Ebbing and flowing, making gains and sliding back; the tide of business in the UK flows ever onwards. Some businesses come into being with a flourish and then vanish with scarcely a ripple. Others prove to be more long-lasting, delivering products or services which resonate with customers.
Whatever the potential outcome, it doesn’t seem to dampen our enthusiasm for company formations. So much so that in statistics released at the end of June Companies House revealed that in the twelve months to March 2018 there were 620,285 company incorporations. Admittedly in the same period there were some 490,000 dissolutions. Nevertheless, with the year-on-year increase of 3.5% overall the register has breached the 4 million mark for the first time.
One of the consequences of this rise in incorporations has been the fall in the average age of a company. In 2000 this stood at 10.7 years; today the average age of companies is 8.5 years with 49.3% having been in existence for less than five years. This raises an important question. With the average age of companies declining, how do you ensure that your people and directors have sufficient experience to meet all of the company regulatory and legal requirements?
The trouble is that when organisations are in their infancy there is more than enough to think about. Ensuring the product is as you’d intended, building a client base, working hard often with multiple ‘hats’ on is enough to stretch even the most proficient of start-up teams. Sometimes just getting to the end of the day is enough. So it can be all too easy to sideline areas such as meeting regulatory requirements, filing declarations and statutory returns and so on.
And if that wasn’t enough, there are also areas such as the requirement for directors to act to promote the success of the company which may seem obvious but in practice require a dedication and consistency of approach. So what’s the solution? Organisations may find that a two-pronged approach works best. Firstly when it comes to areas such as statutory returns it can prove beneficial to buy in expertise; delegating completion of filing returns to a specialist company which has expertise in these areas.
Never stop learning
Secondly, when it comes to ensuring that the board and senior personnel meet approach and behavioural requirements, the mantra is to never stop learning. Promoting success; exercising judgement, skill and diligence may not be top of the list when it comes to the bottom line but at the end of the day these are areas which will have a profound impact on the company, its reputation and profitability. Helping your top people to build the necessary skills in areas such as communication, problem solving, reasoning and risk management will pay dividends in the long term.
Admittedly, in the short term there is going to be a very steep learning curve. And with so many companies in their first five years of growth the one thing you can be sure of is that you are not alone. But as the statistics show, only 10% of companies reach the twenty year mark. The reasons why they fall by the wayside are many and varied. However, by ensuring that from day one you are setting aside time for a continuous programme of learning and self development you could just enhance your chances of not only being one of the survivors, but also having the knowledge and expertise to ensure that when company returns come calling, you are not found wanting.
About Nick Lindsay
Director of Elemental CoSec, a company secretarial firm. Lawyer. Triathlete.
Elemental is one of the leading corporate services firms in the UK, providing company secretarial services, administrative services, accountancy services and corporate services to a full range of clients.
As experts in our field, our team provides you with the advice you need to ensure that your company is complying with its statutory obligations pro-actively and efficiently. We use solicitors, chartered secretaries, chartered accountants and other governance and compliance professionals to ensure that you get the advice you need.