Devour your stat books
If there is a part of our job as corporate lawyers which strays from the script of being at the cutting edge of deal-making and company law, it is undoubtedly the concept of statutory registers, more commonly referred to as stat books. Here, Shaun Little looks at what stat books are, when they matter, and what information you need to keep on top of them.
These little-known and much maligned records of company information play a key role in the lifecycle of any business, and I beg a few minutes of your attention on this dry yet crucial topic while I make the ‘comfortable’ ‘uncomfortable’.
What are stat books?
Firstly, to dispel perhaps the most common misconception in relation to stat books, these are not whatever is filed about the company at Companies House. We are talking here about specific legal requirements for a company to produce and maintain records of certain information about its ownership, the persons responsible for the day-to-day running of the company and the people or entities who have certain levels of control over the company. Stat books are required to challenge or validate ownership of shares, complete the legal transfer of shares, exercise legal rights in relation to shares, verify the conduct of directors, secure investment and provide evidence of the company’s history. In short, they are critical to the success of any company.
Stat books used to be predominantly physical books occupying a dusty corner of the filing room. Increasingly these are now digital files which should in theory be produced on incorporation and maintained throughout the lifespan of the company. The issue we often find is that because the incorporation process has been digitised and streamlined, almost anyone can do it. The result is that the stat books are frequently forgotten and never produced in the first place.
When do they matter?
The subject of stat books (or the absence thereof) tends to rear its head at inconvenient moments in the lifecycle of a company. For example, when external third parties such as prospective investors or buyers start to look more closely at a company, they will invariably ask to see up-to-date stat books. The longer the company has been in existence and the more that has happened in its history, the more fiddly, expensive, and time-consuming a job it is for the lawyers to reconstitute the stat books when the urgent and pressing need arises. This is a well-trodden path in our line of work, but that does not detract from this being a pain for the company and its stakeholders when they have a lot on their plate. It also does not give a great impression to the prospective investor or buyer.
What do you need to produce?
Stat books can be broadly split into two categories:
Must have (by virtue of specific provisions in the Companies Act 2006):
- Register of members
- Register of directors
- Register of director’s residential addresses
- Register of secretaries
- PSC register
- Register of charges
Nice to have:
- Register of allotments
- Register of transfers
We do not propose to describe in detail the requirements for each specific register listed above. We will, however, pick up on some of the key points of which company shareholders and directors should be aware.
Register of members
If you take one thing away from this blog, it should be the importance of the register of members. This is the definitive statement of who the members (owners) of the company are and what shares they hold. It will always be a requirement to produce this on any proposed sale of shares, investment, reorganisation etc. A key point to be aware of is that a share transfer is not legally complete until it has been written up in the register of members.
Any allotment or transfer of shares must be written up in the register of members as soon as practicable and in any event within two months of the allotment or transfer having taken place, otherwise the directors and the company will be in breach of company law.
Registers of directors and secretaries
These registers provide an up-to-date list of who is in control of the day to day running of a company. There is a further requirement to maintain a register of directors’ residential addresses, which is exempt from the need to make the stat books available for public review.
One point to note is that private companies are no longer required to have a company secretary. It follows that if a company does not have (and has never had) a secretary, it does not need to produce a register of secretaries. If a company does still have a secretary or has had one in the past, it must maintain a register of secretaries.
This is the most recent addition to the stat book requirements. On and from 6 April 2016, every company must maintain a register of people with significant control. This regime is designed to ensure that every method of holding significant control over a company is transparent to the public.
Register of Charges
The requirement to maintain a register of charges fell away on 6 April 2013 (although charges should still be registered at Companies House). However, if there are charges created before that date, details of these charges must be recorded and maintained in a specific register.
Consequences of non-compliance
The potential consequences for falling short of your stat book obligations are significant. Failure to maintain stat books for a company is a criminal offence by the directors. All current directors of a company in default of its record-keeping obligations are deemed to have committed a criminal offence, the consequences of which can be an unlimited fine and damage to the reputation of the directors and the company.
Separately, members can request to inspect statutory registers on 10 days’ notice (sometimes shorter). The relevant company will then have to make registers available for inspection and copying on short notice. Failure to comply with such a request is also a criminal offence.
We’ll finish with a few top tips for keeping on top of your stat books:
- Make sure the stat books exist for your company and meet the requirements for information set out in the Companies Act 2006. If they do not, seek legal advice to assist with getting them into shape.
- Maintain your stat books as you go. This will save time and money in the long run.
- Make sure the information in your stat books and on Companies House matches. This will save time and avoid expensive corrections to one or both sets of information down the line.
This article is not provided as advice and should not be relied upon as such. Should you require legal advice from our corporate team, email us at Hello@beyondcorporate.co.uk
By Shaun Little