June 6, 2023
Whether statutory registers have been kept up to date usually comes to light when they are needed for the sale of the company, or where the company is trying to secure new investment.
What registers must a company maintain?
By law, most UK companies are required to keep the following registers:
It is also good practice to have the following registers:
Company registers may be kept in hard copy or electronic form and directors can arrange them as they think fit.
Why is keeping accurate statutory registers important?
Firstly, and most importantly, failure to keep records as required by the relevant provisions of the Companies Act 2006 is an offence by the officers of the company and, in most cases, the company itself.
Further, the register of members is prima facie evidence of who the members of the company are, and what shares they hold. This is particularly important when shareholders wish to transfer their shares.
Members of a private company also have a right to inspect a company’s statutory registers by providing the company with ten working days’ notice (or even shorter notice in certain circumstances). This will require a private company to make its company records available to the member for inspection and copying. Maintaining accurate and up-to-date registers means that the directors can comply with any requests at short notice.
When will statutory books likely be inspected?
Whilst statutory books should be kept up to date, it’s not always a priority in the daily operations of a business; especially smaller businesses who don’t have regular legal or administrative support. However, a company’s statutory registers will require urgent attention in the following situations:
On the sale of a business, as part of the buyer’s due diligence, the buyer will inevitably ask to review the company’s statutory registers. This is not only to show that a seller is registered as the owner of the shares they are proposing to sell, but to show that the company has complied with its legal obligations to maintain the statutory books.
If a private company is looking to secure new investment, whether via a high street lender or a private financier, then the investor will likely wish to inspect the company’s registers to check: (a) who the shareholders of the company are; (b) what class of shares a shareholder holds; and (c) the percentage of equity that a shareholder holds. Again, as part of an investor’s due diligence, they will wish to see that the company has maintained accurate and up-to-date registers.
What if statutory registers have not been maintained?
Private companies will often have statutory registers prepared for them on incorporation of the company, such as by an incorporation agent. However, directors of a company sometimes fail to update the registers when required, such as on an appointment of a new director or on the issue of shares. If the company has registers in existence, then the directors should update these where required. A director may wish to seek professional assistance to ensure that registers have been properly updated; particularly if the company is gearing up for a sale or investment.
If the registers, however, have been lost or never existed in the first place, then the registers will need to be reconstituted. This can be done using the company’s internal records along with the records at Companies House. Often, in the context of a sale of a company, the solicitors acting for the seller will reconstitute the company’s books prior to completion of the transaction.
If you would like assistance updating or reconstituting your company registers, please get in touch with a member of our corporate team, Stephen Thompson, via email on sthompson@darwingray.com or via telephone on 029 2082 9102 for a free initial chat to see how we can help you.
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