A father and son purchased a factory through a company that was established and all of its shares were recorded in the son's name. After a dispute arose between the parties, the father sought to amend the registration of shares to reflect his ownership of half of the company, contending that he was involved int he management of the company and half of the shares were held in escrow for him.
The Court rejected the father's motion to amend the registration. As a rule, the shareholders register constitutes prima facie evidence of the correctness of what is recorded therein and a shareholder in a private company will be someone who is registered as such in the register. Anyone who aspires to challenge the correctness of such registration faces an increased burden of proof. When it comes to familial connections, excessive rigidity should be avoided and the legal bar should not be set too high, where it does not take into account the uniqueness of the familial relationship, which is often conducted without written agreements and on the basis of mutual trust. Here, while the parties did not sign an agreement that determines the ownership of the shares, the father was involved in the management of the company, received funds from it and even holds a recorded admission from the son regarding his entitlement to half of the company, all in a manner that is consistent with conduct between family members without written agreements. However, withing a family also it is customary to grant gifts without consideration between a parent and a child and in lack of an escrow agreement it was found that the shares belong to the son.