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Contents
Power of directors to grant shares 41; Equity capital 41; Reduction of company capital 41; Corporate loans: mortgages, debits and debentures 42;. Fines and penalties 134; Contestable transactions: preferences and transactions below 135; Termination in compulsory termination 136; Limitation of use of the company 136.
Preface
It explains what a private limited company is and the protections and advantages of trading with limited liability. This book is a guide to the incorporation of English and Welsh private limited companies, but the Companies Acts apply in Scotland with minor adaptations to take account of the requirements of Scots law.
PLANNING YOUR SUCCESS
The plan should be used as an opportunity to explain what you offer and who your customers are. It is also wise to keep in mind that a business plan should be flexible enough to satisfy a variety of audiences.
Choices
Why a limited company?
What sort of company?
As of 31 December 2007, over 2.2 million companies, including listed companies, were listed on the Companies Register in England and Wales, while 118,827 companies were listed on the Companies Register in Scotland. At the end of 2007 in England and Wales only 4 per cent of companies on the Companies Register and less than 1 per cent in Scotland were listed companies.
Limited liability partnerships (LLPs) – an alternative corporate structure
Private companies cannot offer shares and debentures to the public, but directors can retain control by restricting the transfer of their holdings, and there have been discounts on smaller companies' application requirements. Decisions can be made by written resolution with a simple 75% majority vote, there are no longer restrictions on providing financial assistance for the acquisition and purchase of company shares, and it is easier to carry out a capital reduction.
Advantages of trading as a limited company
Shareholders with more than 25 percent of the company's shares in a company controlled by less than four people or their directors are excluded. You can 'self-assess' the company's tax account, but you must still provide accounts prepared in accordance with the Companies Acts or calculations showing how the figures were derived from the figures in the accounts.
Prevention is better than cure
This essentially ensures that, in the event of a dispute, there is an easily accessible point of reference that leads to a resolution path. Companies must comply with the Companies Act's rules for company organization and management.
Choosing your company name
He or she may make a name change at any time if the name is so misleading as to the nature of the company's business that it is likely to cause harm to the public. Electronically filed capital and shareholder information is noted in Companies House records and updated in the electronic annual returns.
The Consumer Credit Act 1974
You can search the company name index at Companies House or on their website for free, but it doesn't show pending applications. You can set up your own company and file documents electronically, but you must first register as an electronic filing representative.
Trade marks
Trading names
Displaying the company’s name
The name must also be affixed or painted on the outside of the registered office in a prominent position and at each of the company's offices, factories and places of business. If the company is registered for VAT, invoices must contain the VAT registration number, the invoice number, date of supply, description of the supply, amount payable excluding VAT, the VAT rate and the amount, the rate of any cash discount. and the customer's name and address.
Documents to be completed
It also regulates the tax district which deals with company returns and tax matters, with the exception of PAYE, which is usually dealt with at the local level where payroll records are held. That the liability of members/shareholders/shareholders is limited. This means that if the company is insolvent, shareholders are only liable to creditors for the amount still owed on their shares; if they are paid in full, they have no further obligation.
How can you be confident your ideas are secure?
It is not a defense that the infringer was not aware of the competitor's prior rights, nor that the company name is registered. There may also be legal and related costs due to the dispute with the rights owner.
The Memorandum of Association
Subject to approval, the certificate of incorporation is issued with the date of signature and company number. From the date of issue of the Certificate, the subscribers form a legal entity – the new company – which exercises its own powers.
The Articles of Association
The person entitled to the shares in the event of the death or bankruptcy of a shareholder must notify the company that they are entitled to the shares; instead they can nominate someone else to be registered as the transferee, in which case they must execute an instrument of transfer. They can exercise all the company's powers to borrow, mortgage the company's property and issue securities.
Duties and fees payable
Directors' remuneration and their expenses must be approved by a relevant provision in the articles.
Incorporation
Pre-incorporation contracts
Transfer of existing business to your company
Corporate capital
Capital
Common stock entitles you to income on equal shares of the company's net assets. The holder remains a shareholder, but whether he or she is a member of the company depends on the articles of association of the company.
