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Directors, shareholders, chickens and eggs – success for David Lascelles in Companies Court

David Lascelles
Articles of association frequently provide that it is for the shareholders to appoint directors and for the directors to decide whether to register a potential transferee of shares as a shareholder. 
When the sole director shareholder of a company dies this creates a potential chicken and egg problem.  There is no shareholder to appoint a director and no director to authorise the registration of a member.  It is an issue which is particularly faced by longer established companies whose articles of association incorporate Table A.  The issue does not arise under the Model Articles which specifically provide that “In any case where, as a result of death, the company has no shareholders and no directors, the personal representatives of the last shareholder to have died have the right, by notice in writing, to appoint a person to be a director.”
In a matter before Chief Registrar Baister in the Companies Court in the High Court in London on 18 June 2015, David Lascelles acted for the personal representatives under the will of a sole shareholder and director in a company which incorporated the 1948 Table A which prima facie created this chicken and egg problem.
David successfully persuaded the Chief Registrar to register his clients as shareholders so that they could appoint a director.   He did so by reference to Re Swaledale Cleaners Ltd [1968] 1 WLR 1710 (CA) which dealt with a transferee’s right to be registered where the board had failed to refuse to register a transfer within the two month period permitted in the articles (in Swaledale because the Board was inquorate).   
On the facts of David’s case there had (inevitably) been no refusal within the requisite period and hence the Chief Registrar agreed that the shareholders were entitled to rectification of the register pursuant to section 125 of the Companies Act 2006.  The result is that David’s clients may now be registered as shareholders and appoint a Board to manage the company.
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