The Basics of the Limited Company (Ltd.)

or information on: The Basics of the Limited Liability Partnership (LLP)

CONTENTS

Glossary

The limited company and its benefits

Company Registration requirements

Types of Corporate Structure

Directors

Company Secretary

The company formation agent and the transfer of your company

What Next.?
How Stanley Davis can help

Appendix:
A Brief list of controlled words

The Basics of the formation of a Limited Company

This document is aimed at the layman and sets out in brief the benefits of company formation of a limited company as well as presenting the registration requirements and post incorporation compliance obligations. The information is not exhaustive nor is it designed to advise the reader on which corporate structure is the most favourable to use. Professional advice must be sought before entering into business and choosing the most suitable corporate vehicle.

GLOSSARY

Act means the Companies Act 1985 as amended by the Companies Act 1989

Agent means the person or company who assists with the registration of the company

Audit means a statutory review of the company's accounts

Authorised Share means the share capital with which the company is Capital incorporated and as altered from time to time by resolution and from which shares are taken to reflect ownership

Charge means a debt secured by the assets of the company

Incorporation means registration or formation

Issued Share means the share capital which has been allocated to Capital shareholders the extent of which constitutes the degree of ownership of the company

Passing Off means attempting to 'steal' the business of another company by using a similar name

Objects Clause means the clause containing details of the activities of the company

Registration means incorporation or formation

The limited company and its benefits

A company is an association of people formed together for some common purpose. Through the process of registration a company becomes a legal person distinct from its members and directors. It can therefore :
enter into contracts in its own name
sue and be sued in its own name
buy, sell and lease property in its own name

Incorporation as a limited company brings with it a number of advantages :

Limited liability
The liability of the members is limited to payment of the shares held by the members. Where a shareholder has one share of £1 and he part pays for the share, he still has to pay the remainder. This is the limit of his liability.

Perpetual succession
A company ceases to exist only if it is formally wound up or struck from the Companies Register by Companies House. Members and directors can leave the company for whatever reason and the company continues.

Protection of the name
Incorporation ensures that no other company can be registered with the same name.

Governing structure
The Memorandum and Articles of Association of the company clearly set out the powers and regulations with which the company, the members and directors must comply. Investment platform Shares can be issued to reflect the investment made e.g. a company has an authorised share capital of £1,000 divided into 1,000 shares of £1 each. Two prospective shareholders invest £600 and £400 respectively in the company. They may reflect their investment by each taking shares to the value of their investment i.e. 600 and 400 shares respectively. The extent of ownership is clearly identified by the number of shares taken up. Share certificates provide the prima facie evidence of the ownership.

Ease of Transfer of ownership
Ownership changes by agreement to sell or give the shares to another party.

Borrowing provision
A limited company is permitted to arrange for borrowings by way of fixed or floating charges over its assets.

Exit strategy
Provisions can easily be made in the constitution of the company to effect smooth exit from the business by key members.

Status
A company's profile is enhanced by going through the incorporation procedure. Registration increases the perceived credibility of the company in the market place.

Credit Rating
It is difficult to obtain a credit rating when operating as an unregistered business. Incorporation brings accountability and transparency which provide comfort to prospective clients and suppliers.

Cost effectiveness
Incorporation fees in the UK are relatively inexpensive, between £100 and £200 and, subject to the company achieving a turnover of currently less than £1 million per annum, there is no audit requirement.

Pensions and Tax advantages
The company can make pension contributions augmenting the Pension Fund. Dividends may be a more suitable and less expensive method of paying director shareholders their remuneration.

Independent financial advice should be sought.

