Łukasz Śliwiński

Share register serves a real purpose

Maintaining a share register in a limited-liability company is not just mandatory, but can also prove valuable.

Under Art. 188 of the Polish Commercial Companies Code, the management board of a limited-liability company is required to maintain a share register in which each shareholder is entered, with the name, address, number of shares held, par value of the shares, and any pledge or usufruct of the shares. The entries are updated to reflect any changes concerning the shareholders or their shares.

Before complaining about imposition of a legal duty to maintain a share register, managers should consider the usefulness in a company’s day-to-day operations of having an up-to-date and historically complete share register.

Because the share register serves as a current record of the shareholders and their addresses, it may be helpful in particular to persons newly appointed to the management board of a company that has been in existence for some time. For example, when they need to formally convene a shareholders’ meeting, the share register enables them to determine the operative address, as previously indicated by each shareholder, to insure that the management board convenes the meeting properly.

An up-to-date record of all changes in the shareholdings, which may go back many years, helps avoid time-consuming efforts to seek out documentation necessary to determine whether historical shareholders’ meeting were properly convened and who was duly authorised to exercise voting rights at any given time. When there are frequent changes in the shareholdings over time, without a proper share register it may be impossible to recreate later the sequence and interconnections of the various changes.

Transcripts from the National Court Register cannot take the place of the share register. For one thing, the National Court Register includes information concerning only shareholders with at least 10% of the shares. Even in the case of major shareholders, every change may not necessarily be entered in the National Court Register; for example, if there are several changes within a short period, it may happen that only the final change is registered and the intervening changes are skipped.

This all may seem pointless in the case of a freshly established company, but over time it may prove painfully relevant.

Apart from the usefulness of the share register in the day-to-day functioning of the company, failure to maintain a share register can have important legal consequences—including criminal sanctions.

Under Commercial Companies Code Art. 594 §1(2), a member of the management board of a commercial company who fails to comply with the duty to insure that the management board maintains a share register in accordance with Art. 188 §1 may be subject to a fine of up to PLN 20,000. The fine, which may also be assessed against the liquidators of a company, is imposed by the registry court.

Moreover, failure to maintain a share register may be held to be an unlawful omission by members of the management board (or liquidators), which may serve as grounds for holding them liable for damages if the omission causes the company to suffer a loss, under Commercial Companies Code Art. 293.

When new management board members are appointed, they should for their own peace of mind check to be sure that the company has maintained a share register in proper order.

Łukasz Śliwiński, Corporate Law practice group, Wardyński & Partners