All your resources at your fingertips.Learn More
All of your Company Law resources at your fingertipsFind Out More
Precedents and forms dealing with every aspect of company administration
INTRODUCTION – TYPES OF PRIVATE COMPANY
Company law recognises a fundamental distinction between public and private companies. This is a particularly strong feature of the Companies Act 2006. Private companies, which are the subject matter of this book, are able to be incorporated as new companies in a variety of forms:
• Private companies limited by shares.
• Private companies limited by guarantee.
• Private community interest companies limited by shares.
• Private community interest companies limited by guarantee.
• Unlimited companies.
Note that new incorporations of limited companies must opt for either limitation of liability by shares or by guarantee, it is not possible to incorporate a new company or a new CIC with both shares, for shareholders, and guarantee-protected members (unlike some other jurisdictions, UK company law does not provide for such ‘hybrid’ companies).
The decision as to which form of liability limitation to use is fundamental. This is, firstly, because limitation by guarantee effectively sets the ethos of the company as being a non-commercial ‘not-for-profit’ entity, in which all members are likely to have equality with regard to most of the fundamental rights of company membership. By contrast, the essence of a share company is to be a commercial organisation, from which its members can derive financial benefits via their shareholdings (such as dividends). Secondly, it is not possible to alter the basis of the members’ limited liability protection later in the company’s existence, so once limited by shares always limited by shares (and vice versa).
CORPORATE BODIES THAT ARE NOT COMPANIES
It should be noted that private companies limited by guarantee, private CICs limited by guarantee, private companies limited by shares and private CICs limited by shares are all corporate bodies.
However, there are a number of other types of corporate bodies that are not ‘companies’ or ‘community interest companies’ under the Companies Act 2006 and the Companies (Audit Investigations and Community Enterprise) Act 2004.
Examples of other non-company corporate bodies include:
• Corporations incorporated by Royal Charter.
• Charitable incorporated organisations ‘CIOs’ (England and Wales).
• Scottish charitable incorporated organisations ‘SCIOs’.
None of these are dealt with in detail in this chapter or generally in this book.
THE REGISTRATION PROCESS – PRIVATE COMPANIES
Private limited companies are incorporated by registration by the Registrar of Companies on the public register of companies held at Companies House. The application for incorporation can be submitted in paper form, using documents and forms described later, or by filing the same information using the electronic methods provided by Companies House.
The paper based documents for a company incorporation are lengthy and somewhat complex to complete, which makes electronic incorporation a far more attractive option. A further important advantage of using electronic incorporation is that the certificate of incorporation can usually be delivered back to the person applying for incorporation on the same or at least the very next working day (as a pdf). Further details of the electronic process are given later in this chapter. In practice, the vast majority of private company incorporations are now dealt with electronically.
COMPANY INCORPORATION PROCESS – COMPANIES ACT 2006
The law affecting company incorporations flows from the Companies Act 2006. New companies need a single document constitution – the articles of association. The old style two part constitution (memorandum and articles) required under previous company law is now only relevant to older companies, incorporated prior to 1 October 2009 (their memoranda remain effective eg with regard to the limited liability clause). A summary of the key points for incorporation of a new company is set out below:
• The memorandum of association is simply a form that evidences the intention and consent of the subscribers to form a company and become members of it on incorporation.
• The application for registration (Form IN01) must give required information, including required particulars of proposed directors and, for a company with share capital, a statement of initial shareholdings and a statement of capital. This application gives all the other relevant external details of the new company (eg name and registered office). It also includes the statement of compliance with the requirements of the Companies Act.
• Only articles of association are required for the constitution of the new company. These can
take the form of one of the ‘models’ relevant to the type of company being formed or make adaptations to one of those models or be complete ‘stand alone’ articles. Any restrictions or inhibitions required on what the company can do (eg limited objects) must be drafted into the articles. These ‘documents’ may either be delivered in paper form or by using one of the electronic methods to form a company that have been approved by the Registrar of Companies. A statutory incorporation fee must be paid in either case. Most new companies are now formed electronically due to the advantages of speed and simplicity.
The ‘required particulars’ for an individual who is to be a director are:
• name and any former name by which the individual is, or was, known for business purposes;
• a service address;
• the country or state (or part of the UK) in which he is usually resident (note this must be the relevant territory for the usual residential address of the director);
• business occupation (if any);
• date of birth.