Company Registration Requirements

There are 3 types of UK company permitted under UK company legislation examined in the next section. To facilitate understanding of the terms used in the subsequent section it is worth examining the basic registration requirements, which broadly apply to each type of company, in a little detail. For UK companies incorporated under the Act, the following information and documents are required:

NAME

A company name must be chosen with care and may not conflict with an existing name on the register. The Registrar may not register a name which is the same as an existing name on the index, or which is offensive or which would constitute a criminal offence (S26 Companies Act 1985). If the proposed name implies a connection with government or if the name contains a controlled word, it may only be registered with the approval of the Secretary of State. Controlled words are words deemed sensitive by the Secretary of State and require qualification before agreement for use. A brief list of controlled words can be found here. The Secretary of State may order a company to change its name within twelve months of its registration if an objection is made by an existing company on the index and if in his opinion it is 'too like' a name already on the index. He is unlikely to take action unless an objection is raised. (S28 Companies Act 1985). It is open to any trader, business or other company to take a 'passing off' action against the company if it feels that its rights are infringed by the new company. In addition, owners of trademarks may be able to take action if the company name is similar to their mark. Before filing an application to form a company, it is essential to search the Companies House register of names. A trademark search and an internet domain name check are additional safeguards. It is never possible to say for certain that a name is completely safe at the time of applying for registration. Registration is complete when the certificate of incorporation is produced by Companies House. The certificate of incorporation is the birth certificate of the company and shows the name of the company, the date of incorporation and the company number.

USE OF 'LIMITED' AND 'PUBLIC LIMITED COMPANY'
A private company, whether limited by shares or by guarantee must normally end its name with the word 'limited' and a public company must end its name with the words 'public limited company'. These final words may be abbreviated to 'ltd.' and 'p.l.c.' respectively (S27 Companies Act 1985) and the name may be registered either in the full or the abbreviated form. If the abbreviated form is registered this must be used for all purposes. If the full form is registered the company may use the full or abbreviated form interchangeably. Welsh language equivalents may be used by companies from Wales. A private company limited by guarantee may be exempt from the requirement to terminate its name with the word 'limited' if it satisfies the conditions in S30 Companies Act 1985. First, the company's objects must be 'the promotion of commerce, art, science, education, religion, charity or any profession and anything incidental or conducive to any of those objects'. Second, the company's constitution must contain provisions requiring that any profits be used solely to promote those objects, prohibiting the payment of dividends and providing that if the company is wound up its assets are not to be returned to its members but rather are to be transferred to another organisation with similar objects.

POWERS & REGULATIONS
A set of Memorandum and Articles of Association must be prepared which set out the powers of the company and the rules regulating the actions of the directors and the members of the company. These powers and regulations i.e. the Memorandum and Articles of Association should reflect current legislation and be settled by Counsel.

THE MEMORANDUM OF ASSOCIATION
Section 1(1) of the Act requires a Memorandum of Association to be registered for every incorporated company.

The Memorandum can be described as the document which defines the company's powers to act.

The Memorandum contains a number of compulsory clauses:

a. the name of the company;
b. whether the registered office is to be situated in England or Wales or both, or in Scotland;
c. if the company is a public company, that the company is so;
d. the objects clause in the memorandum of association of a company registered under the Companies Act is the single most important provision concerning the company's corporate existence and ability to conduct business. The clause defines the nature and extent of the business which the company may transact. The company may not perform any act or conduct any business which is not expressly or impliedly authorised by the objects set out in its Memorandum;
e. in the case of a company limited by shares or by guarantee, that the liability of its members is limited;
f. in the case of a company limited by guarantee, that each member undertakes to contribute up to a specified amount, normally a nominal amount such as £10 should the company be wound up while the member is a member, or within one year after the member ceases to be a member, towards payment of the debts and liabilities of the company contracted before the member ceases to be a member, of the costs, charges and expenses of winding up, and for adjustment of the rights of the contributors among themselves;
g. in the case of a company having a share capital, other than an unlimited company, the amount of share capital with which the company proposes to be registered and the division of that share capital into shares of a fixed amount e.g. The share capital of the company is £1,000 divided into 1,000 shares of £1 each.

In addition to those provisions which are required by the Act to be stated in the Memorandum of Association, other provisions may be included. This is most commonly done where it is desired to entrench the conditions attaching to certain share rights.

THE ARTICLES OF ASSOCIATION
Every organisation has its own set of rules to govern its internal proceedings.

For a company these are called the Articles of Association. In legal terms the Articles are a contract by which the Company and its shareholders agree to be bound. The Directors (as agents of the Company) have to act within the Articles. The rights and duties of shareholders are set out in the Articles.

