Forming a business in the uk

You will read a dialogue in which a lawyer, Mr Larsen, discusses some of the characteristics of two business entities with Mr Wiseberg, a client who is interested in forming a company in the UK.

11. Read the phone conversation and tick the two company types the men are discussing.

Mr Larsen: Albert Larsen. Good morning.

Mr Wiseberg: Good morning, Mr Larsen, this is Ernest Wiseberg speaking - we met last night at the reception at the museum.

Mr Larsen: Yes, of course, Mr Wiseberg. Good to hear from you.

Mr Wiseberg: You said I could give you a call. Am I disturbing you?

Mr Larsen: No, not at all, not at all. You’re interested in forming a swimwear company, I recall. A private company limited by shares?

Mr Wiseberg: That’s right. I have some experience with company formation, but so far only in the United States. I founded a C corporation with some business associates in Florida some years ago. You’re familiar with C corporations?

Mr Larsen: Yes, yes, of course. C corporations are similar to private limited companies in the UK in many ways, particularly in respect of liability, naturally. Shareholders are not personally liable for the debts of the corporation in both a C corporation and a private limited company.

Mr Wiseberg: That's right.

Mr Larsen: But if I'm not mistaken, a C corporation may become a public corporation, with its shares being bought and sold either through a stock market or ‘over the counter’.

Mr Wiseberg: Mm-hm.

Mr Larsen: In this respect, a private limited company differs. Its shares are not available to the general public.

Mr Wiseberg: I see.

Mr Larsen: The two types of company are like each other in that both can be founded by persons of any nationality, who need not be a resident of the country. Perhaps this is relevant for you, Mr Wiseberg.

Mr Wiseberg: Yes, it is.

Mr Larsen: And there is one big difference between a C corporation in the US and our private limited company: that’s the limit on the number of shares. As I recall, there no limit on the number of shareholders of a C corporation

Mr Wiseberg: That's right.

Mr Larsen: But that's not the case with a private limited company. The Companies Act stipulates that not more than 50 members can hold shares within the company.

Mr Wiseberg: I see. I didn't know that. But that's not a problem for me.

Mr Larsen: On the other hand, a limited company is comparatively easy to form. You have several options open to you, depending on how soon you want the company formed.

Mr Wiseberg: Well, I’d like to begin operations as soon as possible. Of course, I know I'll have to wait until the paperwork is completed. How long would that take? A couple of days?

Mr Larsen: Well, once you supply all the necessary documents to Companies House, it generally takes a couple of weeks for them to process the documents.

Mr Wiseberg: A couple of weeks! That’s much too long. What other options do I have?

Mr Larsen: You could form the company through a company formation agent. The agent would fill in the required forms for you and then submit them to Companies House. It would take around five to eight days before the company may begin to trade.

Mr Wiseberg: That sounds better. Maybe you could tell me where I can find one of these agents. Perhaps you have ..

1. sole proprietor 

2. UK limited partnership 

3. UK private company limited by shares 

4. UK private company limited by guarantee 

5. UK public limited company 

6. US C corporation 

7. US S corporation 

12. Read through the dialogue again and decide whether these statements are true or false.

1. The client has not yet decided what type of company he wants to form.

2. The client has never founded a company before.

3. The lawyer points out that the two types of company differ with regard to the matter of personal liability.

4. The shares of a US C corporation can be freely traded on a stock exchange.

5. Both company types mentioned by the lawyer can be formed by a person who is a citizen of another country.

6. The UK company type discussed places a restriction on the number of people permitted to buy shares in the company.

7. The fastest way to form a company is to submit the documents directly to Companies House.

13. In the dialogue, the lawyer compares and contrasts two company types. Complete the sentences below using the phrases in the box.

a are like each other b are similar to c differs d in both e that's not the case with

f there is one big difference between

1. C corporations ............................... private limited companies in the UK in many ways, particularly in respect of liability.

2. Shareholders are not personally liable for the debts of the corporation ............................. a C corporation and a private limited company.

3. In this respect, a private limited company........................................... Its shares are not available to the general public.

4. The two types of company................................... in that both can be founded by persons of any nationality, who need not be a resident of the country.

5. And.................................. a C corporation in the US and our private limited company: that's the limit on the number of shares.

6. But ................................. a private limited company. The Companies Act stipulates that not more than 50 members can hold shares within the company.

