Pharmacy Company Sale - Why are Statutory Registers so important?
Whether you own a pharmacy company or you’re in the process of selling your shares in a pharmacy company, the importance of having and maintaining the company’s statutory registers cannot be overlooked.
The statutory registers, commonly referred to as the statutory books or statutory registers, of a company are extremely important. Every company is required, under the Companies Act 2006, to maintain certain registers regardless of whether the company is privately owned or publicly traded.
Statutory registers are extremely important because they provide the historic and current record of a company’s ownership and all persons responsible for controlling the company and its associated business. Any changes to the information kept in a company’s statutory registers must be updated to ensure its accuracy on any given day.
The Companies Act 2006 states that every company must 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 (a new requirement which came into effect on 6th April 2016). In addition, details of any share allotments and transfers, shareholders’ agreement, 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.
The statutory 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 at that address 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 under the Companies Act 2006 as is a failure to comply with a valid request to inspect the statutory registers.
Whilst the maintenance and record keeping of internal statutory registers is somewhat of an archaic requirement, it remains a fineable offence not to comply with the Companies Act 2006. Depending on the information that is missing from the statutory registers, the company and its directors could be fined up to a maximum of £5,000. In addition, a 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 and a further fine will accrue daily until corrected. Whilst these more serious consequences are far less common, it highlights some of the risks that are not always considered.
Prima Facie Evidence
Notwithstanding the potential fines highlighted above, 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, then this can cause undesired knock-on effects. If the registers have not been drawn up correctly then, before any errors can be rectified or the register reconstituted, it may be necessary for the company to obtain the approval of the Courts. Not only is this an unwelcome burden if the company is in the process of being sold but any associated Court application to remedy any defect in the registers is likely to be expensive and time consuming.
Not only is maintaining the above registers a legal obligation but 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 and to enter into the transaction that is contemplated. 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 and failure to supply these could delay the sale and incur time and money being spent on the reconstitution of the registers.
It’s 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 under the Companies Act 2006. Whilst almost all information contained within the registers is reported in annual confirmation statements (previously known as annual returns) and contained on the company’s public register at Companies House, 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 and simply provides a snapshot of a company’s details on one particular day of the year.
Despite the legal requirement and vital importance of maintaining company registers, the reality is that many directors remain unaware of this corporate compliance duty, whilst others simply forget to maintain the registers to ensure that they remain accurate and up to date. 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.
Even if you are not looking to sell your company, it is important to keep your statutory books up to date. 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, then its worth contacting a corporate law specialist to assist.
This article was first published on P3 Pharmacy. 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 please contact your usual Charles Russell Speechlys contact.