Companies House has recently published its annual report and accounts for 2013/14 which shows that a record 533,032 new companies were incorporated last year. What options are there for setting up a new company and what key matters should be considered?
Type of company
The Companies Act 2006 confirms that there are three types of company to choose from:
- company limited by shares (these are the most common form of company and may be incorporated as either public or private companies);
- company limited by guarantee and not having a share capital (private companies only); or
- unlimited company (private companies only).
- What should the company be called? A name will be rejected by the Registrar of Companies if that name is offensive, sensitive, already in use by an existing company or too similar to that of an existing company. If the proposed name is similar to that of an existing company or group, but the new company is intended to form part of the same group of companies, then the application may be accepted if the written consent of that existing company or group is obtained and evidence of this is provided to Companies House. For sensitive names there are often additional consents required to be submitted as part of the application process. Certain companies are exempt from using the word ‘Limited’ in their name, for example if the company is a charity.
- Directors of the new company? A public company must have at least two directors. A private company must have at least one director. Each company must have at least one ‘natural person’ director, that is a director who is a person and not a company and all directors must be at least 16 years of age. A new director must state his residential address for the purposes of incorporation but can state a service address which will appear on the public record so that his home address is not disclosed.
- Will the company have a secretary? A public company must have a company secretary. There is no requirement for a private company to have a company secretary but it may do so if it wishes or if this is a requirement of its articles of association.
How do I incorporate a new company?
The documents which need to be filed with the Registrar of Companies to form a new company are:
- a memorandum of association. This is a snapshot of the company’s constitution at the point of incorporation. It contains a statement that the subscribers to the memorandum wish to form a company and that they wish to become the members of that company. In the case of a company limited by shares, each subscriber must also take at least one share each. The memorandum must be signed by each subscriber.
- articles of association. These set out the company’s rules. Standard form Model Articles are provided for each different type of company set out above which automatically apply to any new company. Those Model Articles can then be modified or excluded by the company’s bespoke articles.
- an application for registration (Companies House form IN01). This includes information regarding the company’s proposed name, the type of company required, details of the company’s registered office, the articles of association, details of the directors and secretary (if any) and a statement of capital or guarantee. The application form must also be accompanied by the appropriate fee which can be between £13 and £100 depending on the speed and level of incorporation service required.
How do I know that my company has been incorporated?
If all of the filed documents are in order, Companies House will issue a certificate of incorporation containing the company number and date of incorporation. This certificate confirms that the company is properly constituted and that all of the requirements for registration have been complied with.
The subscribers will be deemed to be members of the company from the date set out in the certificate and the officers of the company are appointed from that date.
A company structure offers limited liability for its members but this comes with all of the burdensome administrative company law requirements which accompany company status. If you would be keen to avoid this, there are plenty of other options available to consider when setting up a new business and incorporating a company may not always be the most attractive route. Alternatives to consider include a limited liability partnership, a limited partnership, a general partnership or simply operating as a sole trader. These should be considered at the outset to ensure you achieve the structure that is right for your business.