All companies that are incorporated in England and Wales are required under the Companies Act 2006 (the “Act””) to keep certain legal and financial records.
In this post we consider 6 key legal record keeping obligations that all companies should adhere to or risk receiving a fine.
The Act states that all companies must produce and keep up to date the ‘Statutory Register’.
The Statutory Register is a collection of records relating to the company that should be maintained in order to provide a historical record of key legal matters relating to the company.
Our own experience in advising companies over the last 25+ years is that most small to medium companies to not adhere to this requirement. The simple reason is that they are not aware of the record-keeping obligations.
Whilst it is an offence not to keep an up to date Statutory Register the reality is that no doing so only gives rise to an issue when a problem arises. This usually happens when a business seeks to raise money or complete a share sale.
At that point the investor or buyer will want to make sure that you have met the record-keeping obligation. Bringing the Register up-to-date can be time consuming, potentially costly and will certainly delay closing the deal. So this is not something a founder wants to happen.
In addition there is the possibility that the failure to maintain the Statutory Register comes to the attention of the authorities.
In that case the company will be liable to a fine of up to £5,000 and the directors of the company could potentially be banned from being directors. A potential disaster for any founder!
Statutory Register – what are the record-keeping obligations?
Under the Act a company must keep the following records in the Statutory Register:
- A list of all Directors (section 162);
- A list of all Directors’ residential addresses (section 165);
- A record of the company secretary (if the company has one) (section 275);
- A list of all shareholders (section 113); and
- A list of any Charges registered against the Company (section 876).
The sixth item that you must include in the Statutory Register is a list of ‘persons with significant control’. That means a list of all shareholders that own, or control, more than 25% of the shares in the company. The Small Business Enterprise and Employment Act 2015 is the legislation requiring this.
Where Do You Keep These Company Records?
Traditionally these 6 company records would be kept in a physical document called the company’s Statutory Register (or ‘Company Books’). This was a hard copy register that you had to keep at the Company’s registered office.
Usually this was in the form of a loose leaf ring binder folder. Instead, you could keep the registers in an electronic format on a computer.
However since the Small Business Enterprise and Employment Act 2015 came into force it is sufficient to keep these records on the Company Register that is maintained at Companies House. You do this by sending the relevant notifications to Companies House using their prescribed forms.
How Long To Keep These Company Records?
A question that frequently comes up is how long you need to keep these company records? The answer is that you need to keep them for the life of the company.
If you dissolve the company at some point and remove it from the Company’s Register (which Companies House maintains), then you no longer need to keep these records.
For more information on the legal obligations of a business see our detailed guide, which provides a full breakdown of what you need to do to make sure your business is legally compliant.