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Setting up a business involves complying with a range of legal requirements. Find out which ones apply to you and your new enterprise.

While poor governance can bring serious legal consequences, the law can also protect business owners and managers and help to prevent conflict.

Whether you want to raise finance, join forces with someone else, buy or sell a business, it pays to be aware of the legal implications.

From pay, hours and time off to discipline, grievance and hiring and firing employees, find out about your legal responsibilities as an employer.

Marketing matters. Marketing drives sales for businesses of all sizes by ensuring that customers think of their brand when they want to buy.

Commercial disputes can prove time-consuming, stressful and expensive, but having robust legal agreements can help to prevent them from occurring.

Whether your business owns or rents premises, your legal liabilities can be substantial. Commercial property law is complex, but you can avoid common pitfalls.

With information and sound advice, living up to your legal responsibilities to safeguard your employees, customers and visitors need not be difficult or costly.

As information technology continues to evolve, legislation must also change. It affects everything from data protection and online selling to internet policies for employees.

Intellectual property (IP) isn't solely relevant to larger businesses or those involved in developing innovative new products: all products have IP.

Knowing how and when you plan to sell or relinquish control of your business can help you to make better decisions and achieve the best possible outcome.

From bereavement, wills, inheritance, separation and divorce to selling a house, personal injury and traffic offences, learn more about your personal legal rights.

Role of the company secretary

The company secretary acts as the chief administrative officer of the company, and shares various responsibilities with the directors under the Companies Act. Private companies are no longer obliged to appoint a company secretary, although most companies continue to do so.

It is in everyone's interest to ensure that the company secretary is the right person for the job, understands what is involved and gets adequate support in doing it.

The best person

Companies House filings

Further legal requirements

Other responsibilities

Complementary roles

What could go wrong?

1. The best person

You are normally appointed by the directors

  • Unlike public companies, private companies are not required to employ company secretaries.
  • In a new company, the company secretary is automatically appointed by being named in the application to register the company.
  • You do not need formal qualifications to act as company secretary to a private company. The requirements are more stringent for public companies.
  • Whether the company for which you are working is private or public, you must understand your obligations as an officer of the company. The Companies Act contains many requirements and around 150 offences.
  • In many smaller private companies, the company secretary is also a director.
  • Like the directors of the company, company secretaries who fail in their duties can be prosecuted. (See What could go wrong?)

Some people cannot be appointed as the company secretary

These include:

  • the company’s auditor;
  • undischarged bankrupts (unless given court leave).

The company secretary may delegate work to a third party

  • The company secretary remains responsible and must check and sign paperwork.
  • You can use a professional chartered secretary, the company’s accountant (but not auditor), a solicitor or another provider of company administration services.
  • This typically costs between £300 and £1,000 per annum for a small company.

2. Companies House filings

As company secretary, the task of filing the company documents at Companies House will normally be delegated to you.

You file details of significant changes in company share capital or administration

  • For example, information on any new shares allotted must be notified within 28 days. Appointments, resignations and changes (eg home address) of directors or secretaries must be notified within 14 days.
  • When making changes, the company’s articles of association should be consulted to see if specific procedures need to be followed.

You submit a confirmation statement every year

  • This confirms that the information Companies House holds about the company is accurate. The statement must be filed within 14 days of the end of the review period.
  • Before filing the confirmation statement, you should check the information held by Companies House. If any information is out of date, you need to update it at the same time or before submitting the confirmation statement.
  • The confirmation statement replaced the annual return from June 2016.

You must file various other documents

These include:

  • A directors’ report giving the name of the company secretary or director approving the accounts.
  • Financial statements, including details of the company’s assets and liabilities. Micro-businesses are only required to produce a simple balance sheet and profit and loss account.
  • A company is a micro-business if it satisfies any two of the following: ten employees or fewer; turnover of not more than £632,000; balance sheet of not more than £316,000.
  • An auditor’s report, unless the company qualifies for the small companies exemption. A company is small if it satisfies any two of the following: a turnover no more than £6.5 million; a balance sheet no more than £3.26 million; 50 or fewer employees.
  • All companies other than those that qualify for the small companies exemption must also produce a strategic report which includes a business review (previously part of the directors’ report).
  • A register of people with significant control. For example, anyone who owns more than 25% of the shares or 25% of the voting rights, or can appoint the majority of the directors.
  • Quoted companies are also required to report on: the numbers of men and women employed within the business; their strategy and business model; their greenhouse gas emissions; human rights issues and policies and the efficacy of those policies.

The timing is prescribed by law

  • The first confirmation statement can be filed at any time within 12 months of incorporation. Subsequent returns must be filed at intervals of not more than 12 months.
  • The first register of people with significant control is included with the first confirmation statement. Details of any changes must be filed at the same time as subsequent confirmation statements.
  • The first annual accounts will have to be filed not more than 21 months after the formation of the company (18 months for a public company).
  • Subsequent accounts must be filed within nine months of the accounting year end (six months for a public company).

Non-compliance with the filing requirements can be expensive

  • The company may face late filing penalties. Directors can face personal prosecution and fines.
  • The company can be struck from the register of companies. Restoration can be a costly procedure.

3. Further legal requirements

You carry much of the responsibility for maintaining the company’s existence as a legal entity.

