Under company law there are certain registers that a private limited company is required to maintain and keep up to date. However, many companies either do not have statutory registers or have not maintained them. This is often the status quo but can cause problems, costs and delay if you are thinking of selling your company.
What are these registers?
There is certain key information about a company that is required to maintain and keep up to date including in relation to its directors and shareholders. These registers evidence your company’s current constitution, history and usually in the form of books / files or registers either in paper or electronic format. Historically, they would be held by your law firm or accountant who would routinely update them for you or may carry out company secretarial functions on your behalf.
It is important to note that these distinct from the records and filing at Companies House. This information can be obtained online.
Whilst there are certain notices that are required by law to be filed at Companies House, there are also legal requirements to update the company registers. Failure to do so is in fact an offence by the directors and secretary (if there is one) which can attract a fine.
What is in these registers?
- Register of members/shareholders,
- Register of directors,
- Register of directors’ residential addresses,
- Register of secretaries,
- Register of people with significant control (PSC) and
- Register of charges (legally required for charges created before 6th April 2013).
In addition to the company registers there is a requirement for the maintenance of company records which includes accounting records, minutes, resolutions, and other documents.
Why are they important?
Legally the register of members is the definitive record of the shareholders of the company who owns it and who is entitled to exercise the legal rights that attach to the shares.
If you are selling or looking to sell your company, then one of the early enquiries will be to require sight of the up to date company registers. It usually also requires a completion condition to hand over up to date-maintained registers.
Failure to have up to date statutory books in one of the most common occurrences in a company sale that can cause delay and costs. If you have not kept your records up to date then you may be required to reconstitute the records which can be costly both in terms of time and money.
The most common errors that are found in company registers include:
- Differences between the registers and the records at Companies House often in terms of shareholdings, classes of shares or share values
- Shareholders being entered into the register of members prior to receipt of a stamped stock transfer form
- Incorrect entries in the register of members on a company buy back of shares. Often not updating the departure of the seller and/or entering the company as a member (when the shares have in fact been cancelled)
- Out of date register of directors
- No PSC registers
Our team of corporate lawyers at FDR Law regularly assist and advise businesses on their constitutional documents and legal requirements relating to the maintenance of statutory registers and also on sales and purchases of companies.
If you are considering selling your business or concerned about legal requirements, please contact our Head of Corporate, Margaret Evans at Margaret.firstname.lastname@example.org or ring Margaret on 01925 230 000.
This article does not present a complete or comprehensive statement of the law, nor does it constitute legal advice. It is intended only to highlight issues that may be of interest. Specialist legal advice should always be sought in any particular case.