Increasing the company’s capital
Directors’ authority to allot shares
The share premium account
Reducing the company’s capital
Company borrowings: mortgages, charges and debentures
Notice of cancellation on Form 122 must be sent to the Registrar within one month. A variable charge is always enforceable after a fixed charge, regardless of the order in which they were paid, unless it prohibits a lien and the lender within the fixed charge knows of the restriction.
Registration of charges
Unless the levy was created after issuance, a copy of the registration certificate issued by the Registrar must be endorsed on each bond or bond certificate issued by the company. A joint and several obligation of the company and an individual falls outside the scope of the law.
Who is a director?
Who can be a director?
Directors
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An important advantage of operating as a limited company is that the business risk is separated from the assets of the business owners, meaning that the personal assets of the shareholders or members are protected if the business fails. A company is controlled by its board of directors, who are personally responsible for the management of the company and must act in the best interests of the company.
Appointment of directors
As of October 1, 2009, no one under the age of 16 can be a director, and anyone serving as a director under the age of 16 will be disqualified.
Resignation and removal
The director must be notified of the decision and can submit written comments in protest. If there is sufficient time, this must be forwarded together with the notice of the proposal sent to the shareholders, otherwise the director may require that his statements be read out at the general meeting.
Directors as employees
Total directors' remuneration does not need to be included in your small business's annual financial statements. Directors' and shadow directors' contracts of more than two years must be approved by shareholders and can be terminated at any time with reasonable notice.
Directors’ duties
The draft model articles entitle them to payment of directors' fees and payment for other services to the company as agreed by the directors or decided by ordinary shareholder resolution, plus payment of reasonable expenses incurred in the performance of their duties and responsibilities. as directors. They must not make a profit at the expense of the company and must disclose their interest in corporate transactions to the board or general meeting; disclosure must be formally recorded;
Directors as agents
Loans to directors and 'connected persons'
Arrangements for anyone to make a loan or provide security for a director in return for company benefits also require shareholder approval. If the company does not comply with the procedures, the transaction may be voided and the director will be liable to the company for the profits.
Connected persons
It must be available for inspection at the registered office 15 days before the meeting, or if it is approved by means of a written resolution, sent to shareholders together with the resolution.
Loans to employees
Transactions under £25,000, including the cost of credit, must comply with the terms of the Consumer Credit Act 1974.
Company non-cash assets
Fines and penalties
Share dealings
Skill and care
Delegation
Statutory duties
This is an appropriate delegation of duties, but the directors still have oversight and are ultimately responsible for ensuring that the company complies with legal requirements. The company secretary, if any, is responsible for maintaining the legal documents and records, but the directors must ensure that the company keeps proper records and submits the necessary documentation to the clerk.
Directors’ liability
However, the directors are only liable for negligence if they are manifestly guilty and the company cannot relieve them of, or hold them harmless from, any liability in connection with negligence, default, breach of duty or breach of trust. Directors are liable for "misfeasance": for example, making secret profits at the company's expense.
Employers’ duties
BUT directors and corporate officers can be indemnified out of the company's assets against liabilities incurred in the defense of civil or criminal actions if they obtain a judgment. They are also responsible for checks and other negotiable instruments that do not bear the company's full registered name.
The directors, the company and the shareholders
The company then has no claim against those directors and any shareholders involved or directors related to them. If the company files a lawsuit against them, they are not liable if the court finds that they acted honestly and reasonably.
Directors and outsiders
They can also ratify the negligence, default, breach of duty or breach of trust of directors, former directors and shadow directors in relation to the company by special resolution.
Business leases
Commercial contracts
Insurance
Disqualification
In addition, you must make regular reports to the shareholders, and the accounts must comply with the requirements of the Companies Act. A list of the documents you can submit online is listed on the Companies House website and their user guide provides details and instructions.
