Your Questions

This section deals with the most commonly asked questions for a Private Limited Company with a share capital. This is by far the most popular trading vehicle with a limited liability. Questions on other types of companies are dealt with in their specific pages.

Disclaimer

The information available on this site is not intended to be comprehensive, and many details which may be relevant to particular circumstances have been omitted. Accordingly it should not be regarded as being a complete source of company law and information, and web users are advised to seek independent professional advice before acting on anything contained herein. Apex Company Services Limited cannot take any responsibility for the consequences of errors or omissions.

Background

What is a limited company?

A limited company is a legal entity formed for the purpose of carrying out any business as decided by the director(s). A limited company is a company that limits the personal liability of its officer(s). The people who combine to form the company normally act as the directors and are responsible for managing the company. They can also be shareholders each taking an agreed proportion of the shares. The shareholders are the owners of limited companies and directors are employees of the company, managing the company on behalf of the shareholders.

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What are the advantages of a limited company?

Limited Liability

A limited company is treated as a ‘person in law’ and is responsible for its own debts. Creditors can claim only the company’s assets and not the assets of any of the officers of the company.

If a limited company becomes insolvent and is forced to “wind up” only the property of the business can be used to try to clear its debts. The officers of the company retain their company salaries, they cannot be made bankrupt and they are free to form a new company.

In contrast, if you trade as a partnership or as an individual, creditors can claim all your personal property to satisfy debts, and where this is insufficient, you can be made BANKRUPT. An un-discharged bankrupt is forbidden from starting another business or becoming a director of a limited company.

Tax Benefits

There are a number of tax advantages in forming a limited company. Its profits are not normally subject to the higher rates of personal income tax. Corporation tax is currently set at a small companies rate of 21% for profits between £0 and 300,000.

Raising Finance

Finance can be raised by selling off issued shares. The value of the shares depends on the viability of each individual limited company.

Continuity of Business

The death or resignation of any director does not affect the structure of the company which continues to trade as before. The shares of the deceased director pass to others as provided for by the Articles of Association, or by a shareholders’ agreement.

Protection of Business Name

Registration protects your company name. By law no other company is allowed to use it.

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Company Formation

What is company formation?

Company formation is the process by which a limited company is incorporated and becomes a legal entity separate from it owner(s) (i.e. the shareholders). This process is commonly referred to as company formation, company incorporation or company registration.

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Company Names

How do I choose a company name?

An index of company names is kept by the Registrar of Companies and must be checked to make sure that the proposed name will not be the same as the name of an existing company. In this regard use our name check service which also checks for same as names, sensitive words and expressions.

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What are sensitive words and expressions?

These are words that cannot be used in the company name without justification or permission from the relevant authority. You may need to supply further information to justify the use of certain words or you may need letter of permission from the relevant authority. Our name checking service will alert you if your chosen name contains a sensitive word in which case you should contact us by email enquiries@eformations.co.uk for further advice.

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What does ‘the same as’ mean?

A name is the ‘same as’ another name appearing on the index of company names if it is either identical to an existing name or would be deemed to be essentially the same because the name differs only by minor elements which the law requires us to disregard when comparing the two names. For example, the Registrar would disregard plurals or certain types of punctuation marks when comparing names.

For example, if the name Hands Limited is already registered, then the following would be rejected:

  • Hand-S Limited or Ltd;
  • H and S Public Limited Company (or PLC);
  • H & S Services Limited (or Ltd);
  • @H & S Limited (or Ltd);
  • Hands: Limited (or Ltd);
  • # H & S Limited (or Ltd);

These are just a few examples of instances where company names are considered to be the same. Please use our name check service to verify if your desired name is available.

Our name check service takes into account all the rules defined by Companies House.

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Are there any exceptions to the ‘same as’ rules?

Yes. ‘Same as names’ are permitted where 2 or more companies are part of the same group. For example, if there is a company name called Keelo Limited then Keelo UK would normally fall under the ‘same as names’ rule and the Registrar of companies will not give permission for it to be incorporated. However, if the owners of Keelo Limited want to incorporate another company called Keelo UK Limited, they will be granted permission to incorporate it provided they can give confirmation on their company letterhead that Keelo UK Limited will be part of the same group of companies.