Companies limited by guarantee and unlimited companies must register a set of Articles. Companies limited by shares need not actually register a set and if they do not, a model set of Articles called Table A applies. In practice it is very rare and it would be unwise for a company not to have its own articles. Table A is a comprehensive set of Articles pursuant to the Act and covers items such as :-

how shares can be transferred
how notices of meetings can be given
how directors are appointed

and much more.

Table A is drafted mainly with public companies in mind. It requires, for example, a minimum of two directors. Directors are also subject to retirement by rotation. This means that one third of the board retire each year and offer themselves for re-election. This gives shareholders a chance to review the Board every year but can be an unnecessary burden for an owner-managed company. Table A does not take account of new legislation, for example repeal of the sealing requirement under Table A still requires all share certificates to be sealed.

At Stanley Davis, we have drafted a set of Articles which is suitable for the majority of private companies and which is reviewed by Counsel each time legislation changes.

SHARE CAPITAL
Every share company must have an authorised share capital, also known as the nominal share capital. This capital signifies the maximum amount of share capital that the directors can issue.

The share capital would normally be signified in pounds sterling. However, foreign currencies can be used, or a mix of currencies, including the Euro.

For a company limited by guarantee there is no share capital requirement. Instead the members agree to pay a nominal fee should the company be wound up.

When a company limited by shares is being set up, consideration must be given to the number of shares proposed to be issued. This often relates to how the company is to be financed.

For companies which do not have a very high capital requirement, a nominal capital of £100 or £1,000 may be sufficient. Some companies may obtain their capital by means of loans. Other companies may need to issue a certain amount of share capital in order to attract additional funds. It is normal to set a nominal capital at the same figure as or perhaps slightly higher than the proposed issued capital. It is not unusual, however, to have a nominal capital substantially in excess of the proposed issued capital. A potential problem with this however occurs if the company has shareholders who are not directors. It would be normal for the Directors to have authority under the Articles to allot shares to whomsoever they please up to the authorised capital of the company at the time of incorporation. A situation may arise therefore where the directors can allot shares to other than existing shareholders; themselves for example. For the protection of shareholders, it is advisable in this situation to have the nominal the same as the issued capital.

The share capital is normally stated in the Memorandum, expressed as: "Nominal capital" divided into "number" shares of "denomination" each. Unlimited companies state their share capital in the articles (s7(2) Companies Act). Nominal or authorised capital already referred to earlier means the amount of capital that the directors have available to issue. Issued capital is represented by the number of shares actually allotted. A company may for example have an authorised share capital of £1,000,000. It may choose to issue 2 shares, 1,000 shares, 10,000 shares or 1,000,000 shares, or any number between 1 (if it is a private limited company) and 1,000,000. If the company were to issue 100,000 shares of £1 each, its issued capital would be stated as £100,000 and it would have a further 900,000 shares available to issue when and if necessary. The issued capital represents the ownership of the company e.g. shareholder has 10,000 shares out of a possible 1,000,000. His shares represent a 1% ownership of the company.

TYPES OF SHARES
The share capital of a company may be made up of a variety of types of shares, each type carrying different rights. Generally speaking there are three types of shares: ordinary, preference and deferred.

Ordinary share
A share which carries no designation is normally deemed to be an ordinary share. Ordinary shares carry equal rights of dividends, voting and return of capital on the winding up of the company.

There may be sub-classes of ordinary shares, eg 'A' ordinary and 'B' ordinary. These may be created for any number of reasons and their rights allocated accordingly. For example, a client may wish to give employees dividend rights without letting them vote. If he creates 'B' ordinary shares he may make them non-voting but allow them to rank the same or 'pari passu' in all other respects.

Preference Share
This class of share is called preference because the shareholder has a preferential right to a dividend and a return of capital on winding up. For example a 10% preference share of £1 will give the holder the right to a dividend of 10p, provided that there are distributable profits available. Other dividends can be paid to ordinary shareholders only if there is money left over. There are a number of other variable rights and conditions attached to preference shares. The dividend may be cumulative - payable next year if profits are not available this year - or non-cumulative. The shares may be redeemable at some future date or convertible into ordinary shares. There are normally no voting rights or voting rights only in certain circumstances, e.g. on a resolution to wind up the company or if dividends are in arrears, or on a resolution to alter the rights attaching to the shares.