Running the company
The price of limited liability is a certain amount of publicity – documentation and reports must be sent to the Companies Register, where some are available for public inspection on payment of a fee. You may wish to appoint one of the directors as managing director or executive director, although they have no specific powers under the Companies Acts.
The company secretary
The statutory records
Directors' and shadow directors' service contracts over two years. The full written contract, if any, must be available for at least one year from the date of termination of the contract. The company's written contract for the purchase of own shares, or memorandum of its terms, must be available for 10 years after the date of completion or termination of the contract.
Annual return
The classification of the company's main business activities is based on the UK Standard Industrial Classification Codes (SIC 03), a numerical classification of companies' main business activities, including sub-class revisions with effect from 1 January 2003. A copy of the annual return signed by a director or the secretary, if any, must be sent to the Registrar with the registration fee of £30, or £15 if filed electronically, within 28 days of the return date.
The accounts
The latest version of the code, SIC 2007, will be adopted once the new IT system is up and running at Companies House. If the annual return is not filed, the company, directors and company secretary, if any, are liable to prosecution and a fine of up to £1,000.
Accounting records
Twenty-one days before the meeting, copies should be sent to all holders of stocks and bonds and anyone entitled to notice of the meeting, such as the auditors, and copies should be sent to the Registrar. If the accounts are not submitted on time, a notice of default and a demand for payment of the fine will be delivered to the registered office of the company within 14 days.
Privacy
Share and bond owners are also entitled to receive a copy of the company's previous accounts free of charge. The directors can be fined up to £1,000 for delay in filing the accounts with the Registrar, depending on the length of the delay (see Appendix 4).
Disclosing the accounts
The report must also contain, prominently above the signature(s), a statement that it has been prepared in accordance with the small business regime. The auditors must also state in their report whether, in their opinion, the information in the management report is consistent with the annual accounts.
Auditors
If the company is without an auditor for any reason, the directors or the company in general meeting can appoint a temporary replacement. If they are not satisfied that your books and accounts properly reflect the company's financial circumstances, this must be stated in their report.
The company seal
If the general meeting does not appoint him, the company must notify the secretary of state within seven days after the general meeting, when the secretary of state can make the appointment. Its use must be approved by the directors and two directors or the director and company secretary, if any, must sign the document on behalf of the company.
Share issues
Now the signatures of the two directors or the director and the company secretary signing for and on behalf of the company have the same effect as if the document had been executed (signed) under seal.
Share certificates
Meetings
If they do not attend, the meeting must be adjourned to the same time, day and place the following week, or the time and place designated by the directors. A single member 'shareholder meeting' must be minuted as such and decisions must be formally notified to the company, including the contract between the company and the single shareholder.
The first board meeting
Reporting the status of the registered office and deciding whether it should be changed. This should be sent to them with a copy of the Memorandum and Articles of Association and they will want to see the Certificate of Incorporation.
General meetings
Confirmation of the authorized users of the company seal and signatories OR the decision to amend the articles of the draft model to give up its use. Minutes of meetings must be kept in the Minutes kept for this purpose and when signed by the chairman of the meeting or the next meeting constitutes evidence of the proceedings.
Voting
The Annual General Meeting
Extraordinary General Meetings
Notice of meetings
Resolutions
The directors are responsible for keeping the registrar informed and there are penalties if any of the documentation is not filed. Some of the documentation must be signed by a director and/or the company secretary and some by the conductor for the meeting in question.
Change of directors and secretary
You can also send financial statements, accounts and reports electronically to shareholders, bondholders and auditors or, provided you notify the recipients, publish them on your company's website for at least 14 days before the meeting until the end of the meeting. on which they must be placed. Notices on a website must contain specified information about the general meeting, and shareholders can send proxy forms and other notices to you by e-mail.
Changes after incorporation
The removal is by majority vote and the shareholders and the director must have 28 days' notice of the removal. Changes of directors and secretary must be filed with the registrar within 14 days of the change on Form 288b (see page 63).
