Legal view: The importance of statutory registers

Whether you own a pharmacy company or are in the process of selling your shares, the importance of having and maintaining the company’s statutory registers cannot be overlooked, writes Tertius Alberts

The statutory registers, commonly referred to as the statutory books of a company are extremely important. Every company in England and Wales is required, under the Companies Act 2006, to maintain certain registers, regardless of whether it is privately owned or publicly traded.

These registers provide the historic and current record of a company’s ownership and all persons responsible for controlling the company and its associated business. They must be updated with any new information to ensure their accuracy on any given day.

Companies are required to maintain a Register of Members, Register of Directors, Register of Directors’ Residential Addresses, Register of Secretaries, Register of Debenture Holders and a Register of Persons with Significant Control.

In addition, details of any share allotments and transfers, shareholders’ agreements, directors’ service agreements, statutory accounts, along with other corporate documentation such as the company’s certificate of incorporation, board minutes, shareholder resolutions and articles of association, should ideally also be stored with the company’s statutory registers. 

Registers should be kept either at the company’s registered office or another single appointed location, which must be notified to Companies House and, in either case, must be made available for inspection by the company’s shareholders, who are entitled to inspect the registers upon request and without charge. A failure to make the statutory registers available for inspection is an offence, as is failure to comply with a valid request to inspect them. 

Avoiding a fine 

Whilst the maintenance and record keeping of internal statutory registers is a somewhat archaic requirement, it remains a fineable offence not to comply with the Companies Act; depending on what information is missing, companies and their directors can be fined up to £5,000.

In addition, failure to maintain a register of members can lead to a fine of up to £1,000 for each person guilty of an offence as well as the company itself. A further fine will accrue daily until corrected.

Notwithstanding these potential fines, detailed and properly made up registers are essential and may be required in a number of instances, such as challenging or validating share ownership, completing share transfers, inheriting shares, exercising legal rights, verifying or contesting officer misconduct and/ or liability, securing investment and providing evidence of a company’s history in order to proceed with the sale of a company. If a company’s statutory registers are inaccurate or missing, this can cause undesired knock-on effects.

If they have not been drawn up correctly, a company may need to obtain approval of the courts before rectifying or reconstituting them – an expensive and time-consuming process, and an unwelcome burden when selling up.

Selling up

It’s not just the legal obligations; having your house in order and maintaining these registers when selling your company is vital. Any purchaser and their legal team will want to inspect the registers to ensure that the proposed sellers have the relevant authority to sell their shares. By law, the register of members is prima facie proof of ownership of the company’s shares. As such, the statutory registers provide any potential buyer with evidence of the company’s share history. Failure to supply these could delay the sale and incur time and money being spent on the reconstitution of the registers.

It is a common misconception that the information available on the company’s public records at Companies House is suitable for the purpose of providing evidence of the company’s share history and compliance with its record keeping requirements. While most of the information in the registers is reported in annual confirmation statements and the company’s public register, companies do not have to report share transfers until the next confirmation statement is due.

Therefore, certain details on the public records at Companies House may not always provide an accurate reflection of a company’s current position. 

Peace of mind

Despite the legal requirement and vital importance of maintaining company registers, in reality many directors remain unaware of this corporate compliance duty, while others simply forget. Regardless of the reason, failing to keep statutory registers is an offence that can lead to unwanted penalties. 

If, as a director, you realise that you have not been keeping company registers, or you discover that they are inaccurate or not up to date, you must rectify this oversight as soon as possible. Likewise, if your original company registers have been lost or destroyed, you should seek to reconstitute them as soon as possible. Depending on your company’s history of ownership and control, this should be a relatively straightforward process.

If you are thinking of selling your company at some time in the future, or just want the peace of mind that your company’s registers are accurate and up to date, it is worth contacting a corporate law specialist to assist.

The above is a general overview and we recommend that independent legal advice is sought for your specific concerns. If you require further information in relation to the points raised in this article, you should contact Tertius Alberts, who is a corporate solicitor and member of the Pharmacy Transactions Team at Charles Russell Speechlys LLP. Tertius can be contacted on tertius.alberts@crsblaw.com