If a body corporate or firm that is a legal person is to be a director, it is important to remember that every company must have at least one director who is a natural person. The ‘required particulars’ for a corporate body (or a firm that is a legal person) that is to be a director are:
• corporate or firm name;
• registered or principal office;
• in the case of a company governed by the law of a state in the European Economic Area to which the First Company Law Directive applies, particulars of: (i) the register in which the company public file is kept (including details of the relevant state), and (ii) the registration number in that register;
• in any other case, particulars of: (i) the legal form of the company or firm and the law by which it is governed; and (ii) if applicable, the register in which it is entered (including details of the state) and its registration number in that register.
Where electronic incorporation is used there is no need for any paper documents, all the information needed is submitted electronically. Company law facilitates this and there are practical advantages in using the electronic route to establish a new company, rather than the more complex and slower paper route. The previous requirement that companies obtain and file evidence of a ‘consent to act’ for each director (and the company secretary, if there is to be a secretary) has been replaced with effect from 10 October 2015 (by virtue of SBEEA 2015, ss 100 and 101, which make the necessary changes to CA 2006, ss 12, 95 and 167 and introduce a new s 1079B). Companies House now writes to each director which enables an objection to be raised by any person who has not in fact agreed to become a director of a company. Directors’ identities are evidenced by the submission of various security codes and security data about the presenter of the incorporation request and about each individual director. To verify the identity of a proposed director, three items from this list of seven must be provided:
• place of birth;
• telephone number;
• national insurance number;
• passport number;
• mother’s maiden name;
• eye colour;
• father’s first forename.
The procedures now followed by Companies House encourage electronic submissions of incorporations. Those normally result in the issue of a PDF certificate of incorporation within 24 hours. The service has been further enhanced so that customised articles, specific to the individual company, can be used on an electronic incorporation (the applicant is not bound to use a standard form set of articles). Professional advisers can use a range of low cost options offered by company formation service providers to order a new company formed electronically. It is not necessary to acquire major and expensive IT equipment and software in-house in order to benefit from the efficiency of electronic incorporation of new companies. Companies House also provides a secure Web Incorporation Service via its website (available 24 hours a day, seven days a week). The fee of £15 may be paid by debit or credit card or via a Companies House Online Filing Services Credit Account (where the applicant has such an account). This service is currently limited to incorporation of private companies limited by shares (only) and the model articles have to be used, without any variations. 4 Sections 100 and 101 are brought into force by reg 4 in the Small Business Enterprise and Employment Act 2015 (Commencement No 2 and Transitional Provisions) Regulations 2015 (SI 2015/1689).
EFFECTS OF INCORPORATION
The new company is incorporated as it is registered by the Registrar. A number of other important legal effects flow automatically from that registration:
• The subscribers become the first members.
• In a company limited by shares, those subscribers become the holders of the shares they agreed to take as subscribers (ie the shares described in the statement of capital and initial shareholdings).
• The status and location of the address given as the registered office are confirmed.
• The people named as first directors and, if applicable, first secretary are deemed appointed.
It is therefore not necessary to file additional forms notifying the allotment of the initial shares or the appointments of the first officers. However it is important that all the required entries are made in the statutory registers to record the members and officers, with relevant data about them. For further details of the register requirements see chapter 13 (statutory and other registers and records).
CERTIFICATE OF INCORPORATION
If the Registrar is satisfied that the requirements of the Act as to registration have been complied with, the information filed will be placed on the public record and the Registrar will give a certificate that the company is incorporated.
The certificate of incorporation will state:
• 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 guarantee;
• whether it is a private or a public company; and
• whether the company’s registered office is in England and Wales (or in Wales), in Scotland or in Northern Ireland.
If the new company was incorporated by electronic means, the certificate will also include this statement:
‘The above information was communicated by electronic means and authenticated by the Registrar of Companies under s 1115 of the Companies Act 2006.’
The certificate is conclusive evidence that the requirements of the Act as to registration have been complied with and that the company: (i) is duly registered under the Act, and (ii) where relevant, is duly registered as a limited company or public company. It is important to note that the registered number is unique to the company. Generally it will not change and will remain with the company throughout its existence. It is possible for a company to change its name (including a name that was previously used by a different company) so the number is an important alternative identifying feature of a specific company. For this reason it is often helpful to include reference to the company number in legal documents, so that the company may be more easily identified in later years when it may have changed its name. For this reason the Registrar also uses the company number as the main identifier in the Registrar’s public records.
Have a question about this product? Please get in touch by completing the boxes below.
"This is an indispensable aid to the busy company secretary. The text is clear, the precedents...
The pre-eminent source for interpreting and applying company legislation
Considers the changes made to the law on shares and share capital by the 2006 Act