The Limited Company Flashcards
How is a company formed?
To incorporate a new company, the applicant must complete Companies House form IN01 and submit it, along with a document called a memorandum of association, and possibly the company’s articles of association, to Companies House with the applicable fee
The application can be made either electronically or on paper
If requirements of CA 2006 have been met when applying to Companies House, the company is incorporated, and a certificate of incorporation is issued.
What details are contained in the certificate of incorporation?
The name and registered number of the company
The date of its incorporation
Whether it is a limited or unlimited company and, if it is limited, whether it is limited by shares or by guarantee
Whether it is a private or public company
Whether the company’s registered office is situated in England and Wales (or in Wales), in Scotland or in Northern Ireland
Give some details about the process of choosing a company name for the IN01 form.
Company name must end with limited or Ltd (private) or plc/public limited company (public)
Company name can’t be same as an existing company or too similar to be considered the same
Company name must not be prohibited (offensive words, some letters/symbols, exceed 160 characters)
Some names need permission by SoS (name suggests connection with government department or authority, name denotes regulated profession or refers to certain geographical area (dentist/British)
Offence for a company not to respond to a direction to change their name within 28 days of being directed to by CH
Companies can trade under a different name to the registered name
Give some details about the registered office for the IN01 form.
Company will need a registered office and to put this address in Form IN01 - common to have solicitor or accountant’s address here, as official documents and CH correspondence will be sent there
Registered office is also where certain records (board minutes and general meeting minutes + usually statutory books (includes register of members, directors and their addresses)) are kept
What is the role of a company secretary and do private companies require one?
Private companies don’t need one, but their name and service address must be added to IN01
They file documents at CH and keep board minutes
What other name is given to the first shareholders of a company? How many shareholders does a company need?
Subscribers
A company can exist with a sole shareholder
How many directors does a company need?
Private company - at least 1 director
Public company - at least 2 directors
What is a company’s statement of capital?
Means information on shares. Must provide (in IN01):
1) Number of shares of each type the company has and their nominal value
2) Names and addresses of all shareholders, known as subscribers
3) They must also give information on rights of the types of shares (prescribed particulars), including
- what share of dividends they receive;
- whether they can exchange (‘redeem’) their shares for money;
- whether they can vote on certain company matters; and
- how many votes their shares entitle them to
What is a company’s constitution?
Set of rules which govern the company. Comprised of:
1) Memorandum of association
- Signed statement that the subscribers wish to form a company and agree to become a shareholder and take one share each
- Largely a formality and has little actual impact
2) Articles of association
- Company rulebook
- There are Model Articles of Association to aid companies
- They apply by default, but if they want to depart from them at all, they must supply their own articles when applying to register the new company
- Table A articles were standard for companies incorporated under the Companies Act 1985 (pre CA 2006) and have some differences to the Model Articles
3) Certificate of incorporation
4) Current statement of capital
5) Copies of any court orders and legislation altering the constitution
6) Shareholders’ resolutions affecting the constitution
7) Certain agreements involving shareholders
How can the articles of association be amended?
Shareholders can amend them by special resolution (decision passed by a majority of 75% or above of them)
Both the special resolution and amended articles must be filed at Companies House within 15 days (of being passed/of taking effect)
The amended articles take effect as soon as the company adopts them by special resolution
What three options do companies have on incorporation in relation to the articles they wish to use?
1) They can adopt the Model Articles in their entirety. If they choose this route, they do not need to file a copy of the Model Articles; they can just tick the relevant box on the IN01 form to indicate that the Model Articles will apply.
2) They can adopt the Model Articles with some amendments. The company’s articles would state that the Model Articles apply in their entirety save for the provisions listed, followed by a list of the aspects of the Model Articles which they wanted to exclude and a list of replacement provisions.
3) They can supply entirely bespoke articles, which they submit alongside IN01
If there is a conflict between the articles of association and the Companies Act 2006, which prevails?
Companies Act, due to Parliamentary supremacy
What are ‘persons with significant control?’
IN01 must detail if there is someone with significant control, which means they:
- Hold more than 25% of the shares
- Hold more than 25% of the voting rights
- Hold the right to appoint or remove a majority of the board of directors of the company
- Have the right to exercise, or who actually exercise, significant influence or control over the company
They also need to note if they hold more than 25%, more than 50% or 75% or more of shares/voting rights if these apply
- 25% - 50% - can block special resolutions alone
- 50% - 75% - can pass or block ordinary resolutions on their own
- 75% or more – can pass special resolutions alone
When does the company become a separate legal person?
When Companies House issue a certificate of incorporation
How can a private company convert to a public company? What must applicants file at Companies House to achieve this?
The special resolution (which shows approval of re-registration, alters the name and articles to a form suitable for a public company) - they must satisfy share capital requirements at this point too
An application for re-registration on Form RR01, which includes a statement of compliance;
The fee for re-registration;
The revised articles (s 94(2)(b) CA 2006);
A balance sheet and a written statement from the company’s auditors, and a valuation report on any shares which have been allotted for non-cash consideration between the date of the balance sheet and the passing of the special resolution
What are shelf companies?
This is a company, which has already been set up, usually with two directors and shareholders, each of whom owns one ordinary £1 share. It is ready for a client for needs a company quickly and would then become a functioning company
The directors and initial subscribers will be employees of the law firm
After incorporation as a company, what various steps/matters will the company consider and decide on?
Chairperson – may or may not have one; they get a casting vote if a board resolution is tied
Bank account – who can spend the company’s money, how much can they get at once
Changing the company name – likely if it is a shelf company; requires special resolution of shareholders, filed with form NM01 and a fee
Accounting reference date – on incorporation, the date up to which the company must prepare annual accounts is the last day of the month of incorporation, but this can be changed by passing a board resolution, then filing AA01 at CH
Auditor – companies classed as small are exempt from audit, but otherwise, a company will need to appoint an auditor to help prepare annual accounts
Tax registrations – CH automatically notifies HMRC of a new company registration; HMRC sends introductory pack concerning tax affairs to registered office, which will include required registration for corporation tax
PAYE and National Insurance – directors need to register the company with HMRC to arrange for the deduction of income tax from employee salaries under PAYE and for the payment of NI contributions
VAT – company must register for VAT with HMRC
