Insights

Many small businesses looking to reduce their tax liabilities will opt for a limited company structure because it can be more tax efficient.  Operating a business as a limited company can reduce tax bills because it offers much greater flexibility over how and when directors can take remuneration and dividends. It also offers the opportunity to equalise income levels where appropriate.  However, whilst incorporating a business as a limited company is beneficial for tax planning, it does mean additional time-consuming paperwork, which falls under the responsibility of the directors and, if the company has one, a company secretary.

Having a company secretary is not a statutory obligation, but there is still an obligation to ensure returns are filed on time and statutory registers are maintained.  Very often the importance of this role is under estimated by smaller businesses, many of whom cannot visualise why they should engage an expert to complete the extra paperwork to be filed, especially when their company is newly formed or operating on a small scale.

It may be a cliché, but we all know oak trees come from acorns and the same applies to businesses.  Company secretarial duties are time consuming and admin intensive, business owners usually lack the resources to undertake them properly and they inevitably get neglected.  This is unsurprising given the pressures facing business owners, but can be an expensive mistake to make in the long run.

In the worst cases, failure to comply with company secretarial obligations could result in prosecution or your company being formally struck off by Companies House. If a director is prosecuted for consistent non-compliance, they could face being disqualified as a company director for up to 15 years.

Apart from these ‘official’ punishments, a short-term approach to managing company secretarial compliance can have a detrimental effect when a company is looking to secure a buyer for a business exit. For instance, during the due diligence stage, missing company secretarial paperwork will alert would be investors to potential poor management practices. From experience, it makes the buyer ‘nit-picking’ and suspicious, and is often used as a way of reducing a sale price during negotiations. Added to this, if your business is thinking of introducing new shareholders, having incomplete company secretarial paperwork can make what is usually a straightforward procedure messy and time consuming.

Due to the harsh potential penalties associated with non-compliance, many business owners are now choosing to outsource their company secretarial activities instead of attempting to take on the role themselves, appointing an independent person or company to ensure they comply with legal requirements.

What does an outsourced company secretary do?

There are many administrative aspects of running a company, but these are the tasks most commonly outsourced to an independent company secretary.

• Company formation

Having a company secretary take care of setting up a limited liability company means they take care of all relevant incorporation formalities and can have the company up and running within 24 hours.

• Registered office facilities

By law, all UK companies are required to have a registered office for all official communications. The company secretary will then either forward official correspondence to directors or deal with it in accordance with their agreement.

• Maintenance of statutory records

This is one of the most important administrative tasks required by limited companies in accordance with the Companies Act. To do it properly requires attention to detail and a sound grasp of the legal requirements.

• Statutory filing requirements

Once a year all limited companies need to submit their annual return in the prescribed form to Companies House as part of the Companies Act requirements, or risk a financial penalty for non-compliance. The annual return contains information about your company, its officers and members. An outsourced company secretary will complete this form on behalf of directors and submit it.

• Meetings and minutes

Every limited company is required to hold one Annual General Meeting (AGM) in each calendar year. For newly incorporated companies, the first AGM must be held within 18 months of incorporation and each subsequent AGM must be held within 15 months of the last. A company secretary will prepare relevant draft Board Minutes, notice and AGM minutes on behalf of the business owners and submit them as required.

To find out how RJP could support you with your statutory obligations, including providing company secretary services, please contact Simon Paterson sp@rjp.co.uk or Colette Reeves - cosec@rjp.co.uk or call 0870 2255220.