When asked if you have your company’s statutory books, it would not be unusual for your response to be ‘what are they?’ or ‘I haven’t seen them in years!’ However, under the Companies Act 2006, it is a legal requirement for all companies to keep an up to date statutory book providing a register of the company’s charges, directors and secretaries and most importantly a register of members showing all past and present shareholders together with their historical and current shareholdings. The statutory books also contain a log of all share allotments and share transfers, and can also be a convenient place to store your company’s corporate documentation, such as any certificates of incorporation, board minutes and the articles of association.
Why is a register of members so important?
Firstly, failure to comply could be costly. If the register of members is found not to be up to date, the company directors could find themselves liable for a fine of up to £1,000.
Secondly, it could be of critical importance if the company’s shareholdings are in contention. If there is a dispute over shareholdings there would first be an examination of the company’s register of members in order to try to determine the correct position. Even if your company has always filed an annual return, this only shows the company shareholders at one given moment in the year and does not keep a running record of any ongoing share allotments and/or transfers which take place. It is therefore important that the statutory books are updated as soon as reasonably possible following a change in shareholdings.
Finally, an out of date or missing statutory book could cause problems if you come to sell your company. Statutory books are more often than not a completion deliverable, and failure to supply these could delay the sale, cost money and time due to reconstitution of the records and could result in the buyer requesting the seller to indemnify them for any loss suffered due to incorrectly maintained statutory books.