The Importance Of Maintaining A Company's Statutory Registers

Mention a company’s statutory registers to a business owner, and it is not uncommon for a confused look to appear. This can mean that (1) they are not aware of what the statutory registers are, (2) the statutory registers are lost or (3) the statutory registers are sitting on a shelf somewhere and have not been touched for some time or since the company was incorporated.

What Are Statutory Registers?

A company’s statutory registers are a collection of registers which are required to be kept under the Companies Act 2006 and sets out information on the company (ideally from incorporation until the present day) in respect of:

• members of the company and the shares they held or currently hold (section 114, Companies Act 2006). In addition to the register of members, companies may wish to maintain a register of share allotments and a register of share transfers;
• directors and secretaries of the company (sections 162 and 175, Companies Act 2006); and
• mortgages and/or charges (section 877, Companies Act 2006).

The statutory registers were traditionally kept as a bound book or in a ring binder but, with the advance of technology, they can also be maintained in electronic format. The statutory registers should be kept at the company’s registered office but may be kept at an alternative inspection location (such location to be notified to Companies House). As such, many companies now have statutory registers kept by one of their professional advisers such as their accountants or solicitors.

The Importance Of Statutory Registers

First and foremost, the statutory registers are vital as the Companies Act 2006 requires that they should be maintained, kept up-to-date, and made available for public access. The register of members is of particular importance as it, and not a share certificate or the form AR01 (annual return), is the primary authority to establish who the members of the company are and the number of shares held by each member. Failure to maintain the register of members could result in the company and its directors being liable for an initial fine plus a further daily fine for each day the company fails to rectify the breach. It is also an offence if a request to view the statutory registers is received by the company and it is not complied with within 5 working days.

Statutory Registers And Selling Your Business

It may come as a surprise to company directors that they are in breach of the Companies Act 2006 for failing to maintain the statutory registers. Contrary to popular belief, the filing of the form AR01 with Companies House is a separate obligation and not a substitute for maintaining the statutory registers.

This issue may first become evident in the context of a sale of a company’s shares when the buyer’s solicitors ask to inspect the statutory registers. If there aren’t any registers or if they have not been kept up to date, then the company must reconstitute the statutory registers as soon as possible. Depending on the complexity of the company’s history of ownership and the relationship between the current directors and/or shareholders, this could be a fairly straight forward exercise or one that requires the intervention of the courts. In any event, the statutory registers must be reconstituted before the company is sold to the buyer. If the statutory registers cannot be fully reconstituted because there are gaps due to insufficient historical information, the sellers may be required to indemnify the buyer for any loss they would suffer as a result of the statutory registers not being properly maintained whilst the company is under the seller’s ownership. Directors should therefore ensure the company’s statutory registers are up-to-date and that they have been properly maintained at all times and it is advisable to ensure this is in hand before commencing any process to sell the company.