The claimants were the executors of the will of Mr Russell Price, who died on 8 March 2020. Mr Price had been the sole shareholder and director of the defendant company. 90% of the shares in the defendant company and the residuary estate were left to the deceased’s daughter, Ms Lucy Price, who had been appointed the defendant company’s secretary on 27 January 2020. The defendant company had carried on a farm-contracting business.
The defendant company’s articles of association incorporated Table A in the schedule to the Companies (Tables A to F) Regulations 1985, Regs 29 to 31 of which provided for the deceased’s shares on death passing by operation of law to the claimants as his executors. However the articles contained no provision to appoint a director or directors in the event of the death of the sole director and shareholder. Only the members could appoint a director, but the claimants could not do this because their names were not on the register. The company’s bank had written to the claimants indicating that it could not operate the company’s bank account without authorities in place, which meant that the company could not pay its creditors, and it could not enter into contracts which it needed to do to fulfil its obligations and carry on its businesses.
The claimants therefore applied for the register of members of the defendant company to be rectified to name them as shareholders. They made the application, however, before they had applied for probate of the will, though they intended to do so. The delay in seeking probate was due to the need to provide detailed valuations before filing a full inheritance tax return. Ms Price supported the application.
Held (dismissing the application):
In light of the urgency of the matter, there was ‘unnecessary delay’ taking place ‘in entering on the register the fact of’ the deceased’s ‘having ceased to be a member’. This meant that s125(1)(b) Companies Act 2006 was satisfied and that the court had jurisdiction to rectify the register, as it did in similar circumstances in Kings Court Trust Ltd v Lancashire Cleaning Services Ltd.
There were two factual differences from the Lancashire Cleaning Services case. First, in this case there was a company secretary (Ms Price) in place. In Lancashire Cleaning Services, however, the absence of a secretary only affected the question of service of the claim which was dispensed with in that case. That was not necessary in this case. Secondly, in Lancashire Cleaning Services an application had been made for probate, which was not the case in this case. This was more significant since it raised the concern that the court might make an order substituting the claimants on the register but then no application might be made (eg because the claimants baulked at paying the IHT in advance).
The court therefore required an undertaking from the claimants that they would not renounce probate, that they would apply for it as soon as possible and make all reasonable efforts to obtain the information necessary for that purpose, and that they would pay all necessary taxes as required so that probate could issue. An undertaking merely to pay taxes from the estate as required was not sufficient as this could lead to a lengthy period in which the claimants were on the register without being able to obtain probate (eg if the estate had liquidity problems). In practice a problem was unlikely since the claimants had received advice that the shares qualified for 100% business property relief from IHT.JUDGMENT HHJ PAUL MATTHEWS: Introduction  This is my judgment on a claim made by claim form issued on 26 March 2020 under CPR Part 8, for an order under s125 of the Companies Act 2006 to rectify the register of members of the defendant company. The claimants are the three named executors of the …