What are they, why should your business have them and what can you do if your business doesn’t have them?
A company’s statutory books, also known as statutory registers, contain key information about the company. As the name suggests, they are required to be maintained by law and failure to maintain them can have significant implications for the company’s officers and shareholders as well as the company itself.
What are statutory books?
As a bare minimum, statutory books should contain the following registers of information:
1. register of directors;
2. register of company secretaries, if a company secretary is appointed;
3. register of directors’ residential addresses;
4. register of members, also known as the register of shareholders for companies limited by shares;
5. register of persons with significant control;
6. register of charges, if the company is subject to charges created prior to 6 April 2013;
7. register of charge holders; and
8. register of interests in shares disclosed, if the company is a public company,
as well as copies of all directors’ service contracts or memoranda of terms and records of resolutions and shareholder meetings.
If hard copy books are held, they should be held at the company’s registered address or single alternative inspection location (SAIL). If the latter, the address at which they are kept must be notified to the Registrar of Companies within 14 days of the move. If electronic books are held, they should be readily accessible at the same address or, subject to the limitations below, at Companies House online.
Whilst the option to have records held online at Companies House has lessened the burden on companies to keep and maintain their registers separately, this option:
1. is only applicable to private companies and registers 1-5 above;
2. has the effect of making certain confidential information publicly available; and
3. is less practical, due to the opt in requirements, for companies which have a high turnover of shareholders.
Company legislation contains further detailed requirements relating to the maintenance of statutory registers including precisely what information has to be included in the registers and when they have to be updated with the details of any changes, for example, a company must enter an allotment of shares in its register of members as soon as practicable and in any event within two months of the allotment.
Why should your business have statutory books?
Some of the main reasons that a company should have statutory registers are:
1. It’s the law: failure to keep statutory books in accordance with the various associated legal requirements is an offence by the officers of the company and, in most cases, the company itself.
2. Right to inspect: whilst such requests may not be a common occurrence, members of the public have a right to request to view copies of a company’s statutory registers, and those registers, bar the register of directors’ residential addresses, must be available for inspection at the company’s registered office, SAIL address or at Companies House online.
3. You are selling the company: in the context of a share sale, a well-informed buyer, will more often than not request to view the statutory registers in the early stages of the transaction, and any inaccuracies within can give rise to delays while further queries are raised or incorrect or out-of-date information is addressed. Typically, sellers are required to give warranties to the buyer in the share purchase agreement that the statutory registers are accurate and have been properly maintained. There could also be requests by the buyer for more specific warranties and indemnities to be included in the share purchase agreement relating to any inaccuracies.
4. The shareholders need to be registered: its important that the shareholders are included in the register of members, so they have the full benefit of the rights attaching to their shares. Only the registered shareholders have the legal title to the shares and therefore the right to vote and receive dividends and other economic returns in respect of them.
5. The court can make you: an affected person can apply to the court for rectification of the register of members if the name of any person is wrongly entered in or omitted and the court may order both the rectification of the register and that the company pay damages to the affected person.
What can you do if your business doesn’t have them?
Whilst many companies deal with the upkeep of their statutory books internally, if these have been lost or destroyed, outsourcing updating or reconstitution of the books is common.
In light of the implications of failing to keep the books up to date, professional assistance to update or reconstitute your business’s statutory books should provide you with the peace of mind that they meet the statutory requirements. Particular care should be taken relating to the register of members where, generally speaking, the directors of a company may rectify the register of members without any application to the court if there is no dispute and the circumstances are such that the court would order rectification, but to remove a person from the register who continues to claim that they are a member would require a court order.
Kuits can deal with your queries in relation to the requirements relating to statutory registers or with the updating or the reconstitution of statutory books, including in the run up to a share sale.