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A Simple Procedure of Limited Company Formation in UK

Prabhat Nigam

| Updated: May 14, 2022 | Category: Company Registration

A Simple Procedure of Limited Company Formation in UK

With the exit of the United Kingdom (UK) from the European Union, many companies want to realign their business arrangements with an independent UK. This calls for establishing business entities in the UK in order to continue tapping the UK market. For conducting business in UK, one of the legal entities employed by most of the companies is the vehicle of limited company. This article lays down the simple procedure of Limited Company Formation in UK.  

What is Limited Company in United Kingdom?  

A Limited Company in United Kingdom is a legal entity that is separate from its owners or shareholders. In UK, there are two types of limited companies viz. Limited by Shares and Limited by Guarantee. The fundamental difference between the two is that companies limited by shares are profit-making legal entities while companies limited by guarantee are considered to be non-profit making organisations as such companies exist for non-profit or achieving charitable objectives.

The company limited by shares means they are owned by shareholders who have certain rights like voting and making changes in the company. Companies limited by guarantee have a ‘guaranteed amount’ instead.

What Is The Procedure Of Limited Company Formation In United Kingdom?  

The procedure of Limited Company Formation in UK is quite simple and can be executed in the following steps. As a note of caution, before embarking on the journey of limited company formation in UK, it is advisable that one should check whether a limited company would be ideal legal entity according to the requirements of one’s business. There are other modes of carrying business such as self-employed, partnership, social enterprise, an overseas company, an unincorporated company etc.

  1. Choosing a name for the company: The procedure of company formation in UK begins with choosing a name for the company. The name of the company must end with either ‘Limited’ or ‘Ltd.’ in case the company is to be registered in Wales, then Welsh equivalents such as ‘Cyfyngedig’ and ‘Cyf’.

A company need not attach ‘Ltd.’ after its name if the company is a registered charity or limited by guarantee as per the Articles of Association.

The name of the company is not supposed to be too similar to another company’s name or trademark[1]. In case that company makes a complaint, then the name of the company needs to be changed.

Another thing that needs to be kept in mind is that the name cannot be offensive or which suggests some connection with the government or local authorities, unless the permission has been obtained.

  • Choosing Directors and a Company Secretary: The next step is to appoint a Directors and Company Secretary of the company.

The company must have at least one Director who shall be responsible for running the company and maintaining the accounts and reports of the company. The director should be at least 16 years of age and disqualified from being a director. The Directors need not live in the UK but they can have a registered office in UK. Directors have to provide a ‘service address’ for correspondence purposes’ which will be publicly available.

However, it must be noted that there is no need appoint a company secretary for a private limited company. Some companies entrust the responsibilities of a director on Company Secretaries. However, a company secretary cannot be the company’s auditor or undischarged bankrupt. Even if a company secretary is present, still the responsibility will lie on the director of the company.

  • Choosing shareholders or guarantors: The promoters of the company need to decide at least one shareholder or a guarantor of the company who shall be the director of the company. If the promoter is the only shareholder, then such shareholder holds 100 per cent of the ownership in the company. When a company is registered, information about the shares known as ‘statement of capital’ needs to be provided by the company. The statement includes the total ‘share capital’ and ‘shareholders’ of the company.

Where the company is limited by guarantee, then such company need to have at least one guarantor and a ‘guaranteed amount’. The guarantors are company members who control the company and not draw profit from the company and reinvest the same back into the company.

Another important step is to identify the person with significant control in the company (PSC)

  • Preparation of Incorporation Documents: Preparation of incorporation documents like Memorandum of Association (MOA) and Articles of Association (AOA) is the next important step in the limited company formation in UK.
  • MOA is the legal statement governing the relationship of the shareholders or guarantors with the company. It also determines the extent where the company can go. 
  • AOA is the document which embodies the written rules and regulations for running the company.
  • Choosing address and SIC code: one of the last few steps in Limited Company formation in UK involves choosing a registered office address for the company where all the written communication is sent. The address must be a physical address in the UK and should be in the same country where the company is registered. Further, the company also needs to decide its Standard Industrial Classification Code (SIC code) for your business which basically depicts what your company actually does. Once, all the above steps are done, the promoters can go for registration of the company with Companies House where the company also receives its Corporation Tax at the time of registration.    

Conclusion 

If the steps discussed above are followed to the T by any person, then such person can successfully execute the task of limited company incorporation in UK.          

Read Our Article: How to Incorporate Company in the United Kingdom?

Prabhat Nigam

Prabhat has done his BA LLB (Hons) and has been writing research papers since his law school days. His interest in content writing made him pursue a career in legal research and content writing. His core areas of interest are indirect taxes, finance and real estate.

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