The Crucial Role of Statutory Registers

by Alan Marks | Dec 1, 2023 | For Clients

We have seen a few firms face delays and issues recently, when coming to sell their businesses. These have been caused by problems with their Statutory Registers. For some reason it is currently a hot topic, we honestly do not know why, but it is, so be ready and expect a push back on what documents you supply. It is one of the things you are going to be asked for, and like warranties and indemnities, this is a non-negotiable request from the buyers and their solicitors.

In essence, Statutory Registers are official documents that companies are mandated to keep under the Companies Act 2006.

Statutory Registers under the Act play a vital role in corporate governance. These registers serve as a repository of essential information about the company, its structure, and key transactions. The Act specifies various registers that companies are required to maintain, each catering to a specific aspect of corporate governance.

These official documents, include:

Maintaining up-to-date and accurate Statutory Registers is not just a regulatory formality; it becomes especially crucial when selling a business. Confirmation Statements and the information found on Companies House cannot be relied upon as being the most up-to-date position of a company.

I’ve highlighted a few areas of concern below:

Due Diligence: –Prospective buyers conduct thorough due diligence before acquiring a business. They scrutinise various aspects, including corporate governance and legal compliance. Up-to-date statutory registers provide a clear and accurate picture of the company’s structure, ownership, and potential liabilities, facilitating a smoother due diligence process.

Legal Compliance Assurance:
Buyers seek assurances that the business being acquired adheres to all legal requirements. Updated statutory registers demonstrate the seller’s commitment to compliance with company law.

A failure to present accurate and current registers may raise concerns about the seller’s governance practices and potentially delay or derail the sale.

Smooth Transition of Ownership:
When a business changes hands, there is a transfer of ownership and responsibilities. Updated registers, especially the Register of Members and Register of Directors, ensure a seamless transition by providing clarity on the current ownership structure and the individuals involved in the management.

Avoiding Disputes and Legal Issues:
Outdated or inaccurate registers may lead to disputes during or after the sale. Incorrect information about shareholders, directors, or charges on company assets can result in legal challenges.

By keeping registers current, sellers mitigate the risk of post-sale disputes and legal complications that could tarnish the transaction.

Enhancing Valuation:
A well-documented and up-to-date set of statutory registers can positively impact the valuation of the business. or at least help to maintain an offer that has been made. It provides confidence to the buyer regarding the accuracy of financial information and reduces uncertainty.

Maintaining Credibility:
Credibility is paramount in business sale transactions. A seller with meticulously maintained statutory registers demonstrates professionalism, transparency, and a commitment to sound corporate governance. Credibility instils confidence in the buyer, fostering a positive perception of the business being sold.

Facilitating the Sale Process:
Selling a business involves numerous negotiations, disclosures, and documentation. Updated statutory registers expedite this process by providing readily accessible and accurate information.

I cannot emphasise enough how efficiency in the sale process is crucial for both parties, reducing the time and resources required, I’m referring here of course to legal fees which as we all know can escalate quite quickly when delays occur.

In summary, when selling a business, up-to-date statutory registers play a pivotal role in instilling confidence in potential buyers, streamlining the sale process, and minimising legal and financial risks.

I can share with you that on a few deals, we have been going round in circles about these, and in one case the solicitors for the seller said “Don’t worry we will put this all together for you for a fee of £5,000 plus Vat”- Ouch!

So what to do?
Like with most things, relating to a sale, I always recommend planning ahead. Even if you are not thinking of a sale, getting your Statutory Registers in order now is a good idea.

If you are about to sell, make sure you have these all ready, and as soon as you have engaged a solicitor ask them to confirm that they are happy with your version of the Statutory Registers. Do not be surprised if they say they are not happy with you/your accountants records.

If they are not, ask them what they think is missing and what they will charge to put it right?

If you want an independent third party to help you, contact us, and we can introduce you to a company who can produce your Statutory Registers for £500 + VAT based on the currently available information. Obviously if there is any remediation work to be done the cost will increase, but in my experience this service is still nowhere near as costly as some of the charges I’m hearing being quoted.

If you need any assistance, please do get in contact.