Keeping the company records a regulator expects to see

Aug 29
3 min read

Updated: 3 days ago

Introduction

A company is incorporated, trades for six years, and is then sold. Due diligence asks for the statutory registers, board minutes, share certificates and evidence of several decisions taken along the way. Almost none of it exists.

The company was run perfectly competently. Nobody kept the records because nothing ever required them, and the requirement arrives all at once, at the least convenient moment, when reconstructing six years of documentation is expensive and sometimes impossible. This is one of the few obligations where the cost of neglect is entirely deferred. Nothing goes wrong for years, and then everything is required at once. Some of it cannot be recreated at all, because the people who knew have gone.

1. Keeping the company records a regulator expects is prescribed rather than optional

Establish the actual list.

Company law in most jurisdictions specifies which registers must be kept, what filings are due, and for how long records must be retained. The list is finite and knowable, and most small companies have never looked at it. The obligations are not onerous; they are simply unknown.

2. Maintain the statutory registers

The core requirement.

Members, directors, secretaries and, in many jurisdictions, people with significant control. Registers that were created at incorporation and never updated are the norm, and they are among the first things a buyer or lender asks to see. They are cheap to maintain and conspicuous when absent.

3. Record decisions properly

Board and shareholder resolutions.

Appointments, share issues and transfers, dividends, significant contracts, and changes to the constitution. A dividend paid without the paperwork can be reclassified with tax consequences, which is the most common practical problem here. A dividend without a resolution can be treated as a loan, with tax attached.

4. Keep accounting records that meet the standard

More than the annual accounts.

Records sufficient to show the company's financial position at any time, with sufficient detail to explain transactions, retained for the required period. This is an obligation on directors personally in many places.

5. Meet every filing deadline

Automatic penalties.

Annual accounts, confirmation statements, and notifications of changes to officers, addresses and shareholdings. Penalties accumulate, they are rarely waived, and persistent failure has more serious consequences.

6. Issue share certificates and record transfers

Frequently missing entirely.

Every shareholder should hold a certificate and every transfer should be recorded and, where required, stamped. Companies routinely discover during a sale that nobody can evidence who owns what.

7. Keep the contracts and agreements together

Not a legal requirement and equally important.

Leases, finance agreements, customer and supplier contracts, employment contracts, and any shareholders agreement. These are requested in every transaction and are usually scattered across several inboxes.

8. Store it somewhere the company controls

Not on one person's laptop.

A single location, accessible to more than one person, backed up. Records held only by a departed bookkeeper or a former accountant are effectively lost, and this happens constantly. Companies change accountants and discover that the records went with the previous one.

9. Do it as you go

An hour occasionally, not a project.

Updating a register when something changes takes minutes. Reconstructing several years of registers and resolutions during due diligence takes weeks and costs professional fees. It also slows a transaction at precisely the point momentum matters most.

Ask your accountant or company secretary to confirm what is missing. Most can review the position quickly, and the gap between what a small company thinks it holds and what it actually holds is usually larger than the owner expects.

Conclusion

Treat this as a prescribed obligation whose cost arrives all at once, later.

Find out exactly what your jurisdiction requires, maintain the statutory registers rather than leaving them as they were at incorporation, record board and shareholder decisions properly including dividends, keep accounting records to the required standard and retention period, meet every filing deadline, issue share certificates and record transfers, keep contracts and agreements in one place, store everything somewhere the company controls, update it as things happen, and ask your accountant what is currently missing.