UK Companies – the basics

Is the UK a good choice ?

The United Kingdom was the first country to draft modern laws for company formation and operation. Consequently UK Company law  provides an influential model and an international standard setter.

What types of company are available?

There are different types of company in the UK. Companies limited by shares are the most common but another similar type are companies limited by guarantee. Both types use “Limited” or “LTD” in their title.

There are also unlimited companies but these are very rare. However much more common are public limited companies. These use “PLC” in their title, and many well known UK international names are such companies. However regulation and reporting requirements for PLC’s do not usually make  these companies a first choice.

Does “the UK ” mean “England” or “British”?

“British” refers in various ways to the island of Great Britain and its people. That island and  parts of other islands  (Ireland for example) is the location for the United Kingdom or the UK.

So “the UK” covers the possibility of registering a company either in Scotland, in Northern Ireland or in England and Wales. In fact companies for England and Wales are only ever registered in Wales, as this is the location for the England & Wales Company Registrar.

The following comments are based on a company limited by shares, formed and registered in England & Wales.

What company name can I use?

The chosen company name must not be exactly identical to any other company name currently in use.  There are also restrictions on including titles such as “Royal” or “British”. In addition use of words that suggest banking, financial and charitable organisations (such as in “Fund”) need approval.

Adding “Limited or LTD”  refers to a private limited company.

Choosing a company name

What does “Limited” mean?

“Limited by shares” means that the company has shareholders, and that the liability of the shareholders  to creditors of the company is limited to the capital originally invested – being the value paid for shares in the company. A shareholder’s personal assets are thereby protected in the event of the company’s insolvency, but money invested in the company by shares will be lost.

How much must I invest in shares?

The company must issue a minimum of one share at the time of incorporation. A company can be created with any number of shares of any value, in any currency. There are no restrictions on who can be a shareholder.

Limited Companies are formed with both an authorised  share capital and an issued share capital. “Authorised” refers to  the total number of shares existing in the company multiplied by the nominal value of each share. Not all such shares may have been issued. So “Issued share capital” refers to  the same calculation in respect of only the issued shares.

Do I need an address in the UK?

A company must have a registered office address in England or Wales. The directors also need to have a contact address in England or Wales.

What people do I need in the company?

The company must have at least one director appointed. All directors must be at least 16 years old.

A company secretary is an optional position for private limited companies. One can be appointed to focus attention to the administration of the company.

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.

Corporate bodies (for example other companies) can act as director, secretary and shareholder. However a company cannot have a sole director that is a corporate entity, there must be a natural director (a real person) appointed at all time

What do I need to do to form a company?

To incorporate a company in England and Wales requires completion of an application indicating who is to be involved, and where they will be located.   To show what the company will do and how it will operate requires the preparation of two key documents – the Articles of Association and the Memorandum of Association. In addition there is of course a registration fee to be paid.

An application states the first directors, the first secretary (being the officers of the company) and the address of the registered office. Each director must give his or her name, address, date of birth, and occupation. Each officer appointed and each subscriber of  share capital (or their agent) must also be shown.

The memorandum of association states the name of the company, the registered office and the company objectives. The objective of a company may simply be stated as being to carry out business as a general commercial company.

The articles of association govern the company’s internal affairs and must include certain requirements set by governing company laws.

What more will you need ?

UK Companies – What more will you need?


Briefing on UK Companies

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