Deferred or founder shares
These shares are normally held by the founders of a business and generally give enhanced dividend or voting rights.

Subscribers
Shares must be taken on incorporation. These are held by the subscribers. The subscribers are the first members or first owners of the company. The Memorandum must be subscribed by one or more persons (the subscribers) (minimum of two for a public company or for an unlimited company). The subscribers are deemed to become members on incorporation of the company. The subscriber is commonly an agent who takes one share and transfers it to the ultimate beneficiary on or shortly after incorporation. The subscriber must sign the Memorandum and identify the number of shares taken. The subscriber's signature must be witnessed.

OFFICERS
Management of the company is the responsibility of the directors and is normally governed by the Articles of Association of the company.

There is no definition in the Act of 'Director'. Generally speaking a Director is held to be responsible for the management of the company, and for the fulfilment of its statutory duties. Although the ultimate responsibility rests with the Directors, the company secretary is normally the person entrusted with ensuring that the Companies Act is complied with.

Every company is obliged to have at least one Director and a company secretary (a sole Director cannot also be the company secretary). Public companies require a minimum of two Directors and private companies a minimum of one under the Act. An additional requirement may be imposed by the Articles of Association. Details of the first directors and secretary must be disclosed to Companies House on statutory forms, together with any changes thereafter. Private companies may appoint corporate directors and secretaries i.e. directors and secretaries who are themselves limited companies or LLPs. Public companies may appoint corporate directors. The appointment of a corporate secretary for a PLC is open to question. There should, however, be no problem for a secretarial company with experience to be appointed in this regard.

MEMBERS
For a private company there is a requirement for only a single shareholder or member. For a public company the minimum number of shareholders is two. It is recommended that two members be in place for a private unlimited company. The director or secretary or some other person or corporate entity can be the shareholder or member.

The subscribers to the Memorandum are the first members. Any company incorporated under the Companies Act may have corporate members provided that such corporate member is authorised by its Memorandum. Where a beneficial owner does not for any reason wish to be seen to be the holder of the shares, he may appoint a nominee. A declaration of trust and a stock transfer form would normally be completed by the nominee; both documents, together with the share certificate remaining in the custody of the beneficial owner.

REGISTERED OFFICE
Every company requires a registered office in its country of incorporation. In the UK, the country of incorporation is either England and Wales, or Scotland, or Northern Ireland. It is not possible to change from one country to another. England and Wales are generally treated as one country, except that a company wishing to take advantage of the Welsh language provisions of the Act may state in its memorandum that its registered office is to be in Wales, in which case the registered office may not move outside of Wales.

The registered office of the company must not be confused with its trading address(es).

Types of Corporate Structure

The Act permits the following structures:

Companies limited by shares
Public
Private

Companies limited by guarantee
Unlimited companies

Public Company

DEFINITION
(The Companies Act 1985)
(a) a company limited by shares or limited by guarantee and having a share capital,
(b) whose memorandum states that the company is to be a public company and
(c) which was registered or re-registered as a public company under the provisions of the 1985 Act or the former Companies Acts.'
(Note: it is no longer possible to form a company limited by guarantee and having a share capital)

USES
Commercial purposes where it is required to raise capital by public advertisement

SHARE CAPITAL
The minimum authorised and issued capital is £50,000. The shares must be paid up to at least one quarter of the value of each share (plus the whole of any premium) before the company can trade.

ARTICLES OF ASSOCIATION
In full or Table A*

DIRECTORS
Minimum of two

SECRETARY
Must be qualified (S286 Companies Act 1985)

SHAREHOLDERS
Minimum of two

COMPANIES HOUSE FILING REQUIREMENTS
Summary of filing requirements:

Annual Return
Accounts
Changes in officers
Changes in registered office
Charges
Special, Extraordinary and some Ordinary Resolutions
*Table A is a model set of Articles prescribed by the Act for share companies

Private Company Limited by shares

DEFINITION
(The Companies Act 1985)
'Any company that is not a public company (S1(3)Companies Act 1985).'

