If not properly kept and maintained, statutory books and records could cause unanticipated anxiety for company directors and shareholders alike.
Companies are legally required to keep and maintain statutory books and records. Certain of such of such information is also required to be made available for public inspection. However, company directors sometimes overlook such administration until they are called upon to produce their company’s statutory registers.
A private limited company may unexpectedly receive a request to inspect such information from any of its shareholders, directors, or members of the public. Companies may also be required to produce certain of their statutory registers to support an application for institutional financing or otherwise in compliance with financial covenants.
Stakeholders will also want to analyse a company’s statutory registers in connection with the exploration of potential investment opportunities, incentivisation plans (such as the grant of share options) or company sale. A request to inspect a company’s statutory registers is also a common due diligence enquiry raised in any M&A transaction.
Whatever the situation, a non-existent, incomplete, or inaccurate set of statutory books could be problematic for a company’s directors and a costly exercise to set right.
Failure to keep and maintain certain information within a company’s statutory books and records is also an offence, punishable by fine, committed by the company in question and every officer who is in default.
Commercially, failure to have a properly constituted set of statutory books and records could deter a nervous investor, derail of potential company sale (or impact completion timetabling), or hinder the implementation of an incentivisation scheme and any assessment of the impact of anti-dilution protection.
What are a company’s statutory books?
Think of a company’s statutory books and records as its DNA. They comprise a collection of registers and information required by the Companies Act 2006 (“CA 2006”).
As at the date of publication, a private limited company’s statutory books comprise the registers and information referred to in the first column of the following table. Pursuant to the Economic Crime and Corporate Transparency Act 2023 (“ECCTA”), with effect from a date to be appointed, private limited companies will no longer be legally required to keep the registers identified by a tick (P) to in the second column.
Notwithstanding the removal of the statutory requirement to keep the registers where a tick (P) appears in the second column of the following table, private limited companies will remain legally obligated to provide up-to-date information about their statutory directors, secretaries (if any) and persons with significant control (“PSCs”) to Companies House. Therefore, companies and their officers will need to be vigilant in the timely filing of accurate information with Companies House to avoid criminal exposure and fines.
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Registers a company must have as at the date of publication |
Registers a company will not be required to keep under ECCTA from a date to be appointed |
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Register of directors |
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Register of directors’ residential addresses |
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For companies that have or have had or are required to by their articles of association to have a company secretary, a register of secretaries. |
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Register of members |
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Register of PSCs |
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Register of charges in respect of charges created prior to 6 April 2013 |
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Register of allotments of debentures |
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Copies of all directors’ service contracts or memoranda of terms |
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Records of resolutions and shareholders’ meetings |
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Minutes of directors’ meetings |
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What are a company’s records?
A company’s records are broadly defined as any register, index, accounting records, agreement, memorandum, minutes, or other document required by the Companies Acts to be kept by a company and any register kept by a company of its debenture holders.
What additional registers could a company keep by way of good practice?
Although there is no legal requirement to do so, it is good practice for private limited companies to keep and maintain the following additional registers:
- register of applications and allotments of shares
- register of share transfers
- register of share certificates
- register of debenture holders – whilst there is no statutory obligation to have such register, if a company chooses to have it, the company is legally required to ensure that such register is available for inspection (section 743, CA 2006)
- register of charges in respect of charges created on or after 6 April 2013
How to keep statutory books and records
Traditionally maintained in hard copy form, many private limited companies choose to keep and maintain all or parts of such information electronically. If kept and maintained electronically, the information needs to be in a format capable of production in hard copy.
As at the date of publication and with effect from a date to be appointed, ECCTA will remove the ability for private limited companies to elect to keep their register of members on the central register maintained by Companies House. Companies that had previously elected to keep such information on the central register will need to compile their own register of members utilising the information on the central register as a starting point.
Where to keep statutory books and records
Generally, statutory books and records of a company must be kept available for inspection at either the company’s registered office or, where the appropriate election has been made, a single alternative inspection location.
Other notable changes to company records pursuant to the Economic Crime and Corporate Transparency Act 2023
In addition to the changes referred to above, ECCTA also introduces the changes referred to below.
- The Secretary of State has been granted powers to make regulations requiring companies to refrain from using or disclosing individual membership information except as otherwise provided in regulations (section 120A, CA 2006).
- Companies are required to notify Companies House and maintain a registered appropriate e-mail address (being one that in the ordinary course of events, emails sent to such address by Companies House would come to the attention of a person acting on behalf of the company in question) (section 88A, CA 2006).
- Companies are required to have an appropriate registered office (being one where a document addressed to the company and delivered there either by hand or by post would be expected to come to the attention of a person acting on behalf of the company in question and the delivery of documents is capable of being recorded by obtaining acknowledgment of delivery) (section 86, CA 2006).
- As at the date of publication, with effect from a date to be appointed:
- shareholders will be required to provide details of their service (correspondence) address to their companies for the purposes of their entry in the register of members, so that the information of the shareholders of a company aligns with the position for directors and PSCs in this respect (section 113A, CA 2006);
- companies will be required to notify Companies House if they know or have cause to believe that a person has become a registrable PSC or registrable legal entity (“RLE”) but the company in question has not received confirmation of this fact from the PSC/RLE in question (section 790LC, CA 2006); and
- companies will be required to notify Companies House if they know or have cause to believe that there has at some time been a person who is a registrable PSC or RLE and there has ceased to be anyone who is a registrable PSC or RLE (section 790LH, CA 2006).
For further information on some of the other changes to be introduced pursuant to the Economic Crime and Corporate Transparency Act 2023 (in its Bill form) and how to prepare for them, please see Economic Crime and Corporate Transparency Bill | Weightmans.
Statutory books in the context of a company sale
If the shareholders of a company are considering a company sale, they should bear in mind that a prospective buyer is likely to request sight of the company’s statutory books as part its due diligence investigation. The delivery of a company’s statutory books and records usually forms part of the completion deliverables of a seller under the terms of the associated sale documentation. A properly drafted sale agreement will also include warranties and possibly an indemnity that the statutory books and records have been properly maintained and reflect the position of the company immediately prior to completion of the sale.
Significant issues may arise if the information contained in a company’s statutory books and records (for instance, its register of members) is missing, inaccurate or reflects different information to the company’s filing history at Companies House. Correcting certain inaccuracies may require the approval of the Court.
If not addressed early, errors in a company’s statutory books may cause added stress and embarrassment for the company’s directors and shareholders, impact transaction timetabling, and result in unanticipated cost for the company in question
What can you do?
Even if there is no specific transaction on the horizon, take a moment now to see whether your company has a set of statutory books and, if it does, check them to see whether:
- they contain the relevant registers and information;
- the information within them is accurate and up-to-date;
- you need to make any further enquiries of the company’s officers and/or members; and
- whether the information filed at Companies House in respect of the company reflects the information in its statutory books and records.
For further information relating to the importance of filing correct and accurate information at Companies House and the new false statement offences pursuant to ECCTA, please see False or misleading documents or statements | Weightmans.
If your company does not currently have any statutory books and you would like our assistance, please contact the writer.
For further information regarding this article or any of the issues raised, please contact Sumaira Choudary.
