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UK Business Information / Private Limited Company

Private Limited Company

This section includes:

 

Incorporation

A private limited company is relatively straightforward to set up in the UK and can often be incorporated electronically on the same day.  A lawyer will be able to manage this process for you.  The advantage of an overseas company setting up a subsidiary private limited company, as highlighted above, is that it provides a separate distinct entity from which to trade in the UK and has the benefit of limited liability.  The advantage of limited liability is that an overseas company will not be responsible for the debts of its subsidiary company.  The documentation required to be sent to the Registrar of Companies[1] to incorporate a private limited company is as follows:

  • memorandum and articles of association;
  • completed company incorporation form (Form IN01); and
  • registration fee (£20 for a standard registration and £50 for a same day registration).

Following delivery of the above information a company is brought into existence when the Registrar of Companies issues a certificate of incorporation with the official number of the company and the date of incorporation.  This is evidence that the company is properly constituted and that the requirements under the Companies Act 2006 in respect of registration have been complied with.

Memorandum and Articles of Association

The memorandum of association is in a prescribed format and in basic terms confirms that the subscriber or subscribers wish to form the company, that they have agreed to become members of the company and where the company has a share capital, to take at least one share each. 

The articles of association deal with the internal management of a company and often include provisions relating to share capital, transfer of shares, general meetings, directors meetings, appointment and removal of directors etc.  If no specific articles of association have been adopted by a company (formed after October 2009), then model articles provided for in the Companies Act 2006 will automatically be adopted.  It would be normal for a company to adopt its own modified articles of association which are tailored to its needs such as in the case of an overseas company setting up a subsidiary company.  It would be usual for a lawyer to draft such articles of association.

Incorporation Form IN01

Incorporation form IN01 will need to include amongst other things the following information:

  • the proposed company name (see further information below);
  • the proposed registered office (see further information below);
  • the proposed director(s) (see further information below);
  • the proposed company secretary (if any) (see further information below); and
  • information regarding the share capital and initial shareholdings (see further information below).

Share Capital

There are no restrictions on the minimum or maximum share capital with which a private limited company can be incorporated in the UK, provided that at least one share is issued on incorporation to a subscribing shareholder.  It is therefore possible to set up a private limited company in the UK with as little as one ordinary share of £1.  Shares cannot be issued for less than their nominal value but may be issued partly paid up (if permitted by the articles of association) or at a premium.  It is also possible to issue shares with special rights such as particular voting rights, entitlements to dividends or as redeemable shares.  A lawyer will be able draft any particular share rights which may be required into the articles of association.

It should be noted that the paid up share capital or any amount credited to the share premium account of a private limited company cannot be returned its shareholders except in limited circumstances. 

 

Corporate Name Availability

Company Name

There are some words and expressions that cannot be used in a company name in the UK without official permission and certain words which may not be allowed if, for instance, they are considered an offence or to be offensive or imply a connection with the government or certain regulatory bodies.

In addition, it is possible that existing corporate/trading names are already being used by another company in the UK and therefore it is necessary to a choose a name that is not the same as or too similar to another name on the register at Companies House.  Certain words will also be ignored by Companies House when considering whether a proposed name is identical to another name on the register at Companies House and therefore it is necessary to make appropriate checks and searches before submitting an application.

Even if a company name is available and the name is registered by the Registrar of Companies, it may still be possible to infringe laws such as trade mark laws as the Registrar of Companies does not consult the trade marks registry when considering an application for a company name.  Appropriate searches should therefore be carried out in respect of registered and unregistered trade marks in advance.

Business Name

It is also possible for any UK company to trade under a name which is different to its company name, however, certain rules and requirements will also apply to the use of a business name.  Unlike with a company name, there is no central register of business names in the UK and accordingly, no requirement to register a business name.  As with company names, when choosing a business name, checks should be made in internet search engines, domain name registries, local phone books, relevant trade journals or magazines, and the trade marks registry to see if any other business is already using the name.

 

Directors & Secretaries

Directors & Directors’ Duties

A private limited company must have at least one director and all companies need to have at least one director who is a natural person.  A director must be over 16 years of age and not be disqualified from being a director or bankrupt.  There are no restrictions on nationality or residence for directors.

In acting as a director for a company, a director must bear in mind the general duties which he/she must act in accordance with.  These general duties are set out in the Companies Act 2006 and include the following duties:

  • to act within powers;
  • to promote the success of the company;
  • to exercise independent judgement;
  • to exercise reasonable care, skill and diligence;
  • to avoid conflicts of interest;
  • to accept benefits from third parties; and
  • to declare an interest in the proposed transaction or arrangement.

Directors may incur personal liability if they fail to meet the requisite standards and breach their duties.  Also a director may be personally liable if amongst other things he/she is responsible for fraudulent or wrongful trading if the company becomes insolvent.

Secretaries

Unlike a plc, a private limited company is not required to have a company secretary unless required by its articles of association.  The role of a secretary is generally as an administrative officer to ensure that the company complies with the various statutory requirements, for example, the filing of forms with the Registrar of Companies, the issue of share certificates etc.

 

Registered Office

The registered office of a company is the company's official address. The registered office is where bodies such as Companies House will send official correspondence and it is also where court documents must be served.

 

Management

Although a private limited company is owned by its shareholders, those responsible for running and managing the company will be the directors (subject to the provisions contained in the memorandum and articles of association and specific matters set out in the Companies Act 2006 which require the approval of shareholders).

 

Trading Disclosures & Filing Requirements

In the UK all limited liability companies must make publicly available a variety of information including accounts and names of directors and secretaries (if any).

Accounts

Each year the directors of a company must prepare annual accounts and reports which need to be filed with the Registrar of Companies generally within 9 months following the end of the company’s financial year.  The accounts must also be accompanied by an auditors report unless the company is exempted due to its size (based on a number of set criteria relating to annual turnover, balance sheet total and number of employees).  The accounts produced by a company must be in a format prescribed by the Companies Act 2006, and depending upon the size of the company, the level of detail required in the accounts will vary. 

Annual Return

Each year a company will be required to file an annual return along with the prescribed fee with the Registrar of Companies which details the registered office, directors, secretaries (if any), share capital and names of past and present shareholders of the company.  Failure to deliver an annual return within the prescribed time period is a criminal offence and could lead to Companies House prosecuting a company and its officers and/or the company being dissolved.

Other filings

Other matters such as any changes in the address of directors or of the company’s registered office, allotment of shares, creation of mortgages etc must all be notified to Companies House within the prescribed period of time from when such changes occur.  The information filed at Companies House can be viewed by anyone who requests a company search.  However, information such as directors residential addresses will not be available unless such address is the same as the director’s service address.

 

 

This guidance is intended to provide certain information which may be of interest to an overseas company wishing to set up in the UK.  It is not intended to be a full and comprehensive guide, nor to provide any specific legal advice and it does not discuss the special rules or regulatory requirements which apply to certain special types of companies in the UK.  Professional advice should always be sought in relation to any specific situation.

Copyright SGH Martineau LLP

July 2010

[1] The Registrar of Companies is the official responsible for Companies House in the UK.  Companies House deals with all filings which a UK company is required to make under the Companies Act 2006 and the Companies Act 1985 (“together the Companies Acts”) and ensures that document filings are kept up-to-date and that any breaches of the Companies Acts are appropriately dealt with.