original members, and the second are the subsequent members.

It will be noted that the statutory concept of a member does not refer to ownership of any share or interest in the company (because not all companies have a share capital). However, where an agreed transfer of a share or shares in the company is registered by the company, the name of the new shareholder is entered on the register of members, and so he or she becomes “a member of the company” under section 112(2). But section 994(2) applies to a person who is not a member of the company but “to whom shares in the company have been transferred or transmitted by operation of law”.

The question is exactly how far this phrase extends. Certainly, it covers the personal representative of a deceased shareholder. Such a representative does become in law the owner of the assets formerly belonging to the deceased. And this situation is specifically contemplated by section 773, for example. Bankruptcy provides a similar example of vesting of assets by operation of law in the debtor’s trustee in bankruptcy: see the Insolvency Act 1986, section 306. And it appears to extend as far as a person in whose favour a stock transfer form has been executed and lodged with the company: see egRe a Company 003160 of 1986 (1986) 2 BCC 99,276, 99,279 (Hoffmann J), and the judgment of Zacaroli J in the present case given on 5 March 2024 ([2024] EWHC 497 (Ch), [19]).