Company Administration - New Year's Resolution
As we are still in the early part of a new year, here's a little task to put at the top of your to do list(!) which could save your institution hours of digging around in the long term.
Do you know what companies your institution has an interest in? Are you satisfied that all their details are up to date and are there systems in place to ensure they remain up to date? Subsidiary undertakings will be reviewed as part of the annual audit process, as will interests in commercial companies where the university has some carrying value in its shares but what about the little company limited by guarantee that you established a decade ago as part of a public interest venture that never really went anywhere? Has it been forgotten?
Most universities will keep a central list of companies in which the university has a membership or other interest. Why not dig it out and dust it down and check that the details are up to date? If there isn't a central list, maybe now is a good time to pull the information together. No one wants a red notice from the Registrar of Companies informing you they are striking off your company for failure to make the requisite filings. Nor does anyone want to waste hours (and costs) tracking down a former academic who appears to be the remaining sole member of a company you need to dissolve. You can check company details at Get information about a company and can search by company name, company number, officer name and even by registered office.
The Companies Act 2006 requires information about every company's directors, secretary, registered office, constitution and share capital (if it has one) to be kept up to date on the central companies register held by Companies House. The most recent addition to this list (although now not quite so new) is the need to file information about a company's 'persons with significant control' (PSC) (and there are a number of ways to test this). This needs to be filed promptly following any change and not (as some believe) on an annual basis. Any security (in the form of mortgages, debentures or other charges) must also be filed with Companies House in the strict (and relatively short) timeframes and every year the Registrar of Companies will ask the company to confirm its details are up to date in an annual confirmation statement. In theory, all very do-able, as long as the up to date information is making its way to the right people internally to ensure any changes are recorded.
A common oversight arises when a senior member of staff leaves the institution. In some corporate arrangements, the university has a right to appoint a university nominee (often an employee) as a director and/or as a member of a company, for example in a multi-party collaboration or in an educational trust (such as an academy). If the university doesn't have a record of which directors/members it has appointed, that departing employee's removal from the appointment (and subsequent replacement with a successor nominee) may be overlooked. This could be particularly damaging if the university needs to have a presence on the company board or membership to steer policy or exercise voting rights. Whilst usually easily remedied, until it is, the university's influence/oversight over that company could be lost.
Another Companies Act requirement which is often overlooked (and which will be relevant to companies within the university group) is the requirement to keep statutory registers of certain company details and make those registers available for inspection. This is in addition to the filings required to be made at Companies House when company details change. Registers of directors details, the company secretary, members (and details of the shares they hold - if any), debenture holders (if any) and PSCs must be held centrally - in hard copy or electronic form - and must be kept up to date. By default, registers must be held at the company's registered office although the company can opt to hold them at another location provided Companies House is informed of that fact. As an alternative, private companies can elect to keep information on the central Companies House register, rather than maintaining their own registers, by submitting a formal notice of election to Companies House.
The whereabouts and state of the company's statutory registers become quite important when an institution needs to prove its membership in a company or if it is in the process of selling a subsidiary to a third party. In both situations, it is the register of members which evidences who the members of a company are. If there is any doubt and the company's register of members is not up to date (or cannot be located), your institution could end up incurring unnecessary legal fees trying to sort out the dispute or updating the registers (some of which requires the permission of the court to effect).
So dust off that list (or create a new one), make sure those registers are up to date and their location noted, check that the details filed at Companies House details are correct and think about what internal procedures could be put in place to ensure relevant company information gets to the right inbox in a timely manner so that Companies Act requirements can be met. Directors of non-compliant companies can be subject to fines and potentially disqualification for multiple failures. But realistically, it’s the embarrassment factor of not having your governance ducks in a row which is most likely to motivate action.