Corporate mistakes your business may have made

...and what you should do about them.

Corporate requirements can be fiddly and, sometimes, unintuitive. It is easy for businesses to trip up on corporate issues. In this series we look at 10 of the most common corporate mistakes companies make, and, more importantly, what they should do about them.

When does it happen?

Every UK company must keep statutory registers (sometimes called “company books”). In days past, these would have been in a leather-bound book in a dusty cupboard, but now, more often than not, they are kept in electronic form. Statutory registers include registers of “members”, “directors”, “directors’ residential addresses” and “persons with significant control”. These are entirely separate to the information publicly available on Companies House (unless a company elects for the registers to be kept publicly on Companies House which remains unusual). Despite common practice to the contrary, the registers technically cannot be re-created without going to court.

Many companies simply don’t know they need to have these statutory registers or have bigger priorities. Companies often rely on a “cap table” which, although much more user-friendly, isn’t sufficient and won't comply with the Companies Act requirements.

What mistakes are made? 

Registers are wrong, incomplete, out-of-date or lost (or a combination).

Why does it matter? 

Technically, it is an offence not to maintain statutory registers, but it is rarely (if ever) prosecuted. The real issues we see are:

  • If someone, with or without merit, questions the company’s shareholding, the company cannot use the statutory registers as evidence.  
  • On a future sale, a buyer may become nervous about a company’s share history. Being certain that they will be (a) acquiring 100% of the shares and (b) acquiring shares from the people who have the right to sell them will be a key priority for a buyer. They will likely require additional indemnities etc. which sellers may not be keen to agree to. In an extreme example, a buyer may pull out of a sale if it can’t get comfortable or insist that the sellers go to court to get them sorted (which may cause delays / be expensive).

What can you do about it? 

Try to dig out your registers. If there are issues, consider (with advice) what the appropriate action is. If there are uncertainties around shareholdings, in some circumstances, it may be appropriate to go to court, but legal advice should be sought first.

Interested in reading what other mistakes you business may have made? You can read the full article with #1 – 10 here.