Explaining company law in England and the requirements for any new company can be difficult to fully appreciate. Yet we believe that some basic ideas must be understood before deciding what is needed for an international business structure. Looking at these in terms of people and faces can help.
A company is just like a person – right ?
English law establishes that a company has a “legal personality” as a “body corporate” – indicating a company as a person.
This simply means that the company has legal rights and duties as if it were a person. For example it can sue and be sued. It can enter into contracts. It can own shares in other companies, and own all types of assets. It can have liabilities to others, for example in the form of loans to be repaid or sums due to creditors or a local tax collector.
However English law also recognises that a company is “without a body to be kicked or a soul to be damned.” Therefore it is not a real living person.
Where do real living persons fit in ?
A company can only operate through real people – its Directors and any “officers of the company” – for example the Company Secretary. Directors are not required to be UK citizens. Owners of a company can also be from any nationality.
Note that the owners of a company do not operate companies. Instead they arrange for others to do so – the directors. English law also requires that directors operate in the best interests of the company – an objective that does not exclusively refer solely to the interests of the owners.
How real people work with a “body corporate” ?
How the living people (directors) combine with a body corporate (the company) is established by the internal “rules” of the company (known as the Memorandum and Articles of Association) and the various local laws of the UK that give the external requirements for the company.
The most important “external rules” is the requirement to file details of the company in a public record, and provide accounts and tax returns to record the financial position of the company.
Use of Nominees
Nominees lend their names as an alternative to the names of others. A nominee can be a person or company.
A nominee name can be shown as the owner of an asset, for example shares or property, as an alternative to the actual owner. The nominee concept can be extended to some duties and capacities, for example directors and company secretary required at formation or in the continuing business as a visible alternative to the owners.
Ownership & Direction from non-UK owners
The director, secretary and shareholders do not have to be based in the UK and can be of any nationality.
However shareholders and directors originating from outside of the UK can give rise to issues about where a company is being directed and managed from. This in turn can raise the issue of dual tax residency. In what are complex matters, how far a foreign owner exercises conclusions on contracts, prices and key decisions on the direction of the business, becomes important.
Does a company need to have an “English face” ?
For many, an important objective to forming a company is the “face” or image projected to customers and others involved with the core business. However in practice, the country of registration, the documents from the formation, the legal entity or the owners do not wholly contribute to this image.
Many details of a company are open to public view. On inquiry what people “see” as a UK company are the directors, and a record of their activities and compliance with external rules. However it is not just a matter of people’s faces or English names. An “English face” of a company can be determined by many others factors – from where it operates it’s banking, how it conducts it’s business, to the impression given by it’s web site. These all become important in identifying a structure for international business.
In our experience there is no more identifying image of a company than where it holds its bank accounts. When viewed from an international perspective a company with a bank at its home location in the UK is a convincing operator from that country.