What is statutory compliance?
For businesses, there are many areas of compliance. Statutory compliance is just one of them. But what is statutory compliance?
Simply put, it refers to the rules that are laid out and enforced by the government, and must be met by all industries and sectors.
It differs from other areas of compliance, in that statutory compliance governs the operations of a business. Other areas of compliance may be more specific to certain industries – such as data compliance, health and safety compliance, or even HR compliance.
What is statutory compliance vs regulatory compliance?
Most businesses will have to meet both statutory and regulatory requirements in order to maintain their overall compliance. However, they are different.
The primary difference is who makes or enforces these rules – statutory requirements are overseen by the government itself, whereas regulations tend to be dictated by government agencies. They can be industry specific – food hygiene standards, for example, are a regulation.
The other notable difference between statutory and regulatory requirements, is how they are enforced. As they are mandated by the government, statutory requirements are law, and will carry similar penalties if not met. If they’re found to be broken, they can carry criminal penalties, so ensuring your organisation remains compliant is crucial.
The Companies’ Act
Company law is dictated by and outlined in the 2006 Companies’ Act. Replacing the previous Companies Act from 1985, the 21st century version made company law far more straightforward than its predecessor, replacing often archaic language with plain language and bringing about a more comprehensive system for managing the lawful operation of limited companies. It is split into a total of 47 parts, covering the following:
- What a company is, company formation, and naming procedures
- Company management – by members and officers
- Decision making
- Safeguarding officer conduct and accountability
- The raising and managing of share capital and company returns
- Reconstructions, mergers and takeovers
- The regulatory framework
- Company transparency obligations
Statutory compliance during company formation
At the point at which a company is formed, it must conform with several requirements. Laid out in first section of the Companies Act, new businesses and organisations that are serving in the UK as a limited company are required to have:
- A share capital and an undertaking
- At least one shareholder, or member
- A registered office, and a registered agent
- A company director
Ongoing compliance
Previously, it was a requirement at the formation of a limited company to have an appointed company secretary. However, since the implementation of the 2006 Companies’ Act, it is no longer a necessity. Many companies still choose to operate with a company secretary, and they can be particularly helpful in maintaining statutory compliance. We always maintain that, although there is no longer a requirement for a company secretary, the function is still necessary.
It may be within the duties of a company secretary to conduct compliance related activities, reviewing or create company policies, or coordinating reporting and filing. They may also conduct an initial compliance audit – a full review of a company’s proceedings in adherence to the Companies’ Act. Based on the findings of this audit, they will often then create new policies or processes, or facilitate training with the wider company to ensure that all departments are compliant in their operations.
The role of a company secretary in compliance
After an initial review of a company, ensuring that it remains compliant is an ongoing process that requires dedicated time, attention, and expertise. As a result, many organisations will appoint a dedicated individual or team. They would then maintain the company register (and it is a criminal offence not to do so) and records, facilitate communications and decision making amongst shareholders, and liaise with Companies House. They may also organise company meetings, such as AGMs, and would then be responsible for the recording and distribution of meeting minutes.
Some companies may also choose to have a dedicated compliance officer. For larger, complex company structures, a skilled compliance officer can be a great asset. However, the role of a company secretary is much wider than fulfilling compliance obligations – a company secretary is also often responsible for a share of the directors’ duties and plays a role in corporate governance.
Whether a compliance officer or a company secretary is most suitable for your company comes down to the individual requirements of your organisation. If your structure is complex, your company is very large, or you conduct business in an industry associated with a high level of risk, you may require in-depth or specialist knowledge. However, for a company with less technical compliance requirements, a skilled company secretary can contribute a diverse and agile skillset to your business, alleviating not only your compliance pressures but helping to streamline operations across the board.
Company secretarial packages offered by MSP Secretaries
Having a company secretary can be extremely beneficial to the smooth running of a company, but choosing one that’s right for your business is crucial. Outsourcing to an external company can remove the pressure, leaving companies safe in the knowledge that their operations are being conducted in-line with company legislation.
Company Secretarial outsourcing is a time and cost effective solution for businesses of all sizes across all industries. If it’s right for your business, MSP Secretaries can help.
To find out more about the services that we provide, or to get started, please contact us.