Updated (digital) shareholder register to prevent misery

Shareholder register not in order

The Chamber for Notaries in Den Bosch (ECLI:NL:TNORSHE:2022:9) recently ruled that a civil-law notary should not have participated in a share transfer. In short, the ruling was that, due to the lack of a shareholder register, it was unclear whether shares had been validly issued at the time. The court issued a warning and ordered the civil-law notary and the candidate civil-law notary to execute the transfer.

Just calculate with us what this disciplinary case will have cost the notary and the client:

• €1,050 in damages;
• €2,000 disciplinary law costs award;
• the loss of approximately 50 hours x €200 for preparation, consultation, input on the defence statement, travel time, hearing, etc.;
• approximately 25 hours x €300 for the lawyer;

A total of €20,550.

This case would have been very different if the shareholder register of the company in question had not been lost. In this case, the burden of responsibility is placed on the notary, while the legal responsibility for maintaining the shareholder register lies with the board of the private limited company; in this case, the board improperly performed its duties (mismanagement) because there was no (proper) shareholder register.

Jantje's notepad

This is the perennial problem with the shareholder register, which is not without reason called "Jantje's notepad." Clients lose it, forget to make changes, or don't have it updated by their notary.

Why is keeping an orderly shareholder register so important?

• The shareholder register is the only document that can provide chronological clarity about a company's shareholdings. You can't rely on a central ledger or anything similar.
• The shareholder register is also the only document that helps determine who has preferential rights upon issuance or transfer. Transferring shares that are not properly adhered to the blocking provisions will have no legal consequences.
• If there's no shareholder register, the notary must reconstruct the documents to establish the power of disposition. This is time-consuming and therefore costly for the client.
• The shareholder register plays an important role in the orderly conduct of shareholder meetings.

Consequences

The consequences of not (correctly) maintaining the shareholder register are:

• It is an economic offense. It can be punished with community service, a category 4 fine (€22,500), or a prison sentence of up to six months.
• The board of directors is liable to the company for any damage resulting from the failure to properly maintain the shareholder register.
• Furthermore, the shareholder register includes certain third-party protection aspects (Section 2:196a, Section 3 of the Dutch Civil Code). Directors can be held jointly and severally liable without limitation for any damages suffered by others due to the register being out of date or lost.

However, the soup was generally not eaten quite as hot. We are not aware of any criminal cases or awards of damages on this basis. However, the current ruling by the Chamber for Notaries 's-Hertogenbosch (ECLI:NL:TNORSHE:2022:9) has now marked a turning point.

Conclusion

The shareholder register appears to be one of the most frequently misplaced documents in corporate law. Directors are generally insufficiently aware of its importance.

Failure to maintain a properly maintained shareholder register can have unpleasant and costly consequences and only results in losers.

Tip

Therefore, when you incorporate a BV, you will always be offered a digital shareholder register. This register will be uploaded to your digital My Notary file, so it cannot easily be lost.

This prevents hassle for the client, saves them (legal) costs, and saves them energy. The notary can serve the client better and more cost-effectively, and they sleep better too.

If you would like to read the ruling, please visit: https://tuchtrecht.overheid.nl/zoeken/resultaat/uitspraak/2022/ECLI_NL_TNORSHE_2022_9

Thanks to the Practice Generator for sharing the pronunciation.