USES
Most commercial purposes

SHARE CAPITAL
There is no minimum authorised capital requirement for private companies. However, it is usual for companies to have an authorised share capital of at least £100. Following the introduction of the Companies (Single Member Private Limited Companies) Regulations 1992, it is possible to incorporate a private company limited by shares (or guarantee) with just one member and the minimum capital is therefore 1 penny.

ARTICLES OF ASSOCIATION
In full or Table A

DIRECTORS
Minimum of one

SECRETARY
Minimum of one

SHAREHOLDERS
Minimum of one

COMPANIES HOUSE FILING REQUIREMENTS
Some exemptions are available in respect of accounts for smaller companies otherwise exactly as for the public company

Company limited by guarantee

DEFINITION
(The Companies Act 1985)
'A company having the liability of its members limited by the Memorandum to such amount as the members may respectively thereby undertake to contribute to the assets of the company in the event of its being wound up'.

USES
Companies limited by guarantee are generally formed for charitable, social or other non-trading purposes. They are widely used by schools and colleges, professional and trade associations, clubs supported by annual subscriptions and management companies for blocks of flats in which all the tenants are members.

SHARE CAPITAL
It is no longer possible to form a company limited by guarantee with a share capital. The guarantee which members agree to pay should the company be wound up is normally a nominal figure e.g. £1 or £10.

ARTICLES OF ASSOCIATION
Usually in full or Table C*

DIRECTORS
Minimum of one

SECRETARY
Minimum of one

MEMBERS
Minimum of one

COMPANIES HOUSE FILING REQUIREMENTS
Some exemptions are available in respect of accounts for smaller companies. No members list is required with the annual return otherwise exactly as the private company limited by shares. * Table C is a model set of Articles prescribed by the Act for companies limited by guarantee as opposed to shares

Unlimited company

DEFINITION
(The Companies Act 1985) 'A company not having any limit on the liability of its members'

USES
Companies which do not wish to file accounts or service companies for professionals where loss of limited liability is irrelevant, and where a formal structure is desirable.

SHARE CAPITAL
No minimum authorised capital is specified but two shareholders are recommended therefore the minimum authorised and issued capital is 2p.

ARTICLES OF ASSOCIATION
Usually in full or Table E*.

DIRECTORS
Minimum of one

SECRETARY
Minimum of one

SHAREHOLDERS
Minimum of two

COMPANIES HOUSE FILING REQUIREMENTS
Accounts need not be filed, nor returns of allotments * Table E is a model set of Articles prescribed by the Act for unlimited companies.

Directors

The Directors must act in accordance with the Articles of Association of the company.

Table A Regulation 70 says 'subject to the provisions of the Act, the Memorandum and Articles, and to any directions given by special resolution the business of the Company shall be managed by the Directors who may exercise all the powers of the Company'.

The appointed Directors assume direct control of all or some of the company's affairs by acting as agent, trustee and perhaps employee.

THE DIRECTOR ACTING AS AGENT
A company cannot act by itself. It requires a medium through which to operate. The Directors act as this medium.
Distinct from agent, however, the Directors can become personally liable e.g. where a Director signs or authorises the signature of a cheque which does not contain the correct full name of the company and which the company fails to honour.

THE DIRECTOR ACTING AS TRUSTEE
Directors occupy a fiduciary position towards the company and must act in the best interests of the company.

THE DIRECTOR ACTING AS EMPLOYEE
Directors may have service contracts and be regarded as employees in respect of employment protection legislation.

There are many references to Directors in the Company Acts 1985 and 1989. However, there is no true definition of the term 'Director'. He is recognised as being responsible for the leadership, strategy, development and success of the company. He is obliged under the Act to maintain records and books of account and to make returns to Companies House for the public record. Failure to comply can result in his disqualification and/or the company being fined or worse, struck from the register. A director is identified by his/her function e.g. Shadow Director, Managing Director, Non Executive Director

Shadow Director
S741(2) Companies Act 1995 - 'any person in accordance with whose directions or instructions the directors of a company are accustomed to act.' A Shadow Director is a person who exercises influence over the company using the Directors but does not himself/herself appear on the public record.

