10 Easy steps to setting up a limited company
A great source of information is Companies House itself. In order to register a new limited company, an IN01 application form will need to be completed. This can be done either on line (for a £12 fee) or in hard copy (for a £40 fee), by completing the form and sending it to Companies House. The form will ask for a variety of information including the following:
1) A company name. Deciding on a company name is often easier said than done. In the 12 months leading up to March 2017 there were 644,750 new company incorporations in the UK and 436,526 dissolutions. The total number of companies registered with Companies House reached a massive 3,896,755. So finding an available name that fits with the ethos of your proposed business is no easy feat.
Coupled with this, there are strict rules regarding what words and phrases that can be used and expressions that require approval. The Registrar will not register a name that would constitute a criminal offence, is offensive or is “the same as” a name already registered on the index of company names. It is essential therefore to make a search of the index of company names before the choice of name is finalised. The Companies House website includes a free search facility to check the chosen name has not already been taken and does not contravene the rules. Bear in mind that an initial registration of a name does not guarantee that it is protected from challenge by a third party at a later date.
2) Company Type. It is necessary to specify the type of company you are forming and your intended principle business activity. If you are starting a limited company you will need to state that the company will be a private company limited by shares (or guarantee where appropriate). Information as to the company’s business activities will be with reference to the list of classification codes found on Companies House website.
3) Identify your office address for the business. The application for registration must state whether the registered office of the proposed company is going to be in England and Wales, Scotland or N. Ireland, and must contain a statement of the intended address. This is where all official communications will be sent. It is possible to use your home address or accountants address (with their permission). Any future change of address must be registered with Companies House. All limited companies must also have a register of members, which should be stored at the registered office unless a form ADO2 is completed. This allows you to nominate an alternative address for inspection of the register of members; for example at your nominated accountants.
4) Identify the company directors. Every company must have at least one director; it is not necessary to have a company secretary (this is a requirement for public companies, not private companies). In small companies the directors are often also the shareholders, however it is not necessary for directors to also own shares in the company. The application for registration must contain the statement of proposed officers of the company. The following information must be provided: title, full name and former names, date of birth, country or state of residence, nationality, occupation, service and residential addresses.
5) Statement of capital and initial shareholdings. You will be required to provide details of the company’s finances. A statement of capital and initial shareholding sets out the following information:
- The total shares taken by the subscribers on formation and the total nominal value of those shares, together with the total amount (if any) that will be unpaid on those shares.
- Each class of shares in the company.
- The number of shares in each class.
- The total nominal value of the class.
- What voting rights, rights to dividend, rights to capital distribution and any redemption rights.
6) Statement of initial significant control. UK companies are required to identify and keep a record of people who own or control their company and are required to keep a register of people with significant influence or control in relation to them (PSC). This information must be submitted on the IN01 form. A PSC is defined as someone who holds more than 25% share in the company; or an individual who holds more than 25% of voting rights in a company; or an individual who holds the right to appoint or remove the majority of the board of directors. There are other situations were a PSC may exist, for example where an individual exercises significant influence in some other way. If there are no PSCs within the company this should also be recorded on the IN01. For more information on the rules relating to significant control click here.
7) Statement of compliance; this is included in the IN03 form and must be signed by every subscriber to the memorandum of association. It contains a declaration that the requirements of the Companies Act 2006 as to registration have been complied with.
8) Private companies can elect to keep information on a central register, this may be made on incorporation by the subscribers or at any time following incorporation.
9) Articles of association. Every company must have articles of association which it must register. It is possible to simply adopt the “model articles”, entirely or with amendment, or to draft entirely bespoke articles. Where amended model articles or bespoke articles are being adopted a copy must be attached to the IN01. This is a very important document as it sets out the rules under which the directors and shareholders will run the company. Even if the model articles are being adopted care should be taken to read and understand the obligations contained within. Bear in mind that you can only register your company on line if you are adopting the model articles of association. Seek the assistance of a lawyer if you are interested in bespoke articles.
10) Memorandum of association. An application for registration must include a proposed memorandum of association. This must be in the prescribed form and will state that the subscribers wish to form a company under the Companies Act 2006 and have agreed to become members. This is a legal statement and must be signed by all the initial shareholders agreeing to form the company.
Once you have registered your company, it is very important to ensure that you comply with the various rules regarding filing of accounts, record keeping and the obligations and responsibilities of being a company director.
If you need advice on setting up a company or are concerned you are not keeping the correct records, please contact Julia Furley on 0207 388 1658 or by email at email@example.com.
Julia Furley, Senior Barrister