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Are there any other restrictions on company names?

The company names must end in ‘Limited’, ‘Ltd’ or their Welsh equivalents ‘Cyfyngedig’ and ‘Cyf. The word limited or its equivalent must not appear in the middle of company name.

The name must not be offensive or imply criminal activity.

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Can someone take objection to a company name?

Yes.

Once a company name is registered, another limited company can object because the name is ‘too similar’ to their own. Companies House will consider the objection and can order a company to change its name. A change of name order can be made for up to 12 months after company formation.

It is not possible to check for all the variables of a company name you should use your judgment when searching for similar names. Our name check service checks for the name acceptability by Companies House but cannot alert you to existing companies that are likely to object on the grounds of similarity of name.

You should be aware that if you adopt a name which misleads the public into believing that your business is that of another business – for example, trading as a shop under ‘Harrods’ – then you may face a legal action for ‘passing off’ by the person whose business you have affected.

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Can a company name be changed?

Yes.

Once a company name is registered it can be changed by completing and filing form NM01 along with a Special Resolution. Change of names cannot currently be done electronically but Companies House are taking steps to allow this in the near future. Approximate time scale for change of name is 5-7 working days.

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How is the company name displayed?

A certificate of incorporation is produced by Companies House once the process of company formation is complete. Companies House will print the company name on the certificate of incorporation. However, you can display the name in lower or upper case on your company stationery.

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Guidelines for Company Stationery?

Your company’s letter heading must show:

  • Company name, exactly as registered at Companies House
  • Company number
  • Where the company is incorporated (England & Wales or Scotland)
  • The registered office address

If the letter head shows the names of the directors, it must mention all of them.

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Requirements of Company Formation

At a glance

A private limited company must have:

a) A registered address within the UK which must be a valid postal address and not a mail box,

b) A minimum of; one director

c) A minimum of one shareholder holding at least one share in the company.

d) The sole director may also be the shareholder.

e) Corporate directors are allowed provided there is another director who is a named individual.

This means that a single person can own and run a UK private limited company.

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Is it possible for one person to own and manage a UK limited company

Yes. A private limited company can be owned and managed by one individual.

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Who can become a director?

A director can be of any nationality and can be resident in or outside of theUK. An individual or a corporate body can act as director of a limited company. However if a corporate director is appointed then a second individual director will need to take office.

It is generally up to the shareholders to appoint, as directors, people they believe will run the company well on their behalf, but they cannot appoint:

Anybody who is currently disqualified by a Court from acting as a company director. An undischarged bankrupt. Anybody under the age of 16. For a Plc, anybody over the age of 70 unless specifically approved by a general meeting of the company.

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Who can be a secretary?

Limited companies are no longer required to have a company secretary. However if the directors decide that a secretary should be appointed then the secretary can be of any nationality and can be resident in or outside of the UK. A corporate body may become a secretary of a limited company. For private limited companies a company secretary does not require any qualification or previous knowledge.

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Can the director and secretary be changed after company formation?

Yes. You can resign a director or secretary by completing and filing form TM01 (director) or TM02 (secretary). You can appoint a director by completing and filing form AP01 (individual) or form AP02 (corporate). To appoint a secretary complete and file form AP03 (individual) or form AP04 (corporate).

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What are the responsibilities of a company director?

The management of all limited companies is undertaken on behalf of the shareholders by the director(s). The director(s) have a duty to manage the affairs of the limited company for the benefit of all the shareholders and not just some shareholders. They must always act in their company’s best interests, even if these conflict with their own interests.

Directors are subject to a number of onerous legal duties and carry responsibility if things go wrong. Every company director has a personal responsibility to ensure that statutory documents are delivered to Companies House as and when required:

Accounts must be submitted every year; annual returns must be submitted every year; any changes of directors or secretaries or in their particulars (Forms AP/01/02/03/04, TM/01/02, CH/01/02/03/04); and any change of change of registered office (Form AD01).