Managing Director
The term 'Managing Director' denotes the most senior management post in a company. In law he/she has no specific powers. Board delegation determines his/her authority and any service contract.

Non Executive Director
All Directors prima facie owe the same duties to the company. There is no distinction in law. Executive Directors will owe additional duties as a consequence of service contracts and have responsibility for the day to day 'hands on' management of the company. This is perhaps the real distinction between Executive and Non Executive Directors.
Non Executive Directors will normally:


not be involved in an executive capacity within the company
provide an objective approach to the company's affairs
report to the shareholders their views on board performance
not hold other directorships in the same commercial sector (without board approval)
lead where conflicts arise in respect of directors pay, boardroom successions etc
be appointed for fixed terms

Company Secretary

Companies incorporated under the Companies Act 1985 must have at least one company secretary. The role of the company secretary is subservient to the Directors of the company and is not a management function.

Responsibility, however, for the corporate compliance of the company would normally fall to the secretary. He would advise on procedure and obligations under the Act and ensure the company did not fall into default.

The role of the company secretary is more fully explored in the Stanley Davis publication entitled 'Corporate Compliance'.

The company registration agent and the transfer of your company

A company registration agent will deal with the formalities surrounding your company formation and will supply you with the necessary statutory forms and advice in relation thereto.

After the name check to ensure availability for registration, statutory forms 288a (Consent to act as Director or Secretary) and 287 (Situation of the Registered Office) will require completion together with information in respect of the authorised share capital and the form of constitution or Memorandum and Articles of Association. The information contained in the statutory forms may be submitted electronically to speed up the transfer of the company. In this case three personal identification criteria must be submitted.

Pursuant to S.13 of the Act the company registration agent will submit the incorporation documents to Companies House applying for registration of your company. Companies House receives all applications for registration and is the body responsible for two main functions: the incorporation, re-registration and striking off of companies and the registration of documents required to be delivered under the Act, the Insolvency Act and related legislation, and the provision of company information to the public. The main office of Companies House is in Cardiff.

A Certificate of Incorporation is produced by Companies House within a few days of the application or within hours if the application is filed electronically. Alternatively the company registration agent may have a list of readymade or 'off the shelf' companies from which you can make a choice. Readymade companies are companies which are already registered and ready for use. Choosing a readymade company can speed up the process should the matter be time critical. Whether you have chosen a readymade company or asked the agent to form a custommade company the agent will normally retain the certificate until you have completed the statutory forms 287 and 288a or provided the relevant criteria to permit electronic filing. In this way your appointment and the resignation of the agent's nominees is simultaneous.

When the company is incorporated it is normal practice for the company registration agent to supply, in addition to the Certificate of Incorporation at least the following items :-

One set of statutory books, incorporating the:
Register of Members
Register of Debenture Holders
Register of Directors
Register of Secretaries
Register of Directors' Interests
Register of Interests in Shares (plc)
Register of Charges

These statutory registers record information in respect of the names and addresses of the directors and shareholders together with details of the shareholdings. The Register of Charges and Debentures provides a diary of secured borrowings. The statutory books must be kept up to date. The company registration agent or the company accountant, solicitor or professional advisor may take on this responsibility on the company's behalf. Financial penalties under the Act are imposed on companies and its officers for non-compliance in this regard. It is the Directors of the Company who will be penalised for non-compliance and not the company accountant, solicitor or professional advisor unless they are themselves also the company directors.

Other non-statutory books may also be included :-

Register of Applications and Allotments
Register of Transfers

The agent will also generally supply several copies of the Memorandum and Articles of Association for distribution to the bank, company accountants, shareholders, directors and other interested parties.
A company seal may be included. There is no requirement for the company to have a seal under the Act but if it does, its use must be regulated and an appropriate article added into the constitution identifying when and under which circumstances it can be used.

What Next...?

Post-incorporation matters
Once the company is incorporated it is a legal entity in its own right. As such it acquires certain privileges and confers many obligations on the Directors. The Directors are responsible for the management of the company and are bound to comply with the law. These notes are a brief overview of some important matters requiring attention.

