Incorporating a Private Limited Company
Updated June 2018
This Briefing Note sets out the factors that you need to consider if you are thinking of incorporating a private limited company. This briefing note should not be relied upon as legal advice and you should contact us for advice on your specific circumstances.
What type of company can be incorporated?
A new business can be set up as a company or an existing business can be incorporated as a company. The latter is often the case when a business has reached the stage where the increased administrative burden of company law requirements is offset by the benefits that the company structure offers, such as limited liability. A company can be incorporated as:
- A company limited by shares (the most common form).
- A company limited by guarantee.
- An unlimited company.
A company is incorporated by filing the necessary documents and paying the required fee at Companies House. You can either:
- Create a tailor-made company. This is a new company with documents that are specifically tailored to their requirements.
- Buy a shelf company. This is a company that has already been incorporated but has not yet traded. Company formation agents register shelf companies with standard provisions in their constitutions and sell them to buyers who can change them to meet their requirements.
A company’s constitution and the rules governing its administration are set out in its:
- Memorandum of association. A memorandum of association must be submitted to Companies House with the other registration documents. It states that the subscribers to the company want to form a company and have agreed to become members and, in the case of a company that is to have a share capital, to take at least one share each. The memorandum cannot be updated; it is a “snapshot” of part of the company’s constitution at the point of registration. The memorandum must state the name of each subscriber and their individual authentication.
- Articles of association. All registered companies must have articles of association which set out the basic management and administrative structure of the company. They regulate the internal affairs of the company (for example, the issue and transfer of shares) and create a contract between the company and each of its members in their capacity as members. Companies can either create bespoke articles of association or adopt (in whole or in part) model articles. If no bespoke articles are registered, the model articles will apply as the default set of articles for limited companies.
Incorporating a tailor-made company
To register a private limited company, an application form must be lodged with the Registrar of Companies at Companies House, together with the memorandum of association and articles of association. The application form (which is usually completed and filed online includes
- The proposed company name. There are restrictions on the choice of registered name that a company may adopt both on incorporation and on a later change of name. The Registrar of Companies will refuse registration of any unacceptable name. A company cannot be registered with a name that an existing company is already registered with. You should search the index of company names at Companies House to check that your preferred name is not already registered by another company.
- The type of company. You must state whether the company is:
- to be limited by shares or guarantee; or
- to have unlimited liability.
- Details of the registered office. A company must have a registered office at all times, so that communications and notices can be addressed to it.
- Articles of association. A new company must indicate whether it is adopting:
- model articles in their entirety or with amendment; or
- entirely bespoke articles.
- Details of directors. Private companies must have at least one director who is at least 16 years of age. They do not need to have a company secretary. Certain particulars must be provided for each director.
- Statement of capital. This statement sets out:
- each class of share in the company;
- the number of shares in each class;
- the aggregate nominal value of the class; and
- the amount paid up or unpaid on each share.
The statement must also include details of the rights attaching to each class of shares of the company:
- voting rights;
- rights to dividend;
- rights on a capital distribution (including on a winding up of the company); and
- any redemption rights.
- Statement of initial shareholdings. This states the total shares taken by the subscribers when the company is formed. It includes the number, class and aggregate nominal value of those shares as well as the amount paid up or the amount to be unpaid on each of the subscriber’s shares.
- Statement of guarantee. If the company is limited by guarantee, it must deliver a statement of guarantee. This is a statement from each of the subscribers that if the company is wound up while he is a member or within one year of him ceasing to be a member, he will contribute (up to a specified amount) to the assets of the company:
- payment of the debts and liabilities of the company contracted before he ceased to be a member;
- payment of costs, charges and expenses of winding up; and
- adjustment of the rights of the contributories among themselves.
- Details of people with significant control (PSC) These are the persons or entities who hold a majority of the shares in the company or otherwise hold significant control over it. Certain particulars must be provided for each PSC.
Filing the registration documents
- The required documents must be delivered to Companies House. The company is brought into existence when the Registrar issues the certificate of incorporation. This normally takes 8 to 10 days if the application for registration is made using the normal postal service and currently costs £40..
- An expedited service of incorporation within 24 hours is available and currently costs £100.
- Companies House has an electronic filing service for new incorporations, which allows for electronic submission of the necessary documents. It currently costs £13 (£30 for same day service).
The incorporation formalities (including drawing up and completing the company registers and issuing share certificates) should be completed at a meeting of the board of directors as soon as possible after receipt of the certificate of incorporation and any documents that require filing at Companies House must be filed within the statutory time limits.