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What are the responsibilities of a company secretary?

The company secretary usually undertakes administrative duties:

  • Maintaining the statutory registers.
  • Ensuring that statutory forms are filed correctly with Companies House.
  • Providing members and auditors with notice of meetings.
  • Sending copies of resolutions to Companies House.
  • Supplying a copy of the accounts to every member of the company, every debenture holder and every person who is entitled to receive notice of general meetings.
  • Keeping, or arranging for the keeping, of minutes of directors’ meetings and general meetings.

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Does a company secretary have any powers?

No, but the company secretary is allowed to sign prescribed forms on behalf of the company, make statutory declarations and sign the annual return.

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What rights does a company secretary have?

They depend on the terms of his or her agreement with the company. The secretary has no special rights under the Company Law.

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What is a subscriber?

A subscriber is a person who subscribes to the Memorandum of Association and agrees to take up shares in the company at the time of company formation. Effectively, a subscriber(s) is the first shareholder(s) of a limited company.

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What is registered office?

Like a natural person, a company has a ‘home’ address where legal documents and notices are served. The registered office must be in the country where the company is incorporated. So companies incorporated in England and Wales must have a registered office in England or Wales. If you wish to maintain the registered office in Scotland, the company must be incorporated in Scotland.

The registered office must be a physical location – not just a post office box – as people have the right to visit the office to deliver documents there by hand.

It is important that the mail sent to the registered office receives attention. This will include reminders and annual return forms from Companies House as well as demands for corporation tax from Inland Revenue. The registered office can be maintained at home or at the trading address of the business. However, if you do not have business premises and do not wish to use your home as company’s registered office you could benefit from our registered office service. Please select this additional service when you place your order for company formation.

The company may change its registered office at any time by completing form AD01 and submitting it to Companies House.

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What are Memorandum and Articles of Association?

These are two documents: the Memorandum of Association and the Articles of Association.

The Memorandum details the subscribers of the Company.

The Articles of Association detail the provisions relating to the regulation of the company in terms of the rights of its members and the authority of the directors.

These two documents are printed and bound together as one document and are referred to as the Memorandum and Articles of Association. We, the company registration agent will provide a model set of Memorandum and Articles of Association suitable for most types of business.

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What is Share Capital?

It is the capital of the company contributed or to be contributed by shareholders.

Issued capital is the value of the shares issued to shareholders. The amount of issued capital is no longer restricted under Companies Act 2006. After the initial shares have been issued further shares can be allotted by completing and filing form SH01

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Can Share Capital be in any currency?

Yes.

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Can currency of the share capital be changed after company formation?

No. Not easily.

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Post Incorporation Queries

What are the various forms in my company formation package?

When you receive your company formation documents they will include:

Form AA01 – this form should be used if you wish to change the accounting reference date. You do not need to complete this form if you want the company’s financial year end to be one year from its date of incorporation.

Form SH01 – this form should be used if you wish to allot further shares. One or two shares would already have been allotted as part of the procedure of company formation. You do not need to complete this form if there is no further requirement to allot shares at this stage.

First Minutes of the Board Meeting

The Minutes of the Board Meeting outline the details with which the company formation was carried out. It will outline the names of the officers and shareholders of the company as well as the registered office.

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Annual Compliance

Do dormant companies need to file accounts?

Every limited company must file the following documents regardless of whether any trading has taken place:

Annual return with Companies House. Annual Accounts with Companies House. Corporation Tax Return with Inland Revenue.

Dormant companies have to follow the same rules as for trading companies. The same penalties will apply if accounts are submitted late. Companies will be struck off the Register if annual returns or accounts are not filed on time.

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What is an annual return (Form AR01)?

An annual return is a snapshot of certain company information at the made-up date. It is separate from a company’s annual accounts. An annual return must contain the following information:

The name of the company;

its registered number;

the registered office address of the company;

the address where certain company registers are kept if not at the registered office;

the principal business activities of the company the name and address of the company secretary;

the name, usual residential address, service address, date of birth, nationality and business occupation of all the company’s directors;

the date to which the annual return is made-up (the made-up date).

