Bruce Wallace | Outsourced Company Secretarial Services Blog

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January 2022

11 January, 2022

Q. We currently hold a number of our company's shares in Treasury. Are there any restrictions on what we can do with them or any other considerations we should be aware of?

A: The Treasury share regime is set out in Chapter 6, Part 18 of the Companies Act 2006 and essentially permits shares held in Treasury to be used in four ways:

1. Simply held temporarily or indefinitely (s724(3)(b);

2. Sold for cash consideration (s724(3)(b) and s727(1)(a));

3. Transferred in satisfaction of awards under equity incentive schemes (s724(3)(b) and s727(1)(b)); and

4. Cancelled (s724(3)(b) and s729(1).

The interpretation of "cash consideration" is strict and is set out in s727 of the Companies Act 2006. It means, for example, that Treasury shares cannot be used as consideration in an acquisition.

There is currently no limit on the number of its shares a company can hold in Treasury, although the Investment Association discourages premium-listed companies from holding more than 10% of their shares in this way. Shares can only be bought into Treasury from a shareholder and out of distributable profits.

It should be noted that a company cannot receive dividends on its shares held in Treasury but can receive bonus shares resulting from them (this ensures that its own interests in the shares are not diluted).

In order to buy shares into Treasury, a company needs to ensure that its Articles permit the purchase of its own shares without requiring them to be cancelled.

There are disclosure requirements on listed companies, including AIM listed entities, around the purchase, holding and disposal of Treasury shares via RNS, on the Company's website and in its Annual Report.

Please contact us if you need help with company secretarial or governance matters. All our contact details are on our website www.brucewallace.co.uk.

December 2021

15 December, 2021

Q: I have just incorporated a new limited company. What needs to be considered when changing the Accounting Reference Date of the company?

A: The accounting reference date (“ARD”) is the end of a company’s financial year. Every company must prepare accounts as at its ARD and deliver them to Companies House.

For a new company, the first ARD will be the last day of the month in which the company was incorporated. For example: If the company was incorporated on 15 December 2021, its ARD would be 31 December 2022 and 31 December for every year thereafter. A company may make its accounts up to 7 days either side of their ARD.

An ARD can be changed by either shortening or lengthening the accounting reference period ("ARP"). You can shorten your company’s ARP as often as you like, although the minimum period you can shorten it by is one day. However, there are certain restrictions when lengthening the ARP. You can lengthen your company’s financial year up to a maximum of 18 months from the start date of the accounting period unless the company is in administration.

You may not extend periods more than once in five years unless:

• the company is in administration.

• the Secretary of State has approved the change.

• the company is aligning its accounting reference date with that of a subsidiary or parent undertaking.

To change the ARD, the Companies House Form AA01 must be received at Companies House before the end of the current accounting period. It should be noted that an ARD cannot be changed if the accounts are already overdue.

Please contact us if you need help with changing your accounting reference date or any other company secretarial matters. All our contact details are on our website www.brucewallace.co.uk.

November 2021

25 November, 2021

Q: When is a gift not a gift?

A: As the festive season approaches, the question of gifts and hospitality often arises; however, it’s important to understand when they may be seen as inappropriate.

The UK Bribery Act 2010 (the “Act”) covers the criminal law relating to bribery and has made the giving and receiving of gifts and hospitality a concern for companies and their employees. There is currently no legal definition of corporate hospitality or gift, although the Act recognises that these play an important role in business.

Four key factors should be contemplated:

• INTENTION: Who is the recipient or donor? Gifts to or from public officials should be carefully reviewed. Is the value of the gift or hospitality appropriate? As there is no specific limit on the acceptable value this should be carefully considered, taking into account the business sector and wider economic environment.

• TIMING: Is the gift or hospitality intended to influence the recipient into making a favourable business decision? For example, gifting event tickets to a procurement manager with the intention to sway their decision regarding a contract would be viewed as inappropriate.

• TRANSPARENCY: Is the gift or hospitality made openly and documented? If not, it is likely to be viewed as inappropriate.

• SELF AWARENESS: A good test to apply is whether you would be comfortable with the details of the gift or hospitality appearing in the media.

To ensure transparency around gifts and hospitality, companies should have a clear policy, as well as providing guidance to employees. A register should be maintained where gifts and hospitality offered, received or declined above an agreed monetary value, such as £25, are recorded. Clear anti-bribery terms should also be included in all contracts.

If you need any assistance with any company secretarial or governance matters, please see all our contact information on our website www.brucewallace.co.uk.

October 2021

26 October, 2021

Q: Our current auditors have been in post for over 5 years and we are therefore planning to put the audit work out to tender. What do we need to do?

A: There are few legal or regulatory requirements which apply to the appointment or a change of auditors, but the following should be borne in mind:

If the incumbent auditor takes part in the tender process and is successful, there are no legal or regulatory concerns to take into account, although the directors may include a statement in the Annual Report detailing the audit tender process and the reasons for the retention of the existing auditors.

If a new auditor is to be appointed, the outgoing firm will provide a statement to the Company that there are no circumstances connected with their ceasing to hold office which needs to be brought to the attention of shareholders. A statement is not required in all circumstances. S519 of the Companies Act 2006 (CA 2006) sets out the conditions under which a statement must be circulated and how this is applied to different types of entities.

If a statement is required, it should be circulated within 14 days to all persons entitled to receive a copy of the statutory accounts under s423 C A2006, unless the Company applies to the Court for consent not to do so.

If applicable, notification should be made to the relevant audit authority, currently the FRC, within 28 days of an outgoing auditor ceasing to hold office.

Appointment of auditors does not need to be notified to Companies House, but you should notify the Company's bankers and other professional advisors as soon as possible.

If new auditors are appointed, the incoming and outgoing auditors will liaise to ensure a professional handover takes place. The new auditor will expect to carry out a review of the Company's statutory books and governance policies, and these records should therefore be made available to them.

It should be noted that specific additional regulatory and governance obligations apply to certain companies, for example companies listed on either the Main Market or AIM.

If you need with any company secretarial compliance or governance issues generally, please contact us. All our contact details are on our website www.brucewallace.co.uk

September 2021

7 September, 2021

Q: Can I use an electronic signature platform* to have all my documents signed electronically?

A: If you are thinking of implementing an electronic signature platform, here are some things to consider:

• The licences are fairly expensive, but usually only document originators need a licence (the legal or company secretarial staff who create and distribute the documents for signature). Directors and other signatories do not usually need a licence just to sign a document.

• You may encounter resistance from PAs and others who have become accustomed to using other forms of electronic signature, such as a pasted signature image with email approval backup.

• Electronically signed documents are now acceptable for the majority of purposes:

• Company/board resolutions and minutes

• Statutory accounts, including the auditor’s signature

• KYC documentation required by banks and others

• Commercial agreements

• Outside of the UK, Courts and company registries may still only accept wet-signed hard copy documents, especially where these need to be notarised. You may also find that service providers accept an electronically signed copy to expedite a particular matter, only to ask for a hard copy to be sent to them later. This can lead to duplication of effort and two different versions of the same signed document in existence.

• Resistance to implementing electronic signatures can often be overcome by pointing out how much safer and secure such documents are, compared to those signed with pasted signature images (especially where a high volume of documents are being handled). The electronic signature platform provides an accompanying certificate showing a full audit trail of each and every signature and technical information regarding the encryption.

If a variety of methods of electronic signatures are in use in your organisation, there is usually an argument to be made regarding standardisation of process and reducing the administrative load on your directors and the staff who support them. You will save on courier costs too.

* such as DocuSign or Adobe Sign

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