Thus, shareholders are the persons named in the company's share register (or entitled to be so). Section 96 of the Companies Act makes it plain that each joint shareholder (i.e. each person named or entitled to be named in a company's share register) must be counted when working out whether a company has 50 or more shareholders and therefore is a Code company. Joint shareholders each have their names entered in the company's share register, so each joint shareholder must be counted when assessing how many shareholders there are.
Shareholders does not mean share parcels
The Panel does not accept the argument, put by some on policy grounds, that the definition 50 or more shareholders should be interpreted to mean that a company's voting securities must be held in 50 or more share parcels (by any number of persons) for a company to be a Code company.
The reason often given for this interpretation is that the Code is concerned with voting rights. The argument advanced is that, since each share carries only one vote, regardless of the number of joint holders of that share, 50 shareholders must be intended to mean the 50 shareholders that can exercise the votes attaching to the shares.
This argument cannot be sustained. It ignores the definition in the Code for code company (which refers to 50 shareholders and not to anything else) and the definition provided by section 96 of the Companies Act. Also it does not take into account that there is nothing in the Companies Act, the Takeovers Act or the Code that would limit the shares referred to in section 96 of the Companies Act to voting securities. Indeed, sections 36 and 37 of the Companies Act establish quite clearly that a company can issue shares that do not confer voting rights (e.g. redeemable preference shares). The names of the holders of non-voting shares must be entered in the company's share register.
Accordingly, unlisted companies with 50 or more shareholders who hold any type of shares will be Code companies.
Avoiding double counting
In some companies share parcels are held by trustees. Sometimes one person is the trustee of several trusts for which shares are held in the same company. The trustee (or any person) who holds several separate share parcels in the same company, being the person whose name is entered in the share register (Companies Act section 96), should be counted only once, when deciding if there are 50 or more shareholders.
A shareholder is a person who holds a share or shares. A person's shareholder status is not impacted by the number of shares they hold, or by whether they hold several share parcels in different capacities. Therefore, a company will be a Code company if it has 50 or more different persons named in the company's share register, regardless of the number of shares any of those persons holds and regardless of any different capacities in which they hold shares.
To illustrate this point in reverse, if the share parcels interpretation were adopted for the meaning of 50 or more shareholders (an interpretation that is rejected by the Panel), then each parcel would have to be counted, even if several of the parcels were held by the same person acting as trustee of different trusts.
Shareholders means shareholders.
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