And if the company has share capital, the annual return must also contain:

the nominal value of total issued share capital;

the names and addresses of shareholders and the number and type of shares they hold or transfer from other shareholders.

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How do I obtain the Annual Return form?

Form AR01 is available to download from our website and from Companies House. It is also possible to file the annual return electronically a service that we can assist you with.

Companies House can strike a limited company off the Register for non-filing of an annual return.

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What does a set of accounts include?

Generally, accounts must include:

a profit and loss account (or income and expenditure account if the company is not trading for profit); a balance sheet signed by a director; an auditors’ report signed by the auditor (if appropriate); a directors’ report signed by a director or the secretary of the company; notes to the accounts; and group accounts (if appropriate).

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What is accounting reference date (ARD)?

Accounting reference date is the financial year-end. It is also the date that determines when the accounts are due for delivery to Companies House.

For all new companies, the first accounting reference period is automatically set as the first anniversary of the last day in the month in which the company was incorporated. For example, if the company was incorporated on 10 June 2003 its ARD would be set at 30 June, and the first accounts would cover a period from 10 June 2003 to 30 June 2004 – or up to seven days either side of that date. Although the ARD is set on company incorporation, you can change it using form AA01.

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What period must the accounts cover?

A company’s first accounts cover the period starting on the date of incorporation, not the first day of trading. They end on the accounting reference date (ARD) or up to 7 days either side of that date.

Subsequent accounts start on the day after the previous accounts ended. They finish on the ARD or up to 7 days either side of it.

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How long do I normally have to file my accounts?

Unless you are filing your company’s first accounts the time normally allowed for delivering accounts to Companies House is:

for a private company, 9 months from the ARD; for a public company, 6 months from the ARD.

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What if the accounts are delivered late?

There is an automatic civil penalty for late filing. The amount depends on how late the accounts arrive and whether the company is private or public. The fixed penalties are as follows:

Length of delay (measured from
the date the accounts are due)
Private
company
Public
company
Not more than 1 month £150 £750
More than 1 month but not more than 3 months £375 £1,500
More than 3 months but not more than 6 months £750 £3,000
More than 6 months £1500 £7,500

Double penalties

The amounts set out in the table above will be doubled in cases where:

  • The accounts are filed late under the Companies Act 2006; and
  • The previous year’s accounts under the 2006 Act (i.e. for a financial year beginning on or after 6 April 2008), were also late.

For example:

A private company files accounts which are more than 6 months late under the Companies Act 2006 and incurs a penalty of £1,500.

The following year, the same private company files accounts 2 months late under the Companies Act 2006. We double the usual penalty of £375 for that set of accounts and the company incurs a penalty of £750.

The double penalty will only apply to accounts not filed or filed late in 2 successive financial periods under the Companies Act 2006.

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Who can approve and sign accounts?

The accounts must be approved by the company’s board of directors and signed before they are sent to Companies House.

The balance sheet must be signed by a director, with any statements about accounting or filing exemptions appearing above the director’s signature. The directors’ report, if one is required, must be signed by a director or the company secretary. If an auditors’ report, special auditors’ report or accountants’ report is attached to the accounts, then it must state the names of the auditors or accountants and be signed by them.

To be a small company, at least two of the following conditions must be met:

annual turnover must be £5.6 million or less; the balance sheet total must be £2.8 million or less; the average number of employees must be 50 or fewer.

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Do Accounts have to be filed with Inland Revenue?

Yes. A set of accounts must also be filed with Inland Revenue and a Corporation Tax form must also be completed. A UK company must normally pay corporation tax on its profits. This is currently 21% for profits up to £1, 500, 000.

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Do we need an accountant to prepare company accounts?

No you don’t. But given the complex nature of taxation and requirements laid down by Companies House regarding the formant of accounts presentation etc it is best if you take professional advice, saving your valuable time to run your business. Please contact us on 0870 042 1693 for professional advice and a quote for accounts preparation.

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