A Life In Numbers

If you have yet to attempt to complete an online Annual Return for Companies house then you may need to set aside a good chunk of time and have a few painkillers to hand.

If you have a business that is a simple private company with just a few shareholders and only one issue of shares all at the same price then you shouldn’t have too much trouble.  However, anything more than that and you could find yourself facing some serious frustration.

With good reason, Companies House is encouraging companies to submit their Annual Returns online and the cost for doing so is half that of a paper submission.  And, to their credit, some good changes have been made such as allowing more that 99 shareholders to be added (a limit not made explicit until you tried to manually enter the 100th and found you just couldn’t any further and then needed to repeat the process on paper) or the inability to handle low nominal values for shares (compounded by an inability to understand this was an issue) which has now been fixed.  However, I’m also hearing of instances where paper forms are being rejected because online ones have been started and this means the online version has to be useable and practical.

Where are the major issues now?

Firstly the requirement to update your directors details with the Country/State of Residence.  Not too complex in itself but it feels like repetitive information which is already included in the address.  When you select the country then you are prompted for a “date of change” which is not abundantly clear as most of your directors will not have had any change.  The answer here, according to Companies House, is to put the date of the Annual Return.  Also, although there seems to be an implication that you will also have to complete a 288c for this change, I’m assured that this is not necessary (as there’s been no change!)

The next challenge comes by way of the “Amount paid up on each share:” which has clear notes stating “The amount should include the share premium.”  Unfortunately, if you are a company, as many are, which has had more than one issue of the same class of share at different prices (multiple financing rounds either up or down) then the single box allowed for the submission of this data seems woefully inadequate.  Now, admittedly there is a later note which says “Multiple amount paid and unpaid details within the same class of share.  This form is not currently able to capture multiple paid or unpaid amounts for the same class of share. This information can currently only be provided using the Software Filing service or by submitting the paper version of the form.”  and they seem to be adding this sentiment liberally across the site, so it is obviously causing some consternation. 

The main issue here is that it smacks of a set up that has not been fully thought through.  Unfortunately, it seems it’s also not been communicated clearly to the help desks at Companies House.  I’ve had two separate calls today where I was told “just put the paid up share premium” and when I enquired how I should handle multiple values I was told “just put the current one”; then “put the total share premium”; then “just put in what’s needed to pay it off”; then “I’m not sure I understand this” then “sorry the technical department is busy” and finally “we can’t give you guidance on this and you’ll have to take your own legal advice”.  Our lawyers have confirmed this is a complex issue.

A little more digging has confirmed that the BIS (Business Ideas and Skills department) of BERR (which once upon a time was the DTI) have identified this as an issue.  This link BIS Paid Up Capital explains a little more and they are referring people to ICSA ICSA Guidance for more guidance.  The ICSA essentially say do what you can to provide information but if it’s too complex then ultimately just dividing the total share premium account by all shares should do the trick. 

I understand Company Lawyers are currently advising clients to go the paper submission route and submit all relevant details.  Ultimately it looks as if there is a realisation that this aspect of the Companies Act 2006 needs a little more work and there is talk of a change being made.  If you’re stuck with the online (which you will be if you’ve selected the “Proof” option then you’ll probably need to follow the ICSA guidance.

The next challenge to be faced is the Prescribed particulars (of rights attached to shares) which provides a relatively small box for a whole lot of potential information. 

Here the challenge may come for small companies, where they only have Articles of Association and no Shareholders Agreement and they will have to pick their way through understanding what’s relevant and ensure they don’t include information relating to Directors instead of shareholders.  For companies with more complex structures and detailed Shareholders Agreements as well as Articles, it’s unfortunately not possible to just write “as detailed in the Articles”.  You have to go to through and select all the relevant information and cut and paste it into the boxes in some coherent format. 

I’ve seen indications that there might be a limit on the amount of data that can be input but I haven’t found out whether that is actually the case.

There have been some interesting questions as to the objective of this particular request, as excerpts from Articles and Shareholders Agreement will never tell the whole story and for any potential or existing shareholders they would be better off getting hold of the complete documents.  So for small and medium private companies this does seem an extra burden that serves no real purpose.

 The details that have to be extracted for each class of shares are as follows :-

(a) particulars of any voting rights, including rights that arise only in certain circumstances;
(b) particulars of any rights, as respects dividends, to participate in a distribution;
(c) particulars of any rights, as respects capital, to participate in a distribution (including on winding up); and;
(d) whether the shares are to be redeemed or are liable to be redeemed at the option of the company or the shareholder and any terms or conditions relating to redemption of these shares.

There are a lot of beneficial changes coming out of the Companies Act 2006 but there is still a need to make sure companies can operate and continue without being overburdened by bureaucracy.  For many SMEs it feels like government departments assume you have as many administrative staff as they do.  There’s still a real need to reduce these burdens on hard pressed SMEs, even more so at a time of cost reduction when many are doing their best to get by and keep their staff employed. 

The new Companies Act is a decent step forward in many areas and it’s helping to simplify matters but at the same time its brought in some extra demands that do need more consideration as to how appropriate they are for certain types of companies, especially when it comes to SMEs.