Reading 5: Company directors and company secretaries

14. Read the text, answer the questions and be ready to speak about qualifications and duties of company directors and company secretaries.

1. What persons are disqualified and are not allowed to hold the position?

2. What is a criminal offence and may result in the imposition of a fine?

3. What may lead to disqualification from holding the office of director?

4. What must director insure?

5. Where are accounts for limited companies delivered?

6. When the defaulting company may be charged a late filing penalty?

7. What is provided to the Registrar?

8. What is set out in the Companies Act 1985?

9. When may the company secretary be criminally liable for a default?

10. What does an employment contract usually specify?

Company directors

There are no mandatory qualifications to become a director of a private or public limited company (plc), although the following persons are disqualified and are not allowed to hold the position:

• an undischarged bankrupt, who has not been released by the court from his debts, unless leave, or permission, is obtained from the court;

• a person disqualified by a court from acting as a company director. If leave is given by a court, it must be for the person to be appointed as a director for a specific company;

• in Scotland, a person under the age of 16;

• anyone over the age of 70 in the case of a plc. This age requirements may be waived, or ignored, in the case of a candidate named by a general meeting of the company.

Although incorporation limits liability, the directors retain personal responsibility to ensure the company complies with the filing of documents at Companies House on time, as required by the Companies Act. Failure to do so is a criminal offence and may result in the imposition of a fine together with a criminal record. Persistent failure to fulfill these duties may lead to disqualification from holding the office of director in the future. The directors must ensure that:

• accounts for limited companies are delivered to the Registrar of Companies within the requisite period, normally within ten months of the accounting reference date in the case of private limited companies or within seven months in the case of a PLC, although the requisite period may be amended by legislation. The defaulting company may be charged a late filing penalty in addition to any other fine imposed by a court;

• annual returns are submitted as specified by the Act. In the event that these are not submitted, and the Registrar believes that the company is no longer operating, he may strike it off the registrar and dissolve it. Any assets of the company at that point may become the property of the Crown;

• notice of change of directors or their details is provided to the Registrar;

• notice of any change to the registered office is provided to the Registrar. If this is not done, statutory notices may be validly served on the registered office.

Company secretaries

The qualifications required to be a company secretary are set out in the Company Act 1985. As a company office, the company secretary may be criminally liable for a default committed by the company, for example failure to file the company’s annual return with Companies House in time. An employment contract will usually specify the remit of their duties, that is, the areas of responsibility, which normally include:

• maintaining the statutory registers, for example the register of members;

• filing the statutory forms, for example notifying changes among the directors;

• serving members and auditors with notice of meetings;

• supplying a copy of the accounts to every member of the company;

• keeping minutes of directors meetings and general meetings.

Speaking: Informal presentation: a type of company

When speaking briefly about a topic of professional interest, experienced speakers will organise their thoughts in advance. A simple but effective structure divides information into three parts: 1. introductory remarks; 2. main points; 3. concluding statement. Similarly, the main points are best limited to three, as this is easy for the speaker to remember and for the listener to follow. Notes for a response to Exercise 15 might look like this: Introductory remarks A publikt aktiebolag is the closest Swedish equivalent to a public limited company - most common form for major international businesses in Sweden. Main points 1. liability: no personal liability 2. management: board of directors (Swedish equivalent, styrelsen) has power to make decisions: shareholders don’t participate in management 3. needed for formation: memorandum of association (stiftelseurkund) and articles of association (bolagsordning) Concluding statement An aktiebolag is similar to a public limited company, with the most significant difference being that its shares do not need to be listed on an exchange or authorised marketplace.

15. Which types of companies are there in your jurisdiction? Choose one and describe it as you would for a client from another country. In your description, refer to some of the features given in the UK company table on pages 20-21. Tell your client which documents must be filed to complete the formation process. Wherever relevant, compare and contrast your company type with a UK business entity.

Reading 6: Limited Liability Partnership Bill

New legislation is often proposed in order to improve a situation which many people feel is unsatisfactory. The article on page 26 comes from a legal journal and deals with a bill introduced to the House of Commons which creates a new type of company.

16. Read the first paragraph of the article. What situation is the bill trying to improve?

17. Read through the entire article and match these headings (a-f) with the paragraphs (1-6).

a Limitations of limited liability

b Drawback: accounting requirements

c Despite imperfections, long awaited

d The need for a new form of partnership

e Benefits of the new company form

f Drawback: management liability