Company Secretarial

Introduction

Peterkins have been active in the provision of professional company secretarial services for more than twenty five years, holding all records electronically since 1994. This work is conducted by our qualified company secretary, assisted as necessary by members of our corporate team.

Services

We offer different levels of service to meet different needs. We can do as little or as much as you require.

Basic Service - acting as registered office only, forwarding all post received to an agreed UK address for the attention of a person designated by the company.

Standard Service - The principal elements of our standard service include:

  • Acting as registered office;
  • Acting as nominee company secretary;
  • Preparing and filing annual returns;
  • Issue and transfers of Subscriber Shares;
  • Appointment and resignation of directors;
  • Maintenance of company statutory registers;
  • Preparation and filing of resolutions and company forms;
  • Drafting and completing board and general meeting minutes;
  • Forwarding post received;
  • Reminding you, and/or your accountant, of the filing deadline for accounts;
  • Response to your accountant's annual audit letter. Other services, by agreement, but may include corporate re-organisations, trouble-shooting, winding up/dissolution.

Even where we are not the secretary, we are able to provide a full company secretarial advisory and support service, providing documents, forms and advice, etc as required.

Company Formation

Peterkins also act in the formation of companies, supplying "instant" companies off the shelf, incorporated in a standard form or incorporating companies with more specific and sophisticated capital structures etc.

The services described are not exhaustive of those Peterkins offer. Please contact us if you would like to informally discuss your specific requirements.

Company Formation Services

Peterkins form companies. At any time we can supply ready-made companies "off the shelf", or where time permits a company can be "tailor-made" for a client. In either case, we take care to ensure that the company matches the client's requirements. This involves a consideration of key issues, such as;

  • Directors
  • Shareholders
  • Memorandum and Articles (constitution and rules)
  • Share capital
  • Company Name

We aim to keep costs down whilst maintaining a level of service and customer care which is sometimes absent in many of the "budget" formation agencies. In particular, we recognise the importance of setting up companies quickly and being able to provide information to clients about availability of names etc.

This philosophy has proved very successful, with a broad base of satisfied clients using us for all their company formation and company secretarial requirements. Our aim is simple; to provide a value for money service to our clients, with customer service being of the utmost importance.

"Instant" Companies

We have companies ready to transfer almost immediately. All we require are the details of the new directors and shareholders and the relevant "consent" forms signed by the new officers. Once this has been done, we file all relevant documents at Companies House and the company is "transferred" to you.

These companies have our standard Memorandum and Articles of Association, suitable for a small, general commercial trading company, but these can be adapted to meet new circumstances as the company grows.

All our instant companies are incorporated with the Peterkins "Place D'Or" brand name. We can change the name to one of your choice, subject to availability and statutory restrictions. We carry out the necessary name checks and prepare the resolutions to effect the change of name.

Tailor-made Companies

To enable us to form your company as quickly as possible, we recommend the company is set up with our "nominees" as first director, secretary and shareholders, and with the Registered Office at our address. All we require at this stage is your choice of name for the new company. As soon as practical after formation, we resign and transfer the shares to your choice of shareholder, and we file the relevant documentation to appoint the new directors and change the company's Registered Office to your choice of address, if required.

If time permits, we will take instructions from you to incorporate a company "from scratch", ie using your own nominees as first directors and shareholders and with more detailed Memorandum and Articles of Association, if appropriate.

Whichever type of company is most suitable to your needs, we ensure the whole transaction is fully minuted for the company records and to comply with statutory obligations.

What is a Registered Office?

A limited company is a legal person itself and has to "live" somewhere. This is the official address for the business, where documents and letters can be delivered. A company registered in Scotland must have its registered office located in Scotland and a company registered in England and Wales should have its registered office located within England and Wales. The location of the registered office does not limit where in the UK the company can trade.

Our instant companies are registered in Scotland. If a company is required to be registered in England and Wales, we deal with the registration requirements and, unless the client has suitable premises in the region, can arrange for the provision of a registered office address.

Commencing Trade

You do not have to start trading immediately the company is formed, your company can remain dormant (non-trading) for as long as you wish, but dormant accounts and an Annual Return have to be filed each year with Companies House.

Why a Limited Company?

Conducting a business through the medium of a registered company has certain advantages over a partnership or remaining as a sole trader:

Separate legal identity - a company exists until it is wound up, being unaffected by the death, bankruptcy or resignation of its members or its management.

Ownership - a company belongs to its members and is managed by directors, whose personal assets, in the absence of guarantees given to third parties, are protected should the business fail.

Business assets - business assets belong to the company and are unaffected by changes in its membership or its management, whereas in a partnership, property and assets are vested in the partners personally, necessitating a transfer of assets should changes in personnel take place.

Debts and liabilities - being a separate legal entity, the debts and liabilities of the company belong to the company and not to the members or the directors. A member's liability is restricted to the amount paid up on their shares, or in certain circumstances, the amount unpaid, where the shares are partly paid shares. In a partnership, each partner is jointly responsible for any debts and obligations incurred in the business. There is no legal difference between a sole trader and his business. His businesses debts are therefore his personal debts.

Taxation - A company is liable for tax on its profits after normal and allowable deductible expenses have been paid. Corporation tax is payable by the company and not its members or management. They pay tax on their personal income. Tax advice should always be sought from a suitably qualified professional.

Borrowing - a company has access to a wider variety of borrowing facilities in order to fund the business. Floating charges may be created over company assets but not over partnership assets.

Although conducting a business through a registered company has many advantages, there are some disadvantages:

Formalities - a company has to observe certain formalities with the Registrar of Companies. These are not optional. Penalty fines and ultimately legal action can follow if the formalities are not observed. The main obligations relate to filing of accounts and annual returns but the Registrar must be informed, in the prescribed form, of many actions and decisions of the company.

Privacy - all documents, including the company's accounts, enter the public domain and are open to inspection.

Causes for Thought

Having decided to proceed under the umbrella of a registered company, there are several issues to consider:

Type of Company

  • Private, limited by shares - the members liability is limited to the amount paid up on their shares, or in certain circumstances, the amount unpaid, where the shares are partly paid shares. This is the most popular type of company;
  • Private, limited by guarantee - members liability is limited to the amount they have agreed to contribute to the company's assets in the event of a winding up. This type of company is favoured by "not for profit" and charitable organisations;
  • Private, unlimited - the members liability is unlimited;
  • Public company - company shares may be offered for sale to the public generally. Members liability is limited to the amount paid up on their shares, or in certain circumstances, the amount unpaid, where the shares are partly paid shares;
  • Community Interest Companies (CICs) - CICs are limited companies, with special additional features, created for the use of people who want to conduct a business for community benefit, and not purely for private advantage. This is achieved by a "community interest test" and "asset lock", which ensures that the CIC is established for community purposes and the assets and profits are dedicated to those purposes.

Company name - the name must be unique. It should not be too similