All business owners who have run a successful business and achieved an exit will at some point in that process have been asked by their lawyers or accountants for their statutory registers. The two most common responses are: (i) we have all our Companies House filings up to date so we should be fine, or (ii) what are statutory registers? The result is usually a last-minute drain on time and fees to fill the gap ahead of an exit or any other significant capital event such as investment in the business.
What are statutory registers?
These are records of company information which UK companies are required by law to keep. Depending on the age of the business in question, these might already exist in paper form in dusty files in the back of a dark storeroom (and therefore are most likely out of date). Recently incorporated companies who have statutory registers in place usually hold electronic versions or maintain them on company secretarial software (highly recommended as good practice!).
We often speak to business owners approaching a significant capital event who are not aware of the requirement to maintain registers in the first place, or they are able to produce registers but the information is years out of date. The issue usually starts on incorporation. Formation agents sometimes provide template statutory registers on incorporation, but this step is often skipped. It is also easy these days for any director or shareholder to incorporate a company online without the assistance of a lawyer or a formation agent, and invariably the registers are never produced in the first place.
Legal Requirements:
UK companies are required by law to keep the following statutory registers:
- A register of members (s113 Companies Act 2006 (“CA 2006”)) – this can be kept at the company’s registered office and not in the public record.
- A register of directors (s162 CA 2006).
- A register of secretaries (s275 CA 2006) – there is no longer a legal requirement for a private company to have a secretary, but if it does it must keep a record of who is appointed.
- A register of directors’ residential addresses (s165 CA 2006) – this does not form part of any public record.
- A register of charges and debentures – this only applies to charges created before 6 April 2013.
- A register of PSCs (persons with significant control) (s790M CA 2006).
In addition to these registers, it is good practice (albeit not a legal requirement) to keep registers of allotments and transfers of shares.
Why are they important?
First and foremost, failure by a company to keep and maintain up to date statutory registers is a criminal offence by the officers of the company and by the company itself.
The other key point to be aware of is that the register of members is prima facie evidence of who the shareholders of a company are and what shares they hold. A transfer of shares is not legally complete until it has been written up in the register of members, and this is the register which will be required to be produced and relied upon prior to any exit or capital event. Not having the register in place, or not having it maintained up to date, can cause significant costs and delays during any such transaction.
The statutory registers are also separate from the records on Companies House. There is a common misconception that the Companies House records are the definitive record of the directors and shareholders of a company. This is not the case (unless a company has specifically elected to keep certain registers on the public record at Companies House). There are separate legal obligations to maintain up to date records at Companies House and to maintain the statutory
registers.
Finally, there is a legal right for the shareholders of a company to inspect the statutory registers on request (usually on 10 business days’ notice). It is therefore important that they can be made available at short notice and that they are up to date.
Tips for business owners
- Make sure your company registers exist – check with your company secretary/accountants/lawyers if you are not sure whether you have them and whether they are up to date. If they do not exist, we recommend getting in touch with your professional advisers to assist with putting a set of registers in place.
- Update them regularly – the older a company is, the more complex (and therefore time consuming and costly) it is to reconstitute the statutory registers when you desperately need them (usually in the weeks leading up to your big transaction). We recommend updating the registers as a matter of course any time there is a significant event (an allotment/transfer of shares, a change of directors or PSCs etc).
- Make sure your statutory registers match your Companies House records – there are two separate administrative requirements, and if they have conflicting information this can be difficult to unravel and cause problems and delays down the line.
If you are gearing up for a capital event, or if you have any questions regarding the requirements around statutory registers and other company records, schedule a complementary discovery call with the team today
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For more information, send us an email at contact@sumer.co.uk
About Mahitha Kumar:
Mahitha Kumar is a corporate and commercial lawyer admitted in New Zealand, as well as a chartered accountant with Chartered Accountants Australia and New Zealand. Her previous experience involves working at a top 10 New Zealand law firm, and in the transaction team at Deloitte, giving her rich experience in corporate structuring, M&A, fundraising, equity documentation and general commercial drafting and advisory.
Contact email:
mahitha.kumar@sumer.co.uk
