Companies tend to encounter two main problems when completing a statement of capital:
- financial information - companies with a complicated share history may find it difficult or even impossible to identify the amount paid up on each share (including by way of share premium)
- prescribed particulars - it is not clear how much information companies are required to provide in connection with the obligation to set out the "prescribed particulars" of the rights attached to their shares. The key question is whether, and if so to what extent, it is acceptable to cross-refer to the articles.
BIS is aware of these problems, and in November 2009 it issued a consultation paper seeking views on possible solutions to the financial information problem and acknowledging companies' concerns about the prescribed particulars requirement. It announced its conclusions in light of the consultation at the end of last year.
The government has accepted that the current position is not satisfactory, and will introduce the following changes:
- the statement of capital in the annual return will not need to include any information about the amount paid up on the shares
- every other statement of capital, save that which must be filed upon a company's formation, will need to specify the aggregate amount unpaid on the shares. The statement of capital which is filed upon formation will, presumably, still have to specify the amount paid up and unpaid on each share, on the basis that new companies should not have any difficulty providing this information.
Draft regulations to implement the change to the annual return should be available in the near future, and the change is expected to take effect in October 2011. Unfortunately, it is not clear from BIS's announcement when the change in relation to statements of capital other than in the annual return will take effect, and so for the time being companies have no choice but to continue to comply with the current requirement as best they can. A set of FAQs on the Companies House website contains a brief discussion of this point, and the Institute of Chartered Secretaries and Administrators (ICSA) has published guidance on how to comply with the requirement.
BIS has accepted, too, that there is scope to simplify the prescribed particulars requirement. It plans to remove altogether, from October 2011, the abbreviated version of the requirement which applies in relation to annual returns, but has not provided any details as to the extent to which it might simplify the requirement in relation to other statements of capital. Presumably a further announcement will be forthcoming at some point, but in the meantime companies must, again, comply with the requirement as best they can. For a summary of our view of best practice in this regard, please refer to the article on the Companies Act 2006 in the June 2010 issue of this newsletter.