Settin g up the company
Compliance with company regulations
Appointment of directors and secretaries
Records and documentation
Banking and VAT administration
What is the minimum amount needed for investment in a company?
The Companies House has set a minimum level of £50,000 to be the Authorised Share Capital of a public limited company (plc). The company may however issue any number of shares up to the total authorised value of shares until further required. A private limited company may initiate with a lower share capital but should be sufficient to fund the initial and foreseeable projects or asset acquisitions.
Can anyone apply for a share in a company?
Yes, anyone can openly apply to the company for shares. The company is obligated to issue the shares either through advertisements or through a prospectus. Anyone from the general public may apply against the advertisement and the company is responsible to ensure that no prospective investor is sidelined.
How do I choose a company name?
The company that you choose should be in congruence with the requirements of the concerned legislation, i.e. Companies Act and Business Names Act. Furthermore, the proposed name should be available for use, which can be found out by browsing through the Companies Index, available at Companies House.
Does my company require a registered office?
Yes, all companies are required to have a registered office in England & Wales or Scotland. Companies House requires each company to identify its proposed location and complete address of its office, which will be used for correspondence between the House and your company and all other organisations, individuals and government institutions to which the Companies House may supply your address. Any change in the registered office address should be notified to Companies House as early as possible to avoid inconvenience from all sides.
Are there any registration forms that I need to fill before I start my business?
No, you can just use the electronic company formation service to fill in your company details, which will be sent to Companies House immediately. In addition, you will be appointed as the first director of the company, which will allow to start operations immediately.
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|Compliance with company regulations
What should be the contents of a company letterhead?
A company letter and other stationery should contain the following information:
- The company's official name, as registered with Companies House
- The company's registered office address
- The registration number allotted by Companies House
- The VAT registration number (where applicable)
- The place of registration, England & Wales or Scotland
What should the company do if another business is being operated under its name?
Where there is a dispute over the registered name of the company with another company, the matter must be settled in the court of law, as required by the Companies Act. The Registrar of Companies does not handle such matters and any conflicts must be resolved legally.
Are there any restrictions on the selection of a company name?
The name that a company selects for trade purposes must be in conformation with the requirements of the relevant legislation, that is the Companies Act and Business Names Act, and the Companies Names Index. The Acts set out the regulations for proposing a name, while the Index contains the list of registered names of companies throughout the United Kingdom.
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|Appointment of directors and secretaries
When does a company require a director and/or secretary to be appointed?
A director is appointed by shareholders of the company or is a self-appointed person to manage the affairs of the company. The company director may be an individual person to lead the company or be a member of the Board of Directors, who are appointed by the shareholders.
A secretary is appointed as an administrator of the company, subordinate to and appointed by the director or board of directors. The appointed secretary may also hold the seat of a director of the company, but cannot be a sole director and secretary at the same time.
Who is eligible to take over the role of the director and the secretary?
The candidate for the directorship of a company must fulfil three conditions to qualify for the position.
- The candidate must be an adult, sound of mind and experienced to perform the required tasks;
- The candidate must not be disqualified by a court for holding any position in the future, except where a leave has been granted in specific circumstances; and
- The candidate must not be an undischarged bankrupt and restricted by a court order from holding the position, except where leave has been granted.
The prospective candidate for the position of a company secretary should be at least one of the following to qualify.
- Be a member of a professional accountancy body of the United Kingdom; or
- Held the office of secretary or deputy secretary previously, either within the organisation or in another company; or
- Be a barrister, advocate or solicitor practicing in the United Kingdom; or
- The director(s) believe that the candidate has sound knowledge and experience for the proposed functions, and/or is a member of another professional body that the directors find acceptable for the position.
Who is responsible to ensure compliance with the company regulations?
Companies House requires directors to ensure that statutory documents are dispatched to the Registrar according to the dates announced periodically. These documents include
- Annual accounts and returns;
- Notices of any change in the company directors and secretaries or any modifications in the records of existing directors and secretaries; and
- Notice of a change to the address of the registered office.
If a director fails to supply the above documentation within the time limit, s/he may be prosecuted, as it is a criminal offence to delay or avoid the filing of records. If the Registrar believes that the company is no longer carrying on its business, the name could be struck off the register and dissolved.
A company secretary has no specific duties as far as the legislation is concerned but is required to administer the company and maintain appropriate documentation of all its proceedings. These may include
- Ensuring prompt filing of all statutory forms and documents
- Issuing notices for meetings to auditors and shareholders
- Delivering copies of the company meetings and resolutions passed and agreements made
- Supplying a copy of the annual financial statements to all shareholders, debenture holders and all eligible persons
- Maintaining a record of all minutes during meetings of the board of directors and general meetings
- Allowing accessibility to company records for inspection by eligible persons
The secretary is also responsible for the custody and use of the company seal, although companies are no longer required to use an official seal.
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|Records and documentation
What are the essential documents that a company is required to maintain?