You are responsible for establishing and maintaining the company’s registered office

  • This is the address for any formal communications.
  • The registered office must be a physical location, and not just a post office box.
  • It need not be the place at which the company’s business is normally conducted, but you must make provision for ensuring you receive documents sent there.
  • The company’s name must be shown outside the registered office and every
other place of business.
  • Shareholders (and others) have the right to inspect various registers maintained by the company at the registered office or other convenient locations.
  • You must notify Companies House of any change of your registered office address, using the appropriate form.

The company’s business stationery must include appropriate details

  • All business stationery must carry the company’s name, registered number, country of registration and registered address.
  • These details must also appear on your company website, emails and order forms.
  • There is no obligation to have directors’ names on letterheads. But if you choose to list directors, you must list them all.

The company’s statutory books and records must be maintained

The directors usually delegate responsibility to the company secretary. The statutory books and records should include:

  • a register of present and past directors and secretaries;
  • a register of all shareholders, past and present, and their share holdings;
  • a register of any charges on the company’s assets;
  • minutes of general meetings and board meetings;
  • a register of the debenture holders (typically banks).

You are normally required to ensure the security of the company’s legal documents

These documents include:

  • the certificate of incorporation, recording the formation of the company;
  • the memorandum and articles of association (the company’s constitution);
  • share certificates and stock transfers;
  • the company’s seal (if it has one);
  • certificates of the company’s change of name (if any);
  • directors’ service contracts (if any).

4. Other responsibilities

You normally take responsibility for summoning meetings of the directors and shareholders, and for ensuring that the proceedings are properly recorded.

You must arrange a board meeting, if any director asks for one

  • You must give reasonable notice to the other directors, often 14 days, otherwise the proceedings may be invalid.
  • You must take formal minutes, and keep them in the company’s minute book. Once approved, they should be signed by the chairman of the meeting, or the chairman of the next meeting of the board. They form the only official record of the business transacted.

AGMs (annual general meetings) are no longer obligatory for most private companies

  • A company must hold an AGM if it has traded shares, if a director asks for one or if 5% of members request one.
  • If there is to be an AGM, you must send written notice to the directors and shareholders usually 14 days in advance (21 days for a public company with traded shares).
  • If there are any special resolutions, you must file them with Companies House.

5. Complementary roles

Particularly in small companies, the company secretary is often expected to take on other duties as well. At all times, the company secretary’s principal responsibility is to the directors.

It may make sense for you to take on other administrative responsibilities

For example:

  • PAYE and payroll;
  • VAT registration;
  • insurance and pensions;
  • managing the company’s premises.

Company secretaries are often asked to take on responsibility for legal matters

  • You might be required to advise directors on their duties and to ensure they comply with the articles of association and corporate and other legislation, such as data protection and health and safety.
  • You might be asked to act as a signatory on behalf of the board. For example, to sign leases or, more generally, on the bank account and statutory documents.
  • You might be asked to take responsibility for arranging adequate insurance to protect the company and the directors. Company secretaries are also frequently involved in negotiations with outside advisers, including accountants and lawyers.
  • People dealing with the company are entitled to assume the secretary has authority to agree contracts on behalf of the company.
  • Make sure that you do not exceed the actual authority given to you by the directors, when asked to agree a contract on your company's behalf.

Making the most of it

In a small company, you may rely heavily on outside experts

  • Your role may be restricted to delegating and monitoring their performance.
  • Ensure that official communications are quickly passed to your advisers.
  • Inform your advisers in advance if you want to make any changes to the share capital or administration of your company (eg issuing new shares or appointing a new director).
  • Check documents carefully and sign and return them as soon as possible.

In a larger company, you may want to take a more proactive role

  • Ensure that you are aware of the main statutory requirements for filings etc.
  • Timetable annual events and provide warnings to others as necessary.
  • Educate others about the importance of what you do.

Make sure you get any training you need

  • It pays for an inexperienced company secretary to receive some formal training before taking on the job. This will enable the company secretary to carry out his or her responsibilities properly.

6. What could go wrong?

The job of company secretary involves you in serious potential liabilities

  • In practice, it is the qualified company secretaries employed by public companies, with employment contracts which spell out all the responsibilities, who are most likely to be prosecuted for any serious wrongdoing.
  • An unqualified company secretary employed by a small private company is unlikely to be prosecuted unless he or she is knowingly involved in serious wrongdoing.
  • In any company, it is the company’s directors who have primary legal responsibility.

You could be personally responsible for failures to comply with the Companies Act

  • Directors and company secretaries could be held jointly liable for failures (except for filing company accounts, for which directors alone are responsible).
  • You could incur fines or even criminal charges for failure to file the confirmation statement or accounts.

You could be disqualified, prosecuted or made liable for company debts if the law is broken

  • You could be subject to criminal proceedings if the company trades fraudulently or if company funds are misappropriated.
  • If you are also a director, you could be held personally liable for the company’s debts if there has been wrongful trading.
  • Failure to ensure that the directors are acting properly in the conduct of the business could leave you with personal responsibility for its debts.

Signpost

  • Find companies guidance from Companies House (0303 1234 500).
  • Read guidance on the recent changes introduced by the Small Business, Enterprise and Employment Act from Companies House.
  • Find postal forms or file online with Companies House.
  • Find a solicitor for advice on your legal responsibilities through the Law Society.

Expert quote

"Being appointed as company secretary means you are an officer of the company. This means that, along with the directors, you could be prosecuted if the company does not comply with its obligations." - Martin Dunne, Sayers Butterworth LLP

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