Nobody Kept the Share Register: Who Owns What When Two Founders Fall Out

A cap table lives in three places — the register of members, the Companies House file and everyone's memory. Only the first one decides ownership in law, and most founder-led companies have never written it up.

Two founders, five years in, a business worth something. One says the split was 60/40 from day one. The other says it was 50/50 and always had been, and points to an email from 2021. There is no register of members. There never was. The accountant has one spreadsheet, the incorporation agent has another, and the confirmation statements have been rolled forward untouched since the company was formed.

This is not a rare failure. It is the ordinary condition of a company that was set up online for £50 and then got busy.

The three places a cap table lives — and the only one that counts

The register of members. Section 112 of the Companies Act 2006 says a person becomes a member either by subscribing to the memorandum on incorporation, or by agreeing to become a member and having their name entered in the register of members. Entry in the register is not administration after the fact. For everyone other than the original subscribers, it is the thing that makes you a shareholder.

Section 113 requires every company to keep that register, recording each member's name and address, the date they were registered as a member, the date they ceased to be one, and — for a company with share capital — the shares held and the amounts paid. Section 127 gives it evidential force: the register is prima facie evidence of the matters the Act directs or authorises to be entered in it. Nothing else in the Act carries that status.

The Companies House file. Form SH01, the return of allotment, must be delivered within one month of an allotment under section 555. The confirmation statement carries shareholder information and a statement of capital for companies with share capital. These filings are evidence of what someone once told the registrar. They are useful — often the best contemporaneous evidence available — but they are a report of the register, not the register.

Memory. Memory is where the 60/40 lives. Memory does not survive cross-examination.

There is a fourth complication. Section 126 provides that no notice of any trust may be entered on the register of a company registered in England and Wales. So the register records legal title only. If one founder was holding shares for the other, or for a spouse, or for a future option pool, the register will not say so — and the side arrangement will have to be proved from something else entirely.

What happens when the register was never written up

Section 125 is the route. It allows an application to court where a person's name is omitted from the register, or entered in it without sufficient cause, or where there has been default or unnecessary delay in entering the fact that someone has ceased to be a member. The court can refuse the application or order rectification and damages.

The part founders underestimate is section 125(3). On a rectification application the court may decide any question relating to the title of a person who is a party to it, and any question necessary or expedient to be decided for rectification. That is a wide door. It means the court is not simply correcting a clerical slip — it is determining who owns the company, on the evidence put in front of it.

And when the register was never created, the evidence is all there is. The court builds the register from the documents. Subscriber details on the memorandum. Board minutes, if any. SH01s. Confirmation statements. Bank statements showing who actually paid subscription monies and when. Share certificates. Stock transfer forms. Accountants' working papers and the shareholders' funds note in the statutory accounts. Investment agreements. Emails discussing splits, dilution and vesting.

The founder with the better paper trail wins. Not the founder with the better story.

The standing problem, which bites first

Before you get to who owns what, there is the question of whether you are allowed to ask.

An unfair prejudice petition under section 994 is available to a member of the company, and to a person who is not a member but to whom shares have been transferred or transmitted by operation of law. If your name was never entered in the register and no transfer to you was ever executed, your standing is contested at the threshold.

Winding up on the just and equitable ground is worse. Under section 124 of the Insolvency Act 1986, a contributory cannot present a petition unless the shares were originally allotted to them, or have been held by them and registered in their name for at least six months during the eighteen months before the commencement of the winding up, or devolved on them through the death of a former holder. A person who has never been registered fails that test on its face. In practice the rectification claim has to come first, or run alongside.

So the founder who never chased the paperwork is the founder who has to fund a High Court claim just to earn the right to bring the claim he actually wants to bring.

And the co-founder is holding the box of files

Section 114 requires the register to be kept available for inspection at the registered office or at a specified alternative inspection location. Section 116 gives members the right to inspect it free of charge, and other persons the right on payment of a fee. But section 117 lets the company apply to court within five working days of a request for a direction that the request was not made for a proper purpose.

If your co-founder controls the registered office, the company email domain and the accountant relationship, expect the inspection route to be slow and contested. Gather what you hold personally before the relationship goes public.

The penalty is trivial; the consequence is not

Breach of section 113 is an offence by the company and every officer in default, punishable on summary conviction by a fine not exceeding level 3 on the standard scale, with a daily default fine for continued contravention. Level 3 is £1,000. Nobody has ever changed their behaviour because of that.

The consequence that actually bites is the deal that dies. A buyer's solicitor asks for the register of members on day two of due diligence. If the answer is that there isn't one and the two founders disagree about the split, the transaction stops. It does not get repriced. It stops, because no buyer takes title from a disputed cap table, and no warranty covers a defect the seller has already disclosed.

Transfers that were agreed and never completed

Half of these disputes turn on a transfer everyone assumed had happened. Stamp duty on shares bought using a stock transfer form is charged at 0.5% of the consideration, rounded up to the nearest £5, and transfers where the consideration is £1,000 or less are generally exempt if the certificate on the form is completed. HMRC confirms stamping by letter, and that letter is what the company needs before registering the new owner.

An unstamped, unregistered transfer sitting in a drawer for four years is not a completed transfer. It is a piece of evidence about what two people intended in 2021 — which is exactly the argument you were trying to avoid having.

What Dinmore Bell does

Reconstructs the position before it is contested. That means pulling the full Companies House filing history, the statutory accounts, the accountant's file, the bank records for subscription and transfer monies, and every document that touches the equity, then writing a register of members as at today with a dated schedule of the evidence behind each entry. Where the filings and the evidence diverge, the divergence is documented rather than papered over.

Dinmore Bell does not backdate documents, and treats any suggestion of doing so as the end of the conversation. A register written up today, honestly, with the evidence attached, is a strong document. A register written up today and dated 2019 is a gift to the other side.

Then the forward discipline: SH01 within the month, confirmation statements that reflect reality, certificates issued, transfers stamped before registration, and the register kept where the Act says it should be kept. Companies House has said that under the Economic Crime and Corporate Transparency Act 2023, companies with share capital will need to record shareholders' full names and provide a one-off full shareholder list — which will surface every unwritten cap table in the country.

For family businesses and founder offices, the same exercise runs across the whole structure: who holds what, in which entity, on whose behalf, and what the register in each company actually says.

Where a specialist is needed

A contested section 125 application is litigation. Dinmore Bell instructs solicitors and, where required, counsel, defines the scope and the strategy, sits between the founder and the court timetable, holds the budget and owns the outcome.

Stamp duty on a historic transfer, and any tax consequence of putting the register right — including where shares moved between family members or were acquired in connection with employment — is a computation and a filing position. A tax specialist is instructed to give it. Dinmore Bell holds the budget and the outcome there too.

Sam Ansloos is barrister-trained, which mostly means the reconstruction is built the way a judge will want to read it: chronological, evidenced, and honest about the gaps.

If you are reading this because it has already happened

Do four things this week. Download the complete Companies House filing history, including every SH01 and confirmation statement since incorporation. Ask your accountant for the shareholders' funds working papers for every year. Pull your own bank records for anything that looks like subscription or share purchase money. Export your own email archive for the words "shares", "equity", "split" and "dilution" before anyone changes the passwords.

That is the file the court will decide on. Build it before the other side does.