Time for ChangeThe Register of Members is one of the most important documents a company must keep. These records need to be constantly updated and maintained, especially in the case of publicly listed companies. Quite often, the register is sustained using archaic paper-based methods that are onerous, inefficient, and may result in mistakes. With digital technologies and electronic records, this doesn't have to be the case anymore.
Obligations for Companies in Managing Register of Members
As per section 627 of the Companies Ordinance, Cap. 622 (“the Ordinance”), a company must maintain a register of members, either in English or Chinese. The register contains various details, including name, address, the date of joining and when they cease to be a member. Moreover, details of any issued share capital must be maintained.
These records are to be updated within two months of receiving notice of any change in particulars or when a person is no longer a member. All entries in the register on the date a person ceases to be a member may be destroyed at the end of a ten-year period. The register of members should be kept at the company’s registered office or a prescribed place, with the Registrar having been notified of its location. In addition, the Registrar needs to be informed of any changes to the register or its location within 15 days of the event. To ensure transparency and robust corporate governance, any member of a company or the public is entitled to inspect the register of members of the company in the prescribed manner.
Failure to maintain and update the register as prescribed in the rules is an offence, with the company and responsible persons being liable to pay a fine.
Digitalization of Register of Members
The use of physical registers presents company administrators with a host of challenges, such as updating any changes to members’ particulars, replacing lost certificates and facilitating the public search of a register. They must also deal with the challenges associated with the provision of accurate and up-to-date shareholder summaries. In addition, the pandemic has also meant that many stakeholders and members have been unable to access company records physically. This further highlights the increasing need for digitalizing important company documents to improve access and storage.
The digitalizing of registers and adoption of modern technologies can help overcome these challenges and provide companies with a range of benefits:
- Improved Productivity: With digital technologies, companies can improve the accessibility and storage of records on the register. It will enable administrators to access any required information quickly and update this promptly. The use of digital tools also means that employees can save time and effort, leading to increased productivity. In addition, a digital register can help to identify and swiftly rectify any errors.
- Increased Access and Transparency: With digital records, there is increased transparency for stakeholders, enabling them to easily access records and stay updated. By providing online services, companies can help individuals who cannot visit the registered office in person.
- Improved Reporting and Compliance: Digital records facilitate the easy search and sorting of records, cutting down the time required to conduct internal reviews and audit. The digital register also makes it easier for companies to report any updates quickly and accurately. This helps to cut down the risk of unwelcome and costly compliance costs and fines. Moreover, through the use of cloud technology and digital copies, companies can overcome physical damage or loss of the register.
- Enhanced Security: Sensitive data requires robust security and access control which can be challenging to achieve with physical records. By using digital records, companies can add extra layers of security, such as two-factor authentication and permission-based access. Businesses can restrict access of the register to authorized persons and facilitate access securely, reducing the risk of data being stolen or lost. Furthermore, companies can track when and by whom records have been accessed and altered.
Move towards Digital Corporate Governance
There is a need for enterprises to implement digital transformation across the organization to keep pace with industry best practices. By using technology to modernize the safekeeping and maintenance of the register of members and other records, companies can take concrete steps towards robust digital corporate governance. This increases transparency for investors and stakeholder management and provides a significantly improved experience for the members. Moreover, by moving to digital corporate governance, a company can showcase its commitment to becoming a more sustainably focused organization.