Pitfalls of not having a company secretary25.10.2020
Although under the Companies (Guernsey) Law 2008, as amended (the “Law”), there is no requirement to appoint a company secretary, there are requirements which must be completed that would naturally sit with a company secretary.
A company secretary is an expert in the legal requirements which all companies, regardless of size, need to adhere to. Appointing a company secretary frees up director and senior management time from undertaking tasks such as writing minutes and allowing them to focus on their primary function of ensuring business success.
Part of Redwood Co Sec Limited’s offering is to provide companies with a corporate governance and statutory health check to identify areas which require improvement. From undertaking such reviews, we have identified the following areas which are commonly deficient.
Minutes / Resolutions
Minutes where the company does not have a dedicated company secretary can tend to be too brief and often inaccurate. Minutes may be absent altogether.
In accordance with the Law, all decisions made by the directors on behalf of the company need to be recorded by way of a minute or resolution. Should the actions of the board come into question, the minutes provide a formal record of why the decision was made at the time. This saves directors from having to explain the rationale for their actions and can provide protection. Particularly if the decision made at the time was considered to be in the best interests of the company but subsequent circumstances meant the decision previously made might not have been made in the current environment. Remember, “if it isn’t written down, it never happened”.
We often find that clients who have appointed Redwood to produce their minutes value the extra time this affords them to focus on other core business activities.
There are often gaps in statutory record keeping such as missing or out of date information on the Register of Directors or Shareholders. In accordance with the Law, there is certain statutory information that must be held on record and failure to do so could result in the company committing an offence.
Ultimate Beneficial Ownership (“UBO”)
In 2017 Guernsey companies were required to file a beneficial ownership filing with the Guernsey Registry. In accordance with the Beneficial Ownership of Legal Persons (Guernsey) Law, 2017 companies are also required to have a UBO register.
We have found that companies often rely upon the share register as a UBO register. However, additional information is required in the UBO register that is not covered in the share register and the information on the share register may not match that of the UBO due to nominee relationships.
In accordance with the Law, during certain actions such as the payment of dividends, issuing of additional shares or the appointment of directors, declarations are required to be made. We often find these declarations have not been made which can cause issues at a later juncture.
There are a number of scenarios where the company and board need to file documents with the Guernsey Registry. We often find that filings have not been made for items such as the appointment/resignation of directors or the change of business address. This can lead to fines being imposed and create challenges when formally looking to remove directors who should have been removed previously.
In accordance with the Law, a Guernsey company is required to hold an Annual General Meeting (“AGM”) and have its accounts audited. This can be costly and is potentially unnecessary. Most companies waive the requirement to hold an AGM and an audit. However, we have come across instances where these requirements have not been waived which impacts the company in terms of time and money.
Share Documentation and Transfers
We have also recently found a number of companies with incorrect share documentation whereby share transfers have not been completed and individuals who have sold shares remain on the share register. This can cause difficulties for a company who have a legal obligation to retain accurate records of ownership. Furthermore, delays in transferring a shareholding can occur if incorrect details are held.
Company Registration Information on Documentation and Display
In accordance with the Law, a company’s name must appear in a place which is visible to the public during normal business hours at its registered office. We often find companies are not displaying their name at the registered office. In addition to this, a company’s name and registered number must appear on the company’s website and should be included on formal correspondence.
If you would like any additional information with regards to the above or would like to request a health check of your records, please contact Redwood Co Sec now by:
T: 01481 743690.