A meeting of the board must be held, as soon as practicable, to discuss, among other things, the matters below.

SUBSCRIBER SHARE
Where the agent provides a subscriber or subscribers, they will, in effect, generally take up one share each on the incorporation date. A duty-paid, signed stock transfer form will normally be included in the agent's formation package transferring the share to the new owners. The form requires insertion of the transfer date, transferee's details and, since the share is nil paid, signature of the transferee. The transfer must be approved by the board and then registered in the Register of Transfers, Register of Members and, if appropriate, Register of Directors' Interests.

ALLOTMENT OF SHARES
Where shares in addition to the subscriber shares are to be issued, there must be an allotment by the board. The Directors have the power under most standard Articles of Association to allot shares within the authorised share capital for a period of five years from the date of incorporation. At the expiry of that period, or if the authorised share capital is increased, a further authority must be sought from the Company. A return of allotments must be lodged at Companies House within one month of the date of the allotment. A further return is required if shares are allotted for consideration other than cash. The Register of Applications and Allotments, Register of Members and, if appropriate, Register of Directors' Interest must then be written up.

SHARE CERTIFICATES
Share certificates must be issued within two months of the registration of the transfer or allotment of shares. They must be executed either under common seal or by signature of two directors or one director and the company secretary.

DIRECTORS' INTERESTS
A Director is required to notify his/her interest in the shares or debentures of the Company, its holding company and subsidiary companies within five days of the interest arising. A director's interest includes those of a spouse and children under the age of 18 (if not themselves directors).

APPOINTMENT OF BANKERS
Before a bank account can be opened, the bank will normally require sight of the certificate of incorporation and the memorandum and articles of association. A formal resolution must be passed to appoint the bankers and the relevant wording is normally contained on the bank mandate form.

APPOINTMENT OF AUDITORS
A company must have its annual accounts audited by a registered auditor although it may be possible to be exempt from the audit requirement if:
it is dormant, or if it has a turnover of less than £1 million. (£350,000 for accounting period ending before 26 July 2000) The auditor, if required, need not be appointed until after the year end and before the first annual general meeting.

ANNUAL GENERAL MEETING
A company must hold an annual general meeting once in every calendar year with the following exceptions:
a new company need not hold an AGM in the year of incorporation or in the following year provided that the first AGM is within 18 months of the incorporation date private companies may dispense with holding annual general meetings by passing an elective resolution and in addition elect not to lay accounts before members in general meeting.

ACCOUNTING REFERENCE DATE
The company's accounting reference date will be the last date of the month in which the anniversary of its incorporation falls. The date may be changed by notifying Companies House on form 225. A company's first accounts must cover a period not exceeding eighteen months. The accounting reference period must start on the day of incorporation or the day immediately following the end of the previous accounting period. It must end on the accounting reference date or a date up to seven days either side.

CHAIRMAN
It is usually preferable, but not essential to appoint a chairman. Under normal standard articles, the chairman has a casting vote. This can be removed by inserting the appropriate provision in the Articles of Association of the Company.


General

ACCOUNTS
Accounts are required for all limited and unlimited companies, whether they are trading or not.

The accounts must be approved by the Board of Directors and signed on behalf of the Board by a Director of the Company.

All limited companies must deliver a set of accounts to the Registrar of Companies.

Provisions exist in the Act for smaller companies to be exempt from filing full accounts.

Unlimited companies need only deliver accounts if the company is a subsidiary of, or a parent company of, a limited company, or has operated a trading stamp scheme during the accounting reference period in question.
Some companies need not file audited accounts - see 'Appointment of Auditors'.

The first set of accounts must be filed within 22 months of incorporation (private company) or 19 months (public company) and subsequently within 10 months (private) or 7 months (public) of the year end, subject to extensions being possible for companies with overseas interests.

