Company Establishment in the UK - By: James Walsh

Then comes the type of company one would like to start. The entrepreneur should have a clear idea of different types of companies that can be formed. Companies in the UK are categorised as public or private companies. According to the Companies Act, there are three basic models for share holders’ liability. The three categories of liability of shareholders of a company refer to their liability for the company’s debts in case they go into liquidation. In the case of private companies which are limited by shares, the shareholders’ liability is restricted to the amount of any shares they still owe to the company. These types of companies are the most popular in the UK, as the directors and shareholders are not personally liable for the losses the company may incur at any time. Private companies limited by guarantee are ideal only for charities. Here, the shareholders liability is usually restricted to £ 1 which they will have to contribute to the assets of the company for clearing of its debts. Unlimited companies are not popular with the investors because they do not provide protection to shareholders for company’s liabilities. UK Companies Act permits entrepreneurs to set up the following types of companies:

• Private companies limited by shares
• Public companies limited by shares
• Private companies limited by guarantee
• Private unlimited companies

As mentioned earlier, the private companies limited by shares are the most popular while the private unlimited companies are not preferred by investors for they have no limit on their liability for company’s debts in case it becomes insolvent. However, a study shows that a majority of entrepreneurs in the UK prefer to start public limited companies which are limited by shares. This is because these companies can sell their shares to the public as well as opt for a public listing on one of the recognised exchanges. They have also more freedom in making company policies, and guarantee shared liability among all shareholders. But it should be noted that these companies are also prone to more restrictions by law, especially when they opt for public listing.

After deciding about the type of company one would like to start, steps should be taken to register the company with the Registrar of Companies by furnishing the required documents to him and fulfilling certain conditions. The two most important documents that need to be filed are:

• Memorandum of association
• Articles of association

The memorandum of association includes the name of the company, the proposed location of its registered office in the UK, names of initial ‘subscribers’ (i.e. shareholders), the number of shares held by each shareholder and amount, the objects of the company, etc.

The articles of association deal manly with internal regulation and management. These include powers of directors, rights of members, meeting procedure, procedure for payment of dividends, issues related to winding up, etc. The articles of association could run into several paragraphs and pages and they should be in terms of Table A of the Companies Act 1985 with certain exclusions or modifications permitted by the Act. By law, every limited company must have a company secretary and a director. The company secretary’s functions are mainly administrative in nature. He is responsible for the completion of documentation and submission of the same to the Companies House and for signing off company accounts. However, according to the Companies Act of 2006, which has received the Royal Assent, the appointment of a company secretary is not necessary in the case of private companies. As per the new Act, a private company is defined as “any company that is not a public company”.

Business Plan: Once a company is incorporated, it is necessary to prepare a business plan. It helps set objectives and direction for the company, and also focus effort to realise the objectives of the company. Without a sound business plan, the company cannot raise finance from banks or investors nor monitor its growth. The business plan should discuss aspects like management team, their background, skills, experience, financial projections and assumptions/ cash flow forecast, expected sales in the first five years, description of product/service, premises, quotations for equipment, financial status of the owners, implementation schedule, etc.

Registering a company requires a thorough knowledge of UK Companies Act, various documents and procedures, fees, legal requirements etc. It is advisable to seek professional help from leading online companies which offer quality online company formations solutions to entrepreneurs in the UK within the shortest period and for a reasonable price.

About the Author

James Walsh is a freelance writer and copy editor. For more information how to start your own Company see http://www.smartcompanyformations.co.uk

Article Directory Source: http://www.articlerich.com/profile/James-Walsh/12398

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