STRUCTURE OF A LIMITED COMPANY
The following offers a brief guide to the basic structuring of a UK Limited Company. This does not set out to explain the complexities of company law, nor do we intend to set out a full list of the responsibilities of the company officers or shareholders. We do, however, aim to give some basic information to assist in the important decisions concerning the appointment of company officers and other matters when setting up a company for the first time.
- A private company must have at least one director
- There is no limit to the number of directors allowed
- There must be at least one “real person” listed as a director, therefore it is not permissible for a company to have a sole corporate director
- Directors can be individuals or corporate bodies (subject to the above)
- The directors are responsible for the management and day to day operation of the company and have a duty to be aware at all times of the company's financial situation
- Any or all of the company's directors can be resident anywhere in the world and can be of any nationality
The Companies Act lays down strict rules regarding the duties and conduct of directors, and it is worthwhile investigating such rules upon taking any such appointment. Acting as a director is a serious issue, and you should not consider doing so unless you will be fully aware of the company’s activities. The Companies Act 2006 officially codifies Directors’ Duties for the first time and care should be taken to comply with these regulations. Details can be provided free of charge from ourselves when forming a new company, or direct from Companies House.
Directors have a personal responsibility to ensure that matters of Company Law are adhered to at all times and can be held personally liable for non-filing of Companies House returns and other infringements of law conducted by a company.
- A private company does not need to have a company secretary
- Where appointed the company secretary may also be a director
- A company secretary may be resident anywhere in the world and can be of any nationality
- A company secretary can be an individual or a corporate body
The Company Secretary, very broadly speaking, is usually responsible for administrative matters. It is generally the duty of the Company Secretary to maintain official company minute books, statutory registers and prepare and lodge any necessary returns required by Companies House, such as changes to directors and filing of annual returns and accounts.
The Company Secretary is answerable to the Directors, and is required to keep the Directors advised of changes in company law affecting the running of the company. With major changes to company law introduced under the terms and regulations of the new Companies Act 2006, this is seen as a particularly important issue.
Whilst the Company Secretary can be held personally liable for non-filing of Companies House returns, in practice it is generally the Directors upon whom this responsibility lies.
A Nominee Company Secretary is often appointed in order to fulfil this role in a professional capacity. This is a service that we provide and we strongly recommend that this option is considered especially if you wish to utilise our Managed Compliance Service, and should certainly be considered in conjunction with that service if the Directors are not familiar with maintenance of statutory records or minutes.
Under the Companies Act 2006 private companies are allowed if they so choose to dispense with the role of Company Secretary. Any company may still choose to appoint a company secretary. If no secretary is appointed it is important to note that the duties and responsibilities previously placed on the Company Secretary are still applicable, and must be carried out correctly by the Director. There is a strong argument in support of the retention of the services of a professional Company Secretary particularly in view of the many changes introduced by the Companies Act 2006, and it is important not to degrade the status of the company.
If in any doubt, please feel free to contact us directly to discuss your concerns in more detail.
Shares and Shareholders
- A company can have any number of shareholders
- Shareholders are often known as Members of the company
- There must be at least one shareholder
- Sole shareholders are allowed in private companies
- There is no stamp duty payable on allotments of new shares, but stamp duty is payable in many circumstances when transferring shares from one shareholder to another
- Shareholders can be resident anywhere in the world and can be of any nationality
- The number of shares that can be issued in a company or to specific shareholders is unlimited unless restricted by the articles
In general, the rules regarding shares are quite complex, although with the vast majority of companies, there is little to consider other than the initial allotment of shares, which may not change from year to year.
One of the most frequently asked questions we hear "what is the usual share structure for a new company". There is no strict formula to follow. In simple terms, the shareholding of a company determines its ownership, and this is usually structured very easily. If your company is to be wholly owned by yourself, you need only have a single share issued in your name to begin with.
Alternatively, should you wish to spread shares amongst various family members or investors, an allotment of 100 shares may give the flexibility required. Larger numbers of shares can be issued to shareholders who introduce capital into the company, reflecting their financial investment. High levels of capital are sometimes, although rarely, introduced at the outset in order to demonstrate high levels of capital commitment to encourage confidence in the company on the part of potential lenders or suppliers. However, please note that in the event of failure of a business, a shareholder may be responsible for any amount outstanding on shares registered in his name that are not fully paid at the date of receivership. Therefore it is not advisable to allot large numbers of unpaid shares at the outset.
The structure of a company’s share capital determines its ownership and control. There are various ways in which shares can be utilised to differentiate between members’ equity and voting rights, and by carefully structuring a company’s capital, much can be achieved without the need for complicated legal agreements.
The Companies Act 2006 abolished the concept of Authorised Capital, so that shares only exist when allotted.
It is sometimes necessary to maintain confidentiality of the identity of shareholders, and to enable this, Company Registrations Online can provide nominee shareholders to whom shares can be registered and held in trust on behalf of the beneficial owner. In these circumstances, a confidential Declaration of Trust is signed by our nominee, ensuring the beneficial owner maintains full control of the shares. Click here to find more information about our Nominee Shareholder Service.
Where there is more than one shareholder, it is highly advisable for shareholders to protect their interests with a formal Shareholder Agreement. Such an agreement ensures that there is a structure in place to deal with eventualities such as breakdowns in relationships, death of shareholders and exit strategies.
Click here to find out more about Shareholder Agreements.
A UK company must have a registered office, which must be an address within the borders of England, Wales, Scotland or Northern Ireland. Company registrations must state that the company is registered in either England & Wales, England, Wales, Scotland or Northern Ireland. Whilst all locations are subject to the same Companies Act and the same rules and regulations in respect of general matters, a peculiarity of Company Law prevents a company moving its place of registration from one to the other, although in most circumstances there are no restrictions in moving from England to Wales or vice versa unless the place of registration is specifically just England or Wales.
The registered office, recorded at Companies House, provides a point of contact for correspondence from sources such as Companies House itself, the HM Revenue and Customs and other parties wishing to make formal contact with the company.
A general post office box cannot be used, and it should be noted that Companies House are likely to reject any address which does not appear on the official Post Office lists of addresses.
Whilst there is no reason to prevent companies being registered at the home address of one of its directors, this is often not satisfactory for companies that do not operate out of separate business premises. Company Registrations Online can provide a choice of registered office addresses and forward routine mail as requested.
Click here for more information on our Registered Office Service.