Registering a Company in the UK
Companies are incorporated, or registered, by a process called registration. The Companies Act 2006 determines the steps required to register a company with companies house.
As part of the process, registration involves sending the required company documents and a fee to the Registrar of Companies at companies house, the official responsible for registering companies. Once a certificate of incorporation is issued by the Registrar, the company comes into exisentence.
Types of Registered Companies
- Companies Limited by Shares
- Most companies are limited by shares, this expression refers to the liability of the members or shareholders of the company for that company's debts on a liquidation. The effect of this is that the liability of the member is limited to the amount, if any, which remains unpaid on their shares.
- Usually shares are paid in full when they are issued but in some cases the shares may be issued “unpaid/nil” or “partly paid” in which case payment needs to be made later.
- If the company goes into liquidation, any member who has been issued unpair or partly paid shares will be liable for the amount of the unpaid shares.
- Companies Limited by Guarantee
- Some companies are limited by guarantee instead of shares, this means each member guarantees to pay a specific ammount if the company is wound up while he is a member or within a year after he ceases to be a member.
- Most companies limited by guarantee are charities or other non-trading companies.
- Unlimited Companies
- An unlimited company is one registered under the 2006 Act but without any limit on the liability of its members.
- If an unlimited company goes into liquidation the members are liable to contribute the whole of their private wealth to pay the company’s debts. The members cannot be sued directly, instead the creditors claim in the liquidation and the creditor then calls for contributions from the members.
- Public Limited Company
- A public company has a share capital and limits the liability of each member to the amount unpaid on their shares. It may offer its shares for sale to the general public and may be quoted on the stock exchange.
Public and Private Companies
Most company laws apply equally to all companies, however there are some differences in the rules depending on whether the company is public or private. There are differences between them based on the 2006 Act.
Other categories include:
- Listed Company
- Close Company
- Small and Medium Sized Companies
Formation of a Limited Company
The main reason to incorporate a company is to provide a medium through which a business can be operated, a charity can be formed or to carry out a specific service or project. It is also possible for an existing company to set up additional companies to operate as its subsidisary.
Those who wish to form a company are known as promoters, though there is no legal definition a promoter is anyone who wishes to set up a company which will be used as a vehicle for their new business.
There are 2 ways in which a company can be formed: you may request your solicitor to form the company from scratch or alternatively use a company formation agent. Irrespective of the method, the same requirements have to be met.
Steps for Incorporation
All new companies are set up in accordance with the Companies Act 2006. In accordance with s.7 CA 2006 any promoter of a new company must subscribe their name to a memorandum of association and comply with the requirements for registration with companies house.
Form IN01 is the most significant document which is the application for registration, it must state:
- The proposed company name
- The proposed situation of the company’s registered office, for example England, Wales, Scotland or Nothern Ireland
- Whether the liability of members will be limited by shares or guarantee
- Whether the company will be public or private or unlimited
The application must also contain:
- A statement of share capital and initial shareholdings
- A statement of the company’s proposed officers
- A statement of the intended address of the company’s registered office address
- Details of the company's intended new business activities by reference to a standard industrial classification code (SIC code)
- details of the proposed company director(s) and the secretary if there is one
- details of people with significant control (PSC) or other legally required statements such as a statement that the company doesn't have a PSC
- directors' service address and residential address
- whether a company limited by guarantee wishes to apply to be exempt from needed to use 'limited' or 'cyfyngedig' in its name
- if the proposed name contains a sensisitve word and a section requiring confirmation that a government department or other body has been consulted
In accordance with section 13 CA 2006 a statement of compliance is required to be submitted with the application which is confirmation by the relevant subscribers that all requirements as to registration has been complied with. This statement is included in form IN01.
Articles of association are required and must be submitted with the application for registration. If this is not submitted, it will be assumed the model articles of association will be the articles by default in accordance with s.20 CA 2006.
To register a company, all company details and company documents must be sent to the Registrar of Companies at companies house together with the relevant fee which is dependent on the nature of the application.
- A standard application in paper form takes 5 days from receipt to process.
- A higher fee may be required for urgent requests which guarantees same day incorporation.
- Web-based incorporation is possible to register a company online, using the companies house website, the fee for this service is less and the application is usually processed within 24 hours. However, not all company’s can be incorporated in this way.
Issues to Consider on Registration
Memorandum of Association
The memorandum is only relevant to the application for company registration, as per s.8 CA 2006 the memorandum needs to contain 2 clauses:
a) statement of intent of the subscribers (promoters) to form a company;
b) statement by the subscribers that they agree to become members of the company and to take out at least one share each.
