Company
Law
On
these pages you can find advice on:
A
limited company
A limited company is one incorporated under the
Companies Acts and registered at Companies House.
A limited company is regarded as a 'legal person'
in its own right. This means it can make contracts,
employ people, own property and issue and defend
legal proceedings.
Benefits
of incorporation
| 1 |
The
owners of a limited company enjoy limited liability.
They are only responsible for the company's
debts and other liabilities up to the extent
of their shareholding |
| 2 |
It
can be easier to raise capital through a company
by the sale of its shares, granting of debentures
or the creation of floating charges |
| 3 |
A
company can provide for a more diffuse and larger
ownership. There is no limitation on the number
of shareholders a company may have |
| 4 |
A
company continues to exist and trade notwithstanding
the retirement,
ill health or death of its founders |
| 5 |
The property of a company belongs to it so there
is no change of ownership on any sale of the
shares |
| 6 |
Depending on the taxation laws in place at any
time there can be tax savings on trading through
a company. (You should take advice from your
accountant on this) |
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How
to form a company
A company is formed by the filing of the following
documents at Companies House and the payment of
the registration fee:
Memorandum & Articles
of Association
Memorandum of Association
This sets out the main objects for which the company
is formed. In order to give greater flexibility
and to prevent the company committing an unlawful
act it is a good idea for the company's objects
to be wide ranging.
Articles of Association
These set out the mechanics for the day to day running
of the company. Issues covered include:
They do not provide for how the shareholders,
particularly owner shareholders should run the
business on a day to day basis. If this is required,
then a shareholders' agreement should be created.
A
Company comprises:
Directors - there must be at
least one.
Company Secretary - cannot be
the same person as the sole director. Although
if there is more than one director, a director
can also be the company secretary.
Shareholders - sometimes referred
to as members. A company must have at least one
shareholder (there is no limit on the number).
There is no need for a director to be a shareholder
in a company or for a shareholder to be a director.
Annual filing requirements
All companies must file on an annual basis the
following documents at Companies House:
1. An Annual return
2. Accounts for each financial year (including
directors and auditors reports)
"Small" and "Medium sized"
companies can file accounts in a abbreviated format.
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Directors
duties and liabilities
"Director"
The term can be applied to any person occupying
the position of a director albeit they are not
called a director (sometimes the term, 'managers,'
'governors 'or 'trustees' is used. The term can
also extend to individuals who occupy no formal
position in a company but who exercises control
over it. Such persons are called Shadow
directors.
Directors are responsible for the day to day conduct
of a company's affairs. This imposes various obligations
which include:
1. They must act at all times in the best interests
of the company
2. They must ensure the company complies with
the requirements of the Companies Acts
3. They must not engage in any wrongful or unlawful
trading
4. They must exercise reasonable skill and care
in the discharge of their duties
If a director is in breach of these obligations
they can incur personal liability and face both
civil and criminal proceedings.
"Wrongful trading"
If a director knows, or ought to know that a company
has no reasonable prospect of paying its debts,
but continues to trade then a court can declare
they are personally liable for such debts.
Protection
of minority shareholders
The law gives various forms of protection to minority
shareholders. Their interest can be protected
by a shareholders agreement. In the absence of
such an agreement, minority shareholders can apply
to the courts for protection.
Under S.459 of the Companies Act 1985 a shareholder
can issue court proceedings where the company's
affairs are being conducted in a manner that is
unfair to him.
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Company
services
We can provide a number of services to you including:
Company
searches
These can provide a range of information about
a company you want to do business with including:
Shareholders
agreements
These regulate the running of a company's affairs
by its shareholders. They can deal with issues such
as:
-
amount
of time shareholders devote to the business
-
the
making of investment and management decisions
-
sale
of shares
-
confidentiality
-
non-competition
-
financial
contributions
-
protection
of minority rights
