How to Incorporate a Company. What You Need to Know
Are you thinking about establishing a business in the UK? Where do you start? This note will give you a brief understanding of the Companies Act 2006 and what you need to know in order to set up a business in the UK. The Companies Act 2006 provides for three types of companies to be established:
- Company limited by shares;
- Company limited by guarantee; and
- Unlimited Company.
The most common form is the company limited by shares, which will be discussed here.
Tailor-Made Company or Shelf Company
A company is registered by filing the necessary documents (listed below) and paying the required fee at Companies House. The company is brought into existence when the Registrar of Companies (Registrar) issues the certificate of incorporation. The prospective owners of the company can either register a new company with documents that are specifically tailored to their requirements (a tailor-made company) or buy a company that has already been incorporated but has not yet traded (a shelf company).
Electronic Incorporation: Companies House now has an electronic filing service for new incorporations which allows for electronic submission of the necessary documents. The applicant needs to be registered to file electronically with Companies House and to create a Software Filing credit account. All electronically submitted incorporation documents must be authenticated by the company concerned.
Company Constitution: A company’s constitution and the rules governing its administration are set out in its memorandum of association (memorandum) and its articles of association (articles), which are mandatory for any company.
Memorandum of Association: The memorandum of a company formed under the 2006 Act is very different from companies that were formed under the previous 1985 Act. The memorandum under the 2006 Act simply states that the subscribers wish to form a company under the 2006 Act and have agreed to become members and, in the case of a company that is to have a share capital, to take at least one share each. The memorandum must be in the prescribed form and must be authenticated by each subscriber. The intention is that the memorandum should be instantly recognizable as such and that it should not contain extra information (if it does, the application for registration is likely to be rejected by the Registrar).
Articles of Association: All registered companies must have articles of association. A company must register articles unless it is a company to which model articles apply as a result of section 20 of the 2006 Act (not discussed here). Companies can choose to include provisions of model articles in their articles, with or without modification, whether or not they are the relevant model articles for that type of company. The default articles applicable to a company depend on the kind of company it is when it is formed. Where a limited company is formed and articles are not registered or articles are registered but do not exclude or modify the relevant model articles, the relevant model articles will form part of that company’s articles. The company’s internal rules will be set out in the articles. The company’s objects will be unrestricted unless otherwise restricted by the articles.
Incorporation of a tailor-made company
Registration documents: To register a private limited company, Form IN01(for registration) and the memorandum of association must be lodged with the Registrar. Form IN01 includes:
The proposed company name: Form IN01 provides for the company’s proposed name to be stated in full as required by section 9(2) of the 2006 Act. Under section 66 of the 2006 Act, a company cannot be registered with a name under which an existing company is registered. Any applicant should therefore search the index of company names at Companies House to check that its preferred name is not already registered by another company. The applicant must also state on form IN01 whether the proposed name contains sensitive or restricted words that require approval.
The type of company: The applicant must state whether the company is to be a public or private company, limited by shares or guarantee or is to have unlimited liability.
Details of the registered office: The application for registration must state whether the registered office of the proposed company is to be in England and Wales, Scotland or Northern Ireland and must contain a statement of the intended address of the company’s registered office. A company is required to have a registered office at all times to which all communications and notices may be addressed.
Articles of association: Every company must have articles of association which it must register otherwise a set of the model articles apply in default of registration. Form IN01 allows a new company to indicate whether it is adopting model articles (and if so which version (public company, private company limited by shares or private company limited by guarantee)) in their entirety or with amendment or whether it is adopting entirely bespoke articles. Where the company intends to amend the model articles in some way or is adopting bespoke articles, a copy of the amendments or bespoke articles (as applicable) must accompany the application for registration.
Details of directors and secretary: The application for registration must contain a statement of proposed officers of the company. The wording is set out in section 12 of the Act. Details of the first directors. Private companies must have at least one director and public companies must have at least two directors. A company must have at least one director who is a natural person and all directors must be at least 16 years of age. Form IN01 sets out the particulars that must be provided:
- full name and title including any former names;
- date of birth;
- country or state of residence;
- occupation (if any); and
- service and usual residential addresses. Directors must give a service address and their usual residential address if different from the service address. A director does not have to disclose his residential address on the public register at Companies House. Instead they can give another address as their service address, for example the address of the company’s registered office. The director’s usual residential address must be notified to Companies House as every company must keep a register of directors’ residential addresses but will not be on the public register unless the director specifies his residential address as his service address.
Directors or secretaries who are corporate bodies or firms must state the corporate or firm name, the registered or principal office. Companies in the European Economic Area must state where the company is registered and its registration number. Companies outside the EEA must state particulars of the legal form of the company or firm, the law by which it is governed, and, if applicable, where it is registered and its registration number.
Statement of capital and of initial shareholdings: If the company to be registered is to have a share capital, it must deliver a statement of capital and of initial shareholdings. Form IN01 includes these statements.
Effect of registration: If the filed documents are in order, the Registrar will issue a certificate of incorporation with the official number of the company and the date of incorporation. This is evidence that the company is properly constituted and that the requirements under the 2006 Act in respect of registration have been complied with.
– – –
The law firm Graf & Partners (Germany) has been assisting businesses and private clients in Germany and in the UK since 2003. Do not hesitate to contact us by calling German solicitor Bernhard Schmeilzl on +49 941 463 7070.