Corporate compliance and the Companies Act

Continuous updates to legislation, changes at Companies House and the shifts in corporate requirements can make it difficult to keep up with legal compliance in your business.

Our experienced corporate law specialist solicitors could save you a lot of time and provide your business with invaluable protection against the risk of being non-compliant.

What is corporate compliance?

Corporate compliance involves the setting and governance of policies and procedures around the conduct of a company, its directors and its employees so as not to fall foul of laws and regulations.

Every business has to create statutory registers to avoid falling foul of the legislation laid out in the Companies Act 2006.

Not having the correct documentation is a criminal offence and could lead to a fine of up to £5,000.

The Act details the statutory duties of all company directors, including to:

• act in accordance with the company's constitution.
• promote and work in the interests of the company’s success.
• exercise independent judgement.
• exercise reasonable care, skill and diligence.
• avoid conflicts of interest.
• reject benefits from third parties.
• declare any direct or indirect interest in a proposed transaction.
• act in the interests of creditors.
• maintain company confidentiality.

The Companies Act 2006 also requires all limited companies to keep statutory registers, which are documents that demonstrate corporate compliance.

These documents must be created when the company is brought into being, and stored at the registered office address.

The creation of the statutory registers is the responsibility of the business itself and the registers may be required when opening bank accounts, or when applying for financial support in the form of loans or other funds.

What can a solicitor do for my company?

Solicitors with experience in corporate compliance can be invaluable in helping you to navigate the complexities of statutory registers.

If you are found to be operating a business that does not have one in place, or if your registers are not accurate and comprehensive, you could be liable for an unlimited fine, determined by the court.

As such, it is advisable to keep digital and physical copies of your corporate compliance documents, with more than one back-up copy.

What is the cost of corporate compliance?

The cost of remaining compliant differs from company to company. Depending on the size of your organisation, the work you do, the amount of money you make and your prospects for growth, your compliance obligations may be very different from those of another company.

Remaining compliant comes at a cost to your business, because of the time required to complete the requisite statutory accounting, corporate, and tax obligations that all companies face.

There will be costs involved in the production of annual accounts at any limited company, while limited partnerships may also need to foot the bill to have their accounts audited in order to satisfy the needs of investors.

The cost of corporate compliance increases the moment that your company ceases to be compliant, as you become vulnerable to potential penalties.

You can be fined if you fail to:

• Submit your compliance returns correctly and on time.
• Show in your returns that you have met your compliance obligations in full.
• Balance the expectations of shareholders, regulatory authorities, tax bodies and the government.

I require legal assistance to make sure my company is compliant – what should I do next?

We have corporate law specialists who can look into your business to assist with a particular phase of legal arrangements, such as the creation of statutory registers when your company is being formed.

Alternatively, you could bring a commercial solicitor on board to help review or create a corporate compliance programme, to help detect any issues that could affect your firm from a legal standpoint.

Get in touch for a no-obligation discussion of your requirements.