The Company Name
The registered company name is important and generally the subscribers/promoters have freedom to choose and the purpose is to differentiate the name from other companies. As per the CA 2006, the Registrar is prohibited from registering:
a) a company name which doesn't end with the word limited or the welsh equivalent which is 'cyfyngedig' if it is a private limited company;
b) a company name which is the same as an existing registered company; or
c) a company name, which in the opinion of the Secretary of State constitutes a criminal offence or is offensive.
If the company name suggests a connection with the government or local or public authority, the approval of the Secretary of State is necessary. In addition if the company name includes a sensitive word as listed under s.55 CA 2006 approval of the Secretary of State is required.
Where a name is rejected by the Registrar, a certain level of expensive and delay may be incurred as additional documents will need to be submitted to companies house. In order to minimise delay and cost, you may consult the Registrar of Companies at companies house prior to submitting the application to review the index of company names.
Power of the Secretary of State
The Secretary of State has the power to direct a company to change its name in the following circumstances:
a) if within 12 months of company registration, the Secretary of State finds the name is the same, too similar to a name appearing in the index of company names at the time of registration, or the same as a name which should have been in the index at the time;
b) within 5 years of company registration, misleading information was provided at the time of registration for the purposes of a company's registration; and
c) at any time after company registration, if the name gives a misleading indication of the nature of the company's activities which may likely cause harm to the public.
Trade Mark
If a company has a registered name which includes a registered trademark of another business, they may be open to action for infringement of the trademark. It is therefore important to inspect the trade marks register before applying for registration.
Registered Office Address
A companies registered address is important as it determines the jurisdiction under which the company is formed. For a company to be registered under the CA 2006, the registered office must be situated and remain in the UK. In order to satisfy this requirement, the company address must be stated in the intended situation of the company's registered office and its actual address in the application for registration sent to companies house alongside the company documents.
Limited Liability
As the principle of limited and unlimited liability exists, it is important to determine the status of the shareholder's at the time of registration as they may want the benefit of limited liability. To do this, you can make a statement to this effect in the application for when you register your company with companies house.
Initial Shareholders and Share Capital
Most companies are created with a share capital, as such these companies have shareholders (or at least one shareholder). A company's initial shareholders are subscribers to the memorandum and all agree to take a minimum of one share each. Details of each subscribers' shareholdings must be detailed in the statement of capital and initial shareholdings, which forms part of the form IN01. The statement should include details of:
a) the total number of shares taken on formation by the subscribers;
b) the aggregate nominal value of those shares;
c) the rights attached to the shares;
d) the number, nominal value, and class of share taken by each subscriber and the amount paid up on each share.
Directors and Secretaries
The Companies Act 2006 requires private limited companies to have at least one director. Although the company's articles of association may require a higher number of directors. At least one director must be an individual and a private company does not need to have a secretary unless the company's articles of association require it.
The Articles of Association
The articles of association are the main constitutional documents of the company, they regulate the company's internal affairs and deal with matters such as directors powers, how members meetings are held, board meeting conduct and so on.
When preparing to incorporate a company it is important to consider the contents of the articles and their effect..
The company has 4 options:
- Specially draft articles from scratch.
- Adopt standard model articles supplied by legal advisors or formation agents.
- Adopt model articles with no amendments.
- Adopt model articles with bespoke amendment.
Once the company is incorporated you must notify companies house every time your company makes changes to its articles. You or your company may commit an offence if you fail to do so. Articles can be amended by special resolution and a copy must be delivered to companies house within 15 days of the date it is passed.
Certificate of Incorporation
Once an application for the registration of a company has been submitted, companies house will examine the registration documents and issue a certificate of incorporation which acts as conclusive evidence that the requirements of the Companies Act 2006 have been met. The certificate will state:
- the name and registered number of the company
- the date of its incorporation
- whether it is a limited or unlimited company, where limited whether it is by shares or guarantee
- whether the company is a private or public company
- where the company's registered office is situated e.g. England, Wales, Scotland or Northern Ireland.
The certificate must be signed by the registrar or authenticated by the registrar's official seal.
Conclusion
This article lists some of the key elements to consider when incorporating your own company. It's great to have a fresh new business idea but there are a number of issues to consider to ensure you are legally responsible. You may find it useful to read the gov.uk guidance here.
Please note the contents of this article do not constitute legal advice, we do not offer any legal advice, opinions, recommendations or guidance on which you should rely. Whilst we attempt to make sure our information is accurate and self, we recommend you consult a lawyer if you want legal advice.