Joint ownership of shares

The shares are entered into the share register of the company. While the Companies Act 1993 does not recognise trust ownership, it is common in company searches to see one or more shares (or parcels) owned by more than one person, indicating the presence of a trust. Often those common owners will include a company which is also a trustee. For those companies also it is common for shares or shares to be held by more than one person, often the directors.

The reason for this in trustee companies is that on the death of a shareholder the share is held by the remaining joint holder or holders, avoiding the need for probate and share transfers from an estate. The same applies to other shares held jointly in a company.

The Companies Act 1993 does not restrict the number of joint owners of a share or shares and so potentially if the joint owners are not linked by some mechanism or agreement for example as trustees deciding on who makes decisions in respect of the shares could be difficult. Occasionally, constitutions may limit the number of joint owners of shares but often there is silence on the point. In theory, if the constitution permits this the directors could refuse to register joint owners if this would be an administrative burden, but the decision might be subject to challenge unless justified objectively.

To an extent the Companies Act 1993 does deal with the issue because clause 11 of Schedule 1 to the Act states, “Where 2 or more persons are registered as the holder of a share, the vote of the person named first in the share register and voting on a matter must be accepted to the exclusion of the votes of the other joint holders.”

This raises questions as to the existence and correct recording of the ownership in the share register and any attempts to alter that record in the case of a dispute would be challengeable. Even though only one joint owner can vote there is nothing to prevent all joint owners attending any shareholders meeting. However, the first registered joint shareholder would be the contact for correspondence and notices and if share certificates are issued all joint owners should be on the certificate. In the case of death of a joint shareholder, the remaining shareholders take that share interest without the need for a share transfer, but other changes would need share transfers signed in the normal way by all transferors and usually all transferees.

Joint share ownership therefore raises issues for owners not connected through a trust relationship. If the ownership is purely commercial, then a shareholders agreement would deal with the above administrative issues in more detail and as appropriate for that ownership.