The process of forming a company is called incorporation.
In the UK companies are registered with an organisation called Companies House (CH). Certain information must be provided to CH, which then becomes public record. Incorporation is largely about providing that initial information.
Annually, the information must be resubmitted. Making details about the company publicly available allows stakeholders in the business, from owners to employees to customers, to identify who owns it and how it is governed.
The private within “private limited company” refers not to whether the information about the organisation is in the public domain, but rather whether the shares can be traded on a stock exchange.
“Limited”, often abbreviated to “ltd” refers to the limitation of liability that owners have for its actions – a maximum of the value of the shares combined.
How to register
The easiest ways to register are either to do so online directly with Companies House, or to use the services of an online incorporation agent.
If you want the company to adopt a set of articles of association that are not the model version, then you must register using IN01 offline.
Online applications usually take a maximum of 24 hours and cost £12. Postal applications take up to 2 weeks and cost £40. There is a same day service that costs £100. CH must receive your documents by 3pm on that day.
You must have chosen a unique name for your company that wouldn’t mislead anyone into thinking that your company was another, connected with the government, offensive, or contains a sensitive word.
The address of the company should be where official communications should be sent. It must be a physical address in the same country of the UK where the company is registered. A residential address can be used, but it will be publically available to see on the register of companies.
The standard industry classification code (SIC code) categorises what the company does. There are some very precise codes, but given the range of different types of business, most companies are registered using an industry classification code that is very broad.
There must be at least one director and one shareholder. There is no longer a requirement to appoint a company secretary. The shareholder and the director can be the same person.
Persons with significant control (PSC) need to be identified. These are:
- shareholders with over 25% of the share capital
- people with over 25% of the voting rights
- people who can control appointments and removals of directors
Generally, for a new start-up, PSC will be the founders with more than 25% of the shares.
Directors are responsible for running the company for the shareholders and its administration. A director must be aged over 16 years and not be disqualified. Another company can be a director, but only if there is at least one other person. The names and addresses of directors are made public.
You will need to make a statement of capital – a declaration that lists the shareholders of the company (their names and addresses), the number of shares the company has issued and the total value. In addition, the statement of capital contains prescribed particulars of shares. For each type (or class) of share, you must state:
- what rights to dividends are given
- whether the shares can be redeemed (changed back) for money
- what voting rights are given
- how many votes each share within the class has
Many of the rights can be extended privately if you also use a shareholders agreement.
Since 2006, the memorandum of association has been greatly reduced. It is now a simple statement that all shareholders agree to forming the company.
In order to register your company quickly, you are most likely to do so online, using the model set of articles of association provided by the most recent Companies Act. The articles are a rulebook about how the company should be run that the directors and shareholders must follow. The model set for a private limited company is unlikely, however, to be suitable for how you want your company to be run. There is a lot of flexibility in how a company can be administered that the model articles do not give you.
The solution is to incorporate using the model articles, but immediately after registration to adopt new, customised ones.
Once the company is registered, Companies House will send a certificate of incorporation that confirms the company’s identification number and date of formation.