What are statutory books?
A business’s statutory books contain the records of those who are the directors, secretaries and persons of significant control of a company and, most importantly, shareholders are in a company. A company’s statutory registers can be kept and maintained in hard copy or in an electronic format, as long as the requirements of the Companies Act 2006 are met.
The registers which the Companies Act 2006 recognises as ‘statutory registers’ include the register of members (which lists a company’s shareholders), register of people with significant control, register of directors, register of directors’ residential addresses and register of secretaries. There are additional registers which a company can keep in order to assist with record keeping, such as a register of allotments and a register of transfers, but these are not statutory registers.
As a matter of law, the register of members evidences who the shareholders of a company are, and what shares they hold. Consequently, it is really important that the shareholders are correctly listed in the register of members.
A company’s confirmation statement records that I’m a shareholder – is this sufficient evidence of legal ownership of the shares?
The short answer is no.
It’s really important not to rely on the information filed in a confirmation statement at Companies House as evidence of a company’s share capital and shareholders. Companies House is merely a record and does not substitute the requirement for a company to keep statutory books.
If a person is recorded as a shareholder on the confirmation statement but is not written up in a company’s register of members, then as a matter of law, that person may not be recognised as a legal shareholder of the company.
The importance of statutory books and records if you’re preparing for a sale of a company
As part of the due diligence process in any company sale, one of the key areas that a purchaser’s solicitor will be interested in is the statutory books and records. As the register of members set out who are the legal shareholders, then the purchaser will want to ensure that the sellers legally own, and therefore have the right to sell, those shares, and may also wish to review historical share transactions.
Ultimately, issues with statutory books can result in indemnities being required, or even in extreme circumstances can affect the sale price, so sorting out any anomalies early on can be invaluable in the long term.
What if a company does not have any statutory books and records or if they are not up to date?
If you are concerned that your company does not have, or has never had, any statutory books and records, or that they may have been lost or destroyed, or you are concerned that they may not be up to date, I would recommend that you get in contact with our Company Secretarial team.
Our specialists will be able to guide you in relation to the options, for example by way of updating or reconstituting the books, either with supporting documentation or by way of a Court order. We have a wealth of experience in dealing with these types of matters and can help you find a way forward.
How Moore Barlow can help you
If you are concerned about your statutory books, contact our corporate company secretarial team who will be able to guide you through the process.