Changing the auditors
Unless the court orders otherwise, a copy of the auditor's statement must be sent to the registrar. Notice of removal of auditors must be sent to the Registrar on Form 391 within 14 days of the meeting.
Change of registered office
5 percent of the shareholders serve notice that they are not considered to be reappointed before the end of the accounting reference period after which the presumed re-appointment would apply. The auditors may be indemnified from the funds of the Company against any liability arising in the defense of civil or criminal proceedings in which they obtain a judgment, or if they are not liable for negligence, delay, breach of duty or breach of trust in connection with the affairs of the Company.
Changes in the place where statutory records and documents are kept
Retiring auditors or auditors removed before the end of their term of office may speak at the meeting called to appoint a successor or require the company to circulate their remarks to shareholders. The board of directors or the company's general meeting can fill vacant positions, but the appointment must be confirmed by resolution at the ordinary general meeting.
Change of name
Increases in capital and allotment of shares
It is a criminal offense to allot shares unless permitted by the Articles of Association or by a shareholders' resolution for which the company and its officers may be subject to fines of up to £1,000, plus a daily fine of £100 per day. However, the directors do not need permission to allot shares under an employee share plan, nor may they first offer those shares to other shareholders.
Changes in the Articles of Association
If the new issue changes the rights of existing shareholders, the change must be approved by a three-fourths majority of that class of shareholders, and once the rights have been changed, 15 percent of those shareholders can petition the court to have the change annulled.
Changing the accounting reference date
Filing the accounts
A copy of the annual return, signed by a director or the secretary, if any, must be sent to the Registrar within 28 days of the date of the return, together with a registration fee of £30, or £15 if filed electronically.
Striking the company off the Register
All proceedings require referral to and action by an insolvency practitioner, who must be a member of a recognized professional body such as the Institute of Chartered Accountants or the Law Society, or authorized by the Secretary of State to do so. The procedures include formalities, meetings of shareholders and creditors, deadlines, reporting to and filing of documentation with the Registrar, and publicity.
What is insolvency?
This chapter summarizes the different procedures for winding up a business, but if drastic decisions need to be made, you should consult a professional.
Insolvency
You should therefore ensure that you have sufficient accounts and proper financial advice so that you are able to consider taking appropriate action.
Voluntary striking off
Voluntary arrangements: compositions and schemes of arrangement
The event is handled by the supervisor, who must report to the court, which can postpone (stop) the settlement and comply with an administrative order.
Administration orders
Receivership
Receivers and directors
Voluntary arrangement
There is a general time limit of one year for the administration process, with an extension of six months with the consent of creditors or longer if the court decides. If the administrator is unable to save the company, he or she must file a notice with the court of conversion to voluntary liquidation of creditors and he or she acts as liquidator, unless the creditors decide otherwise.
Protection for floating charge-holders
Voluntary arrangement with a moratorium
During the moratorium, the nominee oversees the affairs of the company and the directors cannot act without his or her consent. The moratorium ends with the convening of the required meetings that approve or reject the voluntary scheme.
Winding up
Voluntary winding up
Voluntary liquidation
Distribution
Creditors’ rights
Dissolution in a voluntary liquidation
Compulsory winding up
Voidable transactions: preferences and transactions at an undervalue
Dissolution in compulsory winding up
Restriction on use of the company name
The ready-made company
It therefore pays to shorten the first accounting period so that it ends on the day you take over ownership of the shares. However, the company must make a special decision not to appoint auditors and submit dormant company accounts for the first (shortened) period, before the first general meeting at which the accounts are presented.
Notes for guidance on company names
The use of the following words and expressions also requires the prior approval of the relevant agency and the Minister of Foreign Affairs. Use of the following words or phrases is subject to other laws and may constitute a criminal offence.
Documents to be filed on incorporation by a private limited company
Documents which must be lodged with the Registrar*
Notice of place 318 ditto Within 14 days. where copies of director's contracts of employment are kept or of change in place. Notification of location 325 Director or Within 14 days. interests in shares, etc., held or of change in place.
