Record Keeping for Fast Growth Companies – Are Your Records up to Date?

1. Maintenance of Books and Registers

Running a company as if a potential buyer is looking over your shoulder is an effective way to ensure that up to date and compliant records are maintained by the company.

Irish law requires companies in Ireland to keep and maintain certain registers as well as minute books, adequate accounting records, and other documents. No matter how small the company, registers must be maintained, even if, in some cases there are few entries to be made.

These registers include:

• A register of a company’s members

• A register of its directors and secretaries, and

• A register of interests of directors, which directors are required by law to disclose to the company.

A company must also keep also copies of instruments creating charges and copies of directors’ service contracts.

A company is permitted to keep some or all of these registers and documents electronically, other than minutes of meetings of shareholders, provided that it has put adequate measures in place to guard against and detect falsification. The registers must have the ability to be easily reproduced in legible form at a place in Ireland.

These registers are always requested by potential buyers. Working on the principle that a stitch in time saves nine, directors should ensure that all entries are made as required from the outset. The longer record-keeping is neglected, the more problematic and expensive it is to put it right.

2. Proper Minute Books

The management of an Irish company is the responsibility of its directors, who will generally make their management decisions in board meetings. These meetings are required to be minuted.

Every fast growing company, irrespective of size, needs to ensure that all original minutes and written resolutions are maintained, as is required under Irish law. This is the case for minutes of meetings of shareholders, as well as directors. The minutes do not need to be epic in length.

Minutes of board meetings, which includes meetings of committees of the board and resolutions of either passed in writing, should record, at a minimum:

• The appointments of officers made by at the meeting

• The names of the directors present

• The details of al resolutions passed, and

• A summary of the proceedings.

Minutes of shareholder meetings, which include resolutions of shareholders passed in writing, should record a summary of the proceedings of the meeting and the terms of the resolutions passed.

In terms of timing, minutes should be prepared “as soon as may be” after the meeting has been held. Once they are prepared and approved, and then signed by the chair of the meeting in question or the next following meetings, they are evidence of the proceedings which they record. This helps directors to justify their decisions should they later be called on to do so.

The requirement to maintain minute books applies to all Irish companies, no matter the size. Failure to do so may result in the company and every officer being found guilty of a category 4 offence. This is a summary offence attracting a fine of up to €5,000.

3. Accounting Records

Irish companies are also required to maintain adequate accounting records that correctly record and explain the transactions of the company. These records should allow the company’s financial position to be measured with reasonable accuracy at any given time.

The law also requires that accounting records are kept on a continuous and consistent basis and that entries made in them are made in a timely manner. This might mean, depending on the size and complexity of the business, that the accounting records be updated daily, weekly or at some other suitable interval.

Failure to comply with the Irish legislation regarding accounting records could result in the company or the officers being found guilty of a category 2 offence. This would result, on indictment, of a term of imprisonment of up to 5 years or a fine of up to €50,000 or both, or on summary conviction, a class A fine or imprisonment not exceeding 12 months or both.

Conclusion

Record keeping is one of the easier things that a business owner can control. Dealing with such matters from the outset and on a continual basis helps to keep them routine and inexpensive. It could also nip any more serious issues in the bud. Records will be requested on the sale of a company. It is helpful, when thinking of a company’s records, to act as though a sale is always around the corner and to update them accordingly.

If you would like assistance in maintaining your corporate governance records or a review of existing records and advice on remedial action that might be needed, please contact a member of our Corporate Governance & Compliance team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.