There’s no doubt that running a company can be stressful, often involving juggling many balls at the same time and a seemingly never-ending list of tasks.
So it’s common for CEOs and company directors to delegate the corporate admin to their accountant, book keeper or PA. While understandable, this can result in problems being created further down the line.
What are ‘company secretarial duties’?
At their most basic level, company secretarial duties include the filing of various documents with Companies House as required by law (including your annual accounts and Confirmation Statement). A company also has to keep various statutory registers and these include:
- Register of directors and their residential addresses
- Register of secretaries (if appointed)
- Register of members (shareholders)
- Register of director and member meetings and resolutions
- Register of charges
- Register of persons with significant control (PSC register)
It is also important to ensure these registers are properly maintained and kept up to date when important events happen, for example when a new director is appointed or removed or if shares change hands, the relevant register needs to be updated. It is also necessary to consider whether or not you need to tell Companies House about a change to the corporate structure of your business and file the relevant form, if so.
Although many accountants have access to standard software which they use for filing returns and updating registers, these products can’t ensure the accuracy of the information being provided nor that transactions were properly executed in the first place.
Consequences of neglecting your company secretarial duties
The consequences of not keeping on top of company secretarial duties are two-fold: legal and regulatory, and commercial.
Legally, company directors are required to ensure their company registers are kept up to date and that any necessary submissions to Companies House are made within the prescribed time limit. Failure to file documents on time can result in Companies House issuing fines and, for repeat offenders, has the power to even strike off a company that doesn’t keep its information up to date. Directors in breach of their duties can also be subject to personal fines and even proceedings in the criminal courts, for example if they fail to file company accounts or confirmation statements – although in reality, this is very rare.
Commercially, the consequences can have a much more significant impact. If, for example, there are discrepancies between what’s in the statutory books and what’s recorded on Companies House when you come to sell the company or are trying to secure investment (and often that it the only time any discrepancies will come to light), this can cause delays at best, or at worst can put potential investors off and even scupper deals. At the very least, an investor or buyer is likely to require you to indemnify them against the risk of problems cropping up down the line which may occur as a result of poor record keeping, for example, if a long-vanished shareholder shows up at a future time to claim some of the shares, or if Companies House issues fines for filing failures.
What should I do?
Although it is possible to tidy up statutory books and company records and rectify any issues retrospectively, it is always cheaper and easier (not to mention less stressful) to ensure everything is properly documented and kept in order at the time, rather than at the eleventh hour of a company sale or investment.
Although it is no longer a legal requirement to have a Company Secretary, you should check the company’s Articles of Association as there may be a requirement contained there – this is especially likely if your company was incorporated pre-2006. If the Articles contain such a requirement, you can update them to remove this requirement providing you obtain approval from the shareholders.
Whether you wish to appoint a formal Company Secretary or not, you need to ensure that someone is responsible for keeping the statutory books in order and up to date, as well as ensuring all the necessary Companies House filing, including the annual accounts, confirmation statements and any other filing, is completed within the relevant deadline.
You should also check any charges that are registered against your company, for example if you personally loaned money to your company or secured outside investment. As a matter of good housekeeping, you should remove charges from the register as soon as any loan is repaid. This will help protect your business’ credit profile and ensure transparency for potential investors and other lenders. Similarly, if a lender is registering a charge over your company, it must be registered at Companies House within 21 days in order to be legally binding. This is especially important if, for example, you have personally loaned money to your company as you will want to be able to exercise your security in the event that, for example, the company goes bust.
You should also ensure that board and shareholder meetings are properly and accurately recorded in the minute book, as well as ensuring that you have obtained any necessary board or shareholder consents (known as resolutions) as part of a transaction. While it’s often thought that minute taking is just taking notes at a meeting, that’s not in fact the case and the importance of good minute taking shouldn’t be underestimated. Minutes are considered legal documents for the auditors and will be referred to as evidence of key decisions throughout a financial year. There is also the risk that if a decision is not properly recorded, it may not be binding.
Finally, you need to ensure that all the share register contains full details of all shareholders, as well as details of any share transfers or allotments of shares. It is particularly important to make sure this register is properly maintained and updated every time there is a transfer or allotment as it can be a particularly painful exercise to later go through the entire share history of the company in order to ascertain the correct position. Any potential buyers or investors will want a clear audit trail when it comes to the share history and will want to ensure that the share register is an accurate reflection of the shareholdings at the time. The last thing you want during a transaction process is to forget what happened with previous share transfers (often carried out many years ago) and not be able to demonstrate clearly who now owns a particular class of shares in your company.
We’re here to help
If you need company secretarial support, or if you simply want to find out more about your secretarial obligations, give the Devant team a call. Our dedicated team are on hand to offer user-friendly secretarial advice and services to help support your business.
We also have a full suite of company secretarial services to keep your business ‘clean and tidy’, integrated with our commercial contracting services to ensure any transactions you might undertake are properly documented and executed. Ensuring all of these things (your registers, Companies House submissions, stock transfer forms, contracts, shareholder agreements, Articles of Association, etc) are properly aligned and kept up to date, is a big ask – and one that the Devant team is happy to step up to. Just ask if you’d like a call to find out more.