Set up and register a limited company in U.K. Part One.
May 18, 2007 by Brad Horowitz
Before your business can start operating as a limited company it has to be registered with the Registrar of Companies - Companies House. The incorporation itself is the process by which a new or already existing business is converted into a corporate body.
This article will explain the requirements that different types of limited companies must meet and will help you better understand the registration process. It will focus mainly on private companies limited by shares but will also highlight some of the special requirements for public limited companies and private companies limited by guarantee.
You can fairly easily handle the registration process yourself but it might be a good idea to seek professional advice before you do so to ensure that the incorporation is right for you. A company formation agent, a solicitor, an accountant or a chartered secretary can carry out the process for you for a fee and will also offer advice.
The Companies Act 2006, which will come into force in stages during 2007 and 2008 introduces a number of changes that will affect both the directors and the shareholders of limited companies.
To set up as a limited company in the UK, either you or the agent that is acting for you will need to complete and send several documents and forms to Companies House, or, in Northern Ireland to the Companies Registry for Northern Ireland.
The following are required
- A Memorandum of Association providing details of the company's name, its location and what it will do.
- Articles of Association, that describe how the company will be run, the rights of the shareholders and the powers of the company's directors.
- Form 10 (Statement of the First Directors, Secretary and Registered Office) giving details of the company's registered office and the names and addresses of its directors and the company secretary. The equivalent form in Northern Ireland is Form 21.
The company's officers
- The officers of the company are the people who are formally appointed to run it which implies the company directors and the company secretary. By law, companies must have officers in place at all times and their names and addresses must be on the company's registration documents. If an officer resigns or new ones are appointed or if their personal details change then the Registrar of Companies must be informed right away.
- You can find downloadable company registration forms on the Companies House website and also information about company officers and company directors on the Companies House website - http://www.companieshouse.gov.uk/
How many officers does a company need to have?
- It depends on the type of company.
- Private companies must have at least one director and at the moment a company secretary as well. If there is only one director then this must be stated in the company's Articles of Association and this director is prohibited from also being the company secretary. From October 2008 it will no longer be necessary for a private company to have a company secretary but if the company chooses to have one then the duties and the authority of the secretary will remain the same.
- Public limited companies (PLCs) must have at least two directors and a company secretary and the company secretary of a PLC must be formally qualified.
- From October 2008, company directors will have to be at least 16 years of age and there is no upper age limit.
Can just one person form a company?
- It will be possible for one person to form a so-called ‘single-member’ private company and to be the sole director of the company but until October 2008, the company will also need to have a company secretary and he cannot be the same person as the sole director.
- This will also apply after October 2008 if the company decides to appoint a secretary.
Private Limited Companies and PLCs (Public Limited Companies)
- Most small businesses that opt for limited company status become private limited companies rather than public limited companies (PLCs) and the main differences between them are as follows.
- PLCs can raise money by selling shares on the stock market whereas private limited companies may not.
- PLCs must have share capital of at least £50,000
- PLCs must have at least two shareholders, two directors and a qualified company secretary
- Find out about the special rules that apply to PLCs at the Companies House website - http://www.companieshouse.gov.uk/
Can a private company be changed into a PLC?
- A private company limited by shares can convert into a PLC but it will need to reregister in order to do so. Find out about reregistering as a PLC at the Companies House website - http://www.companieshouse.gov.uk/
Limited by shares or by a guarantee? The differences.
- Private limited companies are owned by their shareholders and are limited by shares which means that shareholders who paid in full for their shares are not liable for the company's debts. Shareholders who part paid for their shares are still liable for the outstanding amount owing to the company for their shares.
- It is also possible to set up a private company limited by guarantee but in this case the people (its ‘members’) forming the company agree on the liability limits when they set up the company. This structure is often used by social enterprises to limit the personal liability of its directors and trustees.
Naming your company
- You cannot choose a name that is the same as that of a company that already exists and you should also avoid names that people might find offensive, sensitive names and also names that are very similar to those already in existence.
- You are not permitted to choose a name which is potentially misleading like ‘international’ if you are a U.K. only business.
Related article - Set up and register a limited company in UK. Part Two.