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Requirements for Setting up a UK Limited Company

 

The requirements for setting up a company registered in Wales, England, Scotland and Northern Ireland are generally viewed as being easier to set-up than in many other European countries; France, Germany, Netherlands for example.

Whilst this may be the case, there are still certain requirements which have to be satisfied when setting up a company in the UK. This article seeks to provide a thorough and comprehensive description of these requirements and the unique options which only exist in the registration of Welsh companies.

Director and Shareholder Requirements

Setting up a UK limited company requires just a single person who can act as both director and shareholder of the business. One person need not hold both of the above positions and therefore an individual can act as director whilst another act as shareholder.

Of course, it is possible to have two or more people in either or both roles of company director and /or shareholder.

The following table gives some examples of the combinations which are possible under current UK company law and further extends the current topic by including the non-essential position of company secretary.

  Person A Person B Person C Person D
Scenario 1 Director & Shareholder Not Used Not Used Not Used
Scenario 2 Director Shareholder Not Used Not Used
Scenario 3 Shareholder Director Not Used Not Used
Scenario 4 Director & Shareholder Director & Shareholder Not Used Not Used
Scenario 5 Director & Shareholder Director & Shareholder Shareholder Director
Scenario 6 Director & Shareholder Director & Shareholder Shareholder Director & Shareholder

The above requirements relate to private limited companies which are by far the most common form of UK company. Public limited companies which can offer their shares to the public must have at least two directors, a shareholder and a suitably qualified company secretary.

Company Appointment Requirements

Another UK or foreign registered company can act in the capacity of director and shareholder, subject to certain conditions being satisfied.

Where a company is appointed as director, an actual person must also be nominated to that role. This means that in order to appoint a company as a director, at least two appointments would have to be made. One of these must be an individual over the age of 16.

The appointment of a company as a shareholder is less restrictive, allowing for a sole owner of a limited company to be a corporate body.

The table below provides examples of different scenarios which might arise when appointing a company.

  Sole Director Two Directors Three Directors Single Shareholder Two Shareholders
Scenario 1 This must be a person A company can be appointed A company can be appointed This can be a person or company These can be one or more person or one or more companies

Age Restrictions

Age restrictions mandate that UK company directors must be at least 16 years of age at the time of their appointment. Shareholders of a company are not subject to any pre-defined age restrictions.

It is not uncommon for one or more parents to set-up a UK company, appoint themselves are directors and then their children (and perhaps themselves also) as the beneficial shareholders.

There are no pre-determined age restrictions for a person to act as company secretary.

Share Capital Requirements

Setting up a private UK company requires that only a single share be issued to a shareholder upon incorporation. When registering a company the shares which are being issued at that time are assigned an arbitrary value, normally £1.

The value allocated to the shares (known as their nominal value) can be a penny or ten pence and thus, on the basis that only a single share need to be issued when setting up the company; the capital requirements are extremely low.

When a private limited company is set-up, the person(s) receiving the share(s) are deemed to owe the company the equivalent of the share’s nominal value. For example, if a company is registered with a single share of £1, the shareholder would owe the company £1.

The table below provides some examples of how different denominations of shares could be split depending on how many are being issued on incorporation and the nominal values being assigned to them.

  Nominal Value Number Issued Total Share Capital
Scenario 1 £1 1 £1
Scenario 2 £1 10 £10
Scenario 3 £0.50 10 £5
Scenario 4 £0.10 100,000 £10,000
Scenario 5 £0.01 100 £1

Payment for the share(s) taken by the shareholder can be paid for by depositing the amount in the newly formed company’s bank account. In practice, many companies may not open a bank account immediately (or ever) and therefore the amount owed may remain outstanding indefinitely, for a number of weeks, years or longer if the company never trades.

Public limited companies have more stringent capital requirements that state that it must have a combined issued share capital of £50,000, of which at least £12,500 must be deposited in the company bank account before it can trade.

Registered Office Requirements

The jurisdiction of a company is determined by the location of its registered office (also known as its official statutory address). Following on from this, UK companies must first be registered in the UK and then may further be defined by the actual country in which their official address is located.

Thus a company which is incorporated with its registered office address in Wales will be deemed by default to be a company registered in England and Wales. Under these circumstances the incorporation could also specifically request to be that of a Welsh company.

Scottish and Northern Ireland companies will be registered as such if their registered offices are within these respective jurisdictions.

An important point to note is that once a company has been set-up in one jurisdiction it can not subsequently change its registered office address to another country.

This does not however prohibit where the company can trade. For example a company incorporated in Wales can generally trade in England, Scotland and indeed anywhere in the world.

The following table depicts the various UK jurisdictional options based on where the company is initially registered.

  Registered in London (England) Registered in Cardiff (Wales) Registered in Cardiff (Wales) Registered in Edinburgh (Scotland) Registered in Belfast (Northern Ireland)
Company 1 England & Wales        
Company 2   England & Wales      
Company 3     Welsh    
Company 4       Scottish  
Company 5         Northern Irish

Constitutional Requirements

The provision of memorandum and articles of association documents is required when setting up a UK company. This document codifies the operations of the company in line with companies act legislation.

The majority of company formation agents will provide a set of memorandum and articles of association as part of any incorporation package they offer and so this requirement need not be a particularly arduous one.

The exception might be in situations where specific provisions are required for a particular company; for example pre-emption rights relating to shareholders disposing of their interest in the company.

Company Name Requirements

The choice of name when setting up a UK company must follow certain rules, most of which are designed to prevent duplications and to protect the public.

Essentially a company name must be unlikely to offend the public or sections of it; must not be identical or too alike an existing incorporated body.

The suffix Limited or Ltd must be appended to all company names with the exception of companies limited by guarantee which require no appendage and those companies registered in Wales who can substitute cyfyngedig or cyf.

 
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