UK Company Formation- An Overview
Companies in the UK have been regulated by different rules and laws ever since the 12th century. In the 20th century the Government of UK came out with the Companies Act, 1985. Such act regulated all the companies in the UK. However, there were several inconsistencies in the above act which led the government to bring out a white paper related to incorporation and establishment of companies in the UK.
Through this the government brought out the Companies Act, 2006. Apart from this act, there are different forms of codes which regulate companies, SMEs and establishments within the UK. Some of the prominent regulations are the UK Corporate Governance Code and other acts which regulate companies.
The Companies Act, 2006 is an act of the UK Parliament and is a primary source of law which regulates the way in which companies operate within the UK.
Regulatory Authority/Body for UK Company Formation
The primary regulatory authority or body for UK company formation is the Companies Registry of UK (Companies House). This is one of the primary bodies to regulate how companies operate in the UK.
Apart from this, there are other forms of authorities such as the FCA (Financial Conduct Authority) which regulates all the financing activities and prudential policies in the UK. Apart from this there is the Central Bank which is the Bank of England. This authority regulates all the monetary policies within the country.
Benefits of UK Company Formation
The following benefits can be afforded by the applicant by taking or considering the process of UK Company Formation
Vast Resources to Choose from-
An applicant seeking company registration services or UK company formation would have vast resources to choose from. Such resources would include the finance provided by the government, different form of incentives, technology hubs and start-up innovators providing spaces to help the company grow.
Easy Process of Incorporation-
It is easy to incorporate a company within the UK. Usually this process can be carried out offline or online. The process if carried out offline would usually take longer. If the applicant goes for the online process of UK company formation, it would take lesser than 24 hours to incorporate the same. Apart from this the applicant can avail different benefits provided by the Companies Registry of UK (UK Companies House).
Access to Finance-
London is one of the largest financial centres of the world. Lot of firms and financial institutions want to establish or incorporate their businesses in the UK due to this. Hence the process of UK company formation would attract more opportunities for the applicant to raise finances and capital from different financial institutions and banks.
Access to Technology-
Apart from finance, there is also high end technology and automation available to the applicant. Any applicant going for the process of UK company formation can utilise all these technology benefits to receive the best and make the process seamless and straightforward.
Lot of Opportunities to Grow-
Once a company is established in the UK, the products and services can diversify within the UK. For example, if a company is established and registered in London, the company can grow nationally by expanding its services to other cities like Birmingham and Manchester. If the company has to expand internationally, then this would also be possible as the UK has good ties with the European Union and the USA. Hence diversification opportunities would be available to the applicant if the company has to expand its presence.
What are the factors taken into consideration for UK company formation?
The following factors have to be considered for the process of UK company formation:
Type of Business-
First and foremost the applicant has to go through all the types of businesses present in the UK. For company formation process the type of business which is utilised for company formation has to be considered. There are different types of businesses which the applicant can consider for the process of UK company formation:
- Sole Trader
- Social Enterprise
- An Overseas Company
- An Unincorporated Company
The name of the company is one of the next considerations which have to be taken by the applicant. The name of the company must not go against the provisions of any other law in force in the UK. Apart from this the name must be distinct and unique. Such name should not go against the provisions related to any intellectual property rights within the UK.
International company or UK Company-
The applicant to form a company within the UK also has to consider if the company is going to be set up as an international company or a UK company. If the company is set under domestic laws, then the regulations pertaining to UK would be applicable to the company.
Types of Business Structures (UK Company Formation)
In the first step for UK company formation, the applicant has to first select the suitable business structure for establishing the company. The following types of business structures are present in the UK:
As the name implies the business of a sole trader is run by a sole individual. The liabilities of a sole trader are unlimited. Hence the applicant has to take into considerations of the above before going for the process of registering as a sole trader.
A partnership is an agreement between the partners to share the profits of the business. In a partnership type of business the liabilities and assets of the business are shared.
Limited Liability Partnership-
A limited liability Partnership is a business entity where the liability of the partners is limited to a particular extent.
Private Limited Company-
A private limited company is incorporated in the UK which has the status of limited liability. Apart from this, the liability of the members is limited.
Eligibility Criteria for UK Company Formation
The following eligibility criterion is required for UK Company Formation:
Procedure for UK Company Formation
- Check the type of entity which is applicable
- Conduct the Search for the name of the company
- Appoint the Directors and Shareholders
- Consider what the shareholders and guarantors are (PSC)
- Prepare Documents for Running the Company
- Register the Company
Check the type of entity which is applicable- In the first step, the applicant has to check the type of entity which is applicable for the business. An entity can be a company which incorporated within the UK or an overseas company. Hence the applicant must first select the type of company which has to be registered. The process of online company registration can occur through the following website https://www.gov.uk/government/organisations/companies-house.
Conduct the Search for the name of the Company- First the applicant has to consider different rules related to the name of the company. The rules related to the name of the company have to be compliant with the requirements of the Companies Act, 2006. The company has to also check if the name is available. The name of the company also has to confirm with the requirements of the Trademarks Act.
Appoint the Directors and Shareholders- In the next step, the applicant has to appoint the directors and shareholders of the company. The directors are responsible for conducting and managing the affairs of the company. It is also crucial to appoint other key management executives such as the company secretary. Every director in the UK must be more than the age of 16 years. The information pertaining to the service address of the directors must be mentioned properly.
Consider what the shareholders and guarantors are (PSC)- For the company to be registered, there has to be at least one shareholder who can carry out the affairs of the company. Shareholders are required to form the company. After this step, the applicant has to also mention what are the executives (shareholders or directors) that have significant control over the company. Such register is known as the PSC register (People with Significant Control).
Prepare Documents for Running the Company- In the next step, the applicant has to prepare specific legal documents such as the Memorandum of Association (MOA) and Articles of Association (AOA). The AOA are the bye laws which regulate the structure of the company. The company must also have a registered office address for conducting the business.
Register the Company- After all the above procedures are conducted, you will have to put forth a SIC code. This code will indicate what activities are carried out by the company. After this step is carried out, you will have to register yourself with the Companies House. To consider the taxes paid in the UK would have to also register yourself with the corporate tax authorities under the HMRC (Her Majesty Revenues and Customs).
Documents for UK Company Formation
The following documents are required for UK company formation:
- MOA (Memorandum of Association)
- AOA (Articles of Association)
- Residence Status
- Valid Visa
- Details of the Shareholders of the Company
- Details of the People with Significant Control of the Company
- Name of the Proposed Company