Shareholdings listed on the companies office public register do not promise legal ownership; each company’s own register is primary evidence of ownership. Roopa Patel was not liable for damages after unilaterally removing fellow shareholder Jasvinder Singh from the public register, facilitating their company’s bank borrowing during summer holidays.
The High Court was told Mr Singh bought into Ms Patel’s Auckland accounting business in early 2015. The deal saw him paying $300,000 for an expected one third stake in Steve Taylor & Associates North Shore Ltd. While the investment was in his name, it was for the benefit of his spouse Pam Sandhu, a qualified accountant. The balance of the shares in Taylor & Associates was held by Ms Patel, through her company Elite Business Service NZ Ltd.
With Taylor & Associates short of working capital in early 2016, Ms Patel looked to get overdraft accommodation from BNZ. The Bank was looking to take security over company assets and have personal guarantees from all shareholders. Ms Patel then removed Mr Singh as a shareholder from Taylor & Associates companies office records, representing herself to the Bank as now sole shareholder. She was later to tell the High Court she knew Mr Singh would not sign a bank guarantee.
Taylor & Associates subsequently went into liquidation, insolvent. Mr Singh sued, alleging Ms Patel was liable in conversion after taking control of his shares in early 2016; shares then worth $300,000, he said.
Justice Lang ruled an unauthorised change of shareholding on the public register does not amount to conversion. Ownership is proved by looking first at company records, and second at any evidence of sales. There was no evidence that Ms Patel kept a share register for Taylor & Associates. The evidence was that Mr Singh had purchased the shares in 2015 and remained a shareholder at the time of the BNZ transaction. The court was told Mr Singh subsequently negotiated with Ms Patel to have Elite Business Services buy his shares. He has not been paid. His shares in Taylor & Associates are worthless. Mr Singh’s claim that Ms Patel had promised personally to repay him was dismissed by Justice Lang.
Singh v. Patel – High Court (31.08.20)
20.148