When a person owns company shares jointly with at least one other person, they are known as joint shareholders. Most companies allow two or more people to co-own shares, unless expressly prohibited under their articles of association or a shareholders’ agreement.
In this post, we discuss the rights of joint holders, the way in which their details must be recorded, and how they are treated for the purposes of the PSC register. We also explain what happens if a joint shareholder dies.
What are joint shareholdings?
Joint shareholdings are company shares that are jointly owned by two or more people. This type of share ownership is becoming increasingly common, and is most often found in Right to Manage or flat management companies.
Limited by shares companies may allot (issue) or transfer any number of shares to any number of people, whether they are individuals or corporate entities (i.e. other companies). These shares can be held by single natural persons or single corporate entities, or they can be held jointly.
However, it is not possible for subscriber shares to be held jointly. Subscriber shares are those that a company issues to the founding members during the company formation process.
Companies House, the official registrar responsible for approving UK company registrations, requires each subscriber to be a single natural person or a single corporate entity. This rule is based on the registrar’s interpretation of the Companies Act 2006.
Nevertheless, there is nothing to prevent companies from converting individual subscriber shares to joint shares after company formation. A standard share transfer procedure is all that is required.
How many joint shareholders can a company have?
Companies can issue as many joint shares as they wish, unless they specify a limit or prohibit joint shareholdings in their articles of association or a shareholders’ agreement.
In terms of the maximum number of people who can co-own a share in a private company, there is no statutory limit set out in legislation. However, for reasons of administrative practicability, many companies choose to include a provision in their articles restricting the number of joint holders to four per share.
Generally, company directors also have the authority under the articles to refuse the registration of any share transfer. They may choose to exercise this power if a joint shareholding is likely to pose an administrative burden on the company.
Furthermore, article 63(5)(e) in the model articles for public limited companies (PLCs) expressly states that “The directors may refuse to register the transfer of a certificated share if … the transfer is in favour of more than four transferees.”
Do joint shareholders have equal rights?
No. Subject to any provisions in the company’s articles or shareholders’ agreement, joint shareholders do not have equal rights.
As per section 286 of the Companies Act 2006, only the ‘senior holder’ of a joint share has the right to vote at general meetings, appoint a proxy shareholder, and sign members’ written resolutions.
The senior holder is the person whose name is first listed in the register of members, before the names of the other co-owners of the share.
Therefore, upon agreeing to take joint shares, the name of the senior holder should be listed first on the stock transfer form or the documentation agreeing to take newly allotted shares.
The order of the joint shareholders’ names on the relevant form is the order in which the names will appear on the share certificate and in the register of members.
Can all joint shareholders attend general meetings?
The Companies Act makes no reference to the right of joint shareholders to attend and participate in general meetings of the members.
The absence of any express reference to their exclusion from meetings suggests that non-senior joint shareholders have the same right as senior holders and all other members of the company to attend and speak at general meetings.
Company correspondence for joint shareholdings
Unless the articles of association state otherwise, companies are under no obligation to send communications and documents to all joint shareholders. They only need to contact the senior holder when providing documentation or notifications, such as:
- the share certificate
- notice to provide information for the PSC register
- copies of annual accounts
- notices of general meetings and proposed resolutions
- minutes of general meetings
- copies of any proposed written resolutions
- the outcome of any written resolutions
- dividend notices and dividend vouchers
- offer to exercise pre-emption rights on the transfer or allotment of shares
- a ‘call on shares’ in respect of unpaid or partly-paid shares
By delivering communications to the senior holder, the correspondence is deemed to have been delivered to all joint holders of the share.
When taking joint shares, it is important for all joint holders to discuss who is willing and most suited to assume the role of senior holder. They should also collectively agree on a procedure and time scale for the senior holder to communicate information from the company.
Joint share certificates
It is standard practice to issue only one share certificate per joint shareholding.
Companies should include the names of each joint holder, listing the name and service address of the senior holder first. There is no need to include the addresses of the other joint holders.
Ordinarily, a company will send the certificate to the senior holder, who is free to make copies for the other joint shareholders’ records, if they so wish.
Transferring jointly held shares
To transfer a jointly held share to someone else, all of the joint shareholders will need to sign the stock transfer form.
Other actions requiring approval of all joint shareholders
Unless the company’s articles of association state otherwise, the signatures of all joint holders of a share are required on dividend payment mandates, agreements to receive company documents, and communications via electronic means, and when splitting or consolidating joint shares.
Deciding how to vote as joint shareholders
Whilst only the senior holder has the authority to exercise the voting rights attached to joint shares, the joint holders will have to collectively discuss how to vote on each company resolution – i.e. whether the senior holder should cast the joint vote for or against the proposed resolution.
There is no official procedure for how joint shareholders will reach such decisions. It is entirely up to them how they wish to consult with one another and reach an agreement on exercising their joint votes.
Is every joint shareholder a person with significant control (PSC)?
A joint shareholding is not treated as a single share for the purposes of the register of people with significant control (PSC register).
As per the Companies Act 2006 (Schedule 1A, part 3, section 11), where two or more people jointly hold a share, each person is deemed to hold the total number of shares and the attached rights held by all of them.
Therefore, if the joint share represents more than 25% of the company’s issued shares or voting rights, each joint holder of the share must be entered separately on the PSC register.
For example, if two people jointly hold 30% of the company’s issued shares or voting rights, they must work on the basis that they both control that 30%, rather than 15% each.
Recording the details of joint shareholders
Companies must enter the names of all joint shareholders in their statutory register of members. The name and service address of the senior member should appear first, with the names of the co-shareholders listed thereafter.
If the joint share represents more than 25% of the company’s shares or voting rights, the details of every joint holder should be included in the register of people with significant control.
Both of these company registers must be kept up to date and made available for public inspection at the company’s registered office address or SAIL address (single alternative inspection location).
The company must also provide details of every joint shareholder and PSC to Companies House. This information will appear on the public register.
Can you convert joint shareholdings to individual shareholdings?
You can convert joint shareholdings to individual shares (i.e. shares held in a single name) by following the share transfer procedure and completing a stock transfer form.
To do so, all of the joint holders of the share(s) must agree to the decision.
Similarly, it is possible to convert individual shares to joint shareholdings using the same procedure.
In either case, you should refer to the company’s articles of association and shareholders’ agreement to ensure such changes are permitted.
Death of a joint shareholder
On the death of a joint shareholder, the surviving joint holders automatically retain ownership of the shares.
If the deceased was the senior holder and there is only one surviving joint shareholder, that person will automatically hold the share as a single shareholder.
However, if there are two or more surviving joint shareholders, they will have to discuss between themselves who will become the senior holder and notify the company of their decision.
The company will then have to carry out a number of administrative changes, including:
- Entering the date of death on the register of members as the date on which the person stopped being a member of the company
- If applicable, updating the order in which the names of the surviving joint holders are listed in the register of members to reflect the new senior holder
- Updating the PSC register, if the deceased was also a person with significant control
- Filing form PSC07 with Companies House within 14 days of the date of death if the deceased was a PSC
- Updating the register of directors or register of secretaries if the deceased was also a director or company secretary
- Cancelling the existing share certificate and issuing a new one with only the names of the surviving joint holders
- Obtaining a new dividend mandate (instruction for payment), if applicable
- Reporting the relevant changes to Companies House on the next annual confirmation statement, or earlier if preferred
To make these changes, the company will need to see the original death certificate or be provided with a certified copy.
Thanks for reading
If you have any questions about joint shareholdings or require further help and advice on any matter related to limited company formation, please do not hesitate to contact us or leave a comment below.