ANNUAL RETURN
Each year a company must prepare and submit to Companies House a summary of its current officers and shareholders together with the filing fee. The first annual return will normally be on the anniversary of incorporation. After incorporation and in time for the filing of the Annual Return a reminder Annual Return will be sent by Companies House which will contain the information taken from the public record. This must be checked for accuracy, signed by an officer of the company and returned to Companies House within 28 days of the date of the return.

PENALTIES
Failure to deliver an annual return or accounts to the Registrar within the statutory time limit can render the Directors liable to prosecution and a fine, in a civil action. In addition, the Registrar now imposes automatic penalties on companies who deliver their accounts late.

The following penalties are payable on a one day late basis with no provision for negotiation.
Delay Public Company Private Company
Accounts up to 3 months late £500 £100
Accounts up to 6 months late £1,000 £250
Accounts up to 12 months late £2,000 £500
Accounts more than 12 months late £5,000 £1,000

If no annual return or accounts are filed the company may be struck off the Companies Register and dissolved. The assets of the company will subsequently become the property of the Crown, the Duchy of Lancaster or the Duchy of Cornwall and bank accounts will be frozen. Restoration to the Companies Register is possible but this involves material expense in legal costs.

The Registrar of Companies has a very efficient monitoring system and it is therefore important that statutory matters are dealt with promptly.

CORPORATION TAX
After incorporation a company is required to complete and submit to the Inland Revenue a 'New Company Details' declaration giving information about the company and its directors.

VAT REGISTRATION
The current threshold on application for registration is £60,000. The company would normally make application to the Customs & Excise Office local to the Registered Office of the company.

CHARGES
A company must register a charge, mortgage or, debenture within 21 days of its creation.

CHANGES IN COMPANY OFFICERS
Appointments, resignations and changes in particulars (e.g. home addresses of the directors and secretary) must be notified to the Registrar on the relevant form 288 within 14 days of the event. The information can be filed electronically by providing three identification criteria instead of a signature.

CHANGES IN REGISTERED OFFICE
A change in the registered office must be notified to the Registrar on form 287. The change takes effect upon the notice being registered by the Registrar, but until 14 days after it has been registered, documents may continue to be validly served at the previous registered office address. The information can be filed electronically.

LETTERHEADS
The following items are required, by section 351 Companies Act 1985, on all business letters and order forms:-

• full name of the registered company even where the company uses a trading name
  
• place of registration (eg. 'Registered in England and Wales' or 'Registered in Scotland')
  
• registration number as shown on the certificate of incorporation
  
• address of the registered office
  
  

In addition the following conditions apply :-

• if the company is a charity and does not have the word 'Charity' or Charitable' in the title, the fact must be stated
  
• if the company is an investment company within the meaning of S266 Companies Act 1985, the fact must be stated
  
• if reference is made to the share capital it must mean paid up share capital
  
• if directors' names are printed on the letterhead, all directors must be included
  
• if the company is exempt from using the word 'Limited', the fact that it is a limited company must be stated
  
  

How Stanley Davis can help?
Stanley Davis is a national company registration agency with offices in Leeds, London, Manchester and Nottingham.
We incorporate companies for a huge variety of purposes on a daily basis.
We have the systems and knowledge to enable swift and extensive checking and advice on proposed company names. We maintain precedent articles, contracts and agreements and have the technical know-how to enable your new company to be incorporated or your company reconstruction to be carried out.

Our Memorandum and Articles for a private company limited by shares carry the accredited 'Crystal Mark' for Plain English enabling a clearer understanding of the constitution of the company.

Readymade ('off the shelf') companies, sameday incorporations, specialist companies and company re-registrations and restructuring are all within the remit of Stanley Davis.

We can file your company documents at Companies House electronically which speeds up the transfer procedure and enables you to be in business sooner.

We deal with post incorporation matters from the first board meeting to exit provisions for the key shareholders and we are familiar with the prevailing company legislation and abreast of proposed new legislation.

We are your leaders in the company formation field and are ready and waiting to take your instructions.

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Stanley Davis are a formations company that have been providing agent services to accountancy firms, legal partnerships and members of the general public that wish to form companies for over forty years and are trusted throughout the industry for a cheap, efficient and reliable registration service.
To find out more about the company and the many services they provide please visit the Stanley Davis Corporate website.

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