Ben Ironmonger, company and commercial solicitor at Scott Bailey LLP, considers the importance of keeping properly maintained statutory books.
Whatever industry your business is in, if you run a private limited company, you are required by the Companies Act 2006 (the “Act”) to maintain registers holding important information. A compliant set of registers will contain details of shareholders, share transfers, and officers (directors and secretaries) of the company. Many of these details may not be available via public registers such as Companies House.
The various registers are usually referred to as “statutory books” (or “stat books”) and maintained by the company secretary or, if the company does not have a company secretary, then by a director or other person appointed to take responsibility for ensuring they are up to date.
The statutory registers include the register of members, register of directors, register of secretaries and register of persons with significant control (or “PSC”). Companies are also required by the Act to keep minutes of all directors’ board meetings and shareholder resolutions. The non-statutory registers, often included when referring to statutory books, include the register of allotments and transfers (recording new share issues and transfers) and a register of charges relating to company property.
Whilst the statutory books were traditionally kept in hard copy form, they may be kept electronically (but they must be maintained, and show the history of transactions. The company registers should start from the date of a company’s incorporation and should be maintained until its end. Even dormant companies are required to have certain company registers.
Why are statutory books important?
Companies are required by the Companies Act 2006 (the “Act”) to maintain a set of registers. It is the law. Failing to maintain proper registers is actually an offence under the Act, and is punishable by a fine. It is not good enough for directors to assume their accountants, or perhaps solicitors, are doing it for them.
Companies are required under the Act to keep the statutory registers available for inspection. Whilst often a rare occurrence, the shareholders (otherwise known as “members”) are allowed to inspect the registers on request, and without charge. Public access may generally be granted for a fee.
Despite many directors’ and accountants’ views to the contrary, the register of shareholders is the definitive authority as to who legally owns the shares – not Companies House records. If the register is inaccurate or missing, then significant issues can arise. In extreme cases, if the register has not been drawn up correctly (or at all) then, before errors can be rectified or the register reconstituted, it could be necessary for the company to obtain the approval of the Court. This of course can incur significant cost and time for the parties concerned.
When selling a company, the buyer is likely to be asked for a copy of the statutory books, and will be required to warrant that they have been properly maintained. Solicitors will want to ensure sure the registers are up to date and, most importantly, that the shareholdings are properly recorded. Whilst a buyer may take a view on some historical minor inaccuracies, they need to know they are paying the right people for the shares! Hopefully, the you will know where your statutory books are located, and they have been maintained, but it is not uncommon to find that the registers are not up to date, or completely missing.
If the statutory books have been lost or destroyed, it is possible to have them reconstituted. However, this can be a time consuming exercise, and should be done as soon as possible after the realisation that the company is not compliant.
How we can help
Whether you are considering selling your company, restructuring, or bringing in new members for succession plans, it is important to review and maintain the stat books, and ensure the Companies House filings are up to date. The corporate team at Scott Bailey LLP can help bring your statutory books up to date and, where necessary, help fix any issues. We can also manage a whole range of annual company secretarial matters for you. Get in touch with our corporate solicitors in Lymington, Hampshire for guidance on your company law matters.