Companies are required to produce annual financial statements and returns and submit them to Companies House within the stipulated time frame. In addition, the company secretary is required to submit copies of all registers maintained with the company.
What are the contents of the annual accounts or financial statements?
A limited company is required to file a set of financial statements or accounts annually to Companies House. The set of documents includes
- A profit and loss account (income statement) or a statement of income and expenditure;
- A balance sheet signed by the director;
- An auditors' report on the company's performance;
- A directors' report, signed by the company director or secretary;
- Notes to the financial statements; and
- Group accounts (where appropriate)
Are all companies required to submit their annual accounts?
All limited companies and public limited companies are required to submit their accounts to the registrar of companies. Unlimited companies are not required to file their statements provided they have been part of a group of companies, or are a bank or insurance company.
What are annual returns?
An annual return is a précis of the information about the company and its directors, secretaries, registered office address, shareholders and the share capital. A company is required to fill Form 363a with the following information in a comprehensive manner.
- The company's name
- The company's registration number
- The status of the company, i.e. public or private
- The registered office address of the company
- The address or location where company registers are kept, if different from the registered office
- The main or principal business activity of the company
- The name and address of the company secretaries
- The name, residential address, date of birth, nationality and the business occupation of all directors of the company
- The date of drawing up the annual return
- The nominal value of the total issued share capital of the company
- The names and addresses of the shareholders, the number of shares held and the type held by each shareholder
When is an annual return due at Companies House?
Companies Issue sends you the Form 363a (shuttle and regular) two weeks prior to the date you are required to file it, i.e. the made-up date. This will be based on the made-up date, which is usually the anniversary of
- The incorporation of the company; or
- The made-up date of the previous annual return sent to Companies House.
The annual return must be filed at Companies House within 28 days of the made-up date as mentioned on the form.
What information is required regarding shareholders and share capital?
The shuttle return form contains pre-printed information relevant to the company's share capital. If there has been a change in the structure during the financial year, the information must be written on the form where required to update the Companies Register. The information should mention:
- The name and the class of each type of share issued or authorised, e.g. ordinary shares, preference shares etc.
- The total number of shares issued to the shareholders as at the made-up date of the annual return
- The total nominal or face value (excluding any calculations of premiums or discounts on each share issued) of the issued shares of the class as at the made-up date of the annual return
Where the information in Form 363a is incorrect, one or more other forms may be required to be filled and sent over to Companies House.
What is the Accounting Reference Date (ARD)?
The ARD is the financial year-end, according to which all financial statements are prepared. If the company's date of closure were moved to another date, Companies House must be informed promptly to avoid any unfavourable incident for the company. The accounts must be submitted before the deadline, which is set based on the company's ARD.
Can the filing dates be extended?
The filing or deliver dates of the accounts can be extended in special circumstances where the reason has been defined and approved by Companies House. For this, Form 244 must be filled and delivered before the normal filing date and must be done individually for each financial year in question.
An application can also be submitted to the Secretary of State for Trade and Industry for an extension in the delivery date, where some unforeseen circumstances may have taken place such as those that were beyond the control of the company's personnel and the auditors.
Where the deadlines have been breached, the company is automatically charged for a civil penalty for late filing. The amount fined, however depends on whether the company is private or public. Failure to deliver in specified period is also a criminal offence for which the directors of the company may be prosecuted.
Does a dormant company have any obligations for filing any documents?
A dormant company is required to submit its set of accounts and returns annually to Companies House, despite the fact that it is not engaged in any form of business activity. The dormant company is given leave from preparing a full-length set of accounts and may present brief but acceptable financial statements, that are not necessarily audited.
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|Banking and VAT administration
What kind of documentation will be required to open a business bank account?
To open an account with a reputed banking institution, the company should keep its incorporation certificate handy, also the Memorandum of Association, and the Articles of Association. These may be required at the time of application because the bank will ensure that the agreement covers an overdraft facility for the company at acceptable rates.
Do all banks provide overdraft or lending facilities?
Almost all banks provide overdraft and short-term lending facilities to their clients. The matter must be agreed at the time of framing the contract between the company and the bank. Once good business is established between the two parties, further arrangements for short and long-terms financing may take place.
When should a company register for Value Added Tax?
A company should register with HM Customs and Excise for Value Added Tax (VAT) once its annual sales revenue of normal standard goods reach the £54,000 benchmark. The HMCE requires a company to register for VAT if it expects the total sales revenue for the year including the proceeding month should equate or go beyond the threshold. Companies may voluntarily register for VAT if they wish to gain relief on input tax on the products and/or services they purchase from VAT registered suppliers.
When is VAT due?
Value Added Tax is payable to HMCE in quarterly instalments after calculating the net VAT payable. The net VAT is calculated by deducting the input tax from the output tax of all products and/or services sold. The instalments are due by the 10th of April, July, October and January for the revenue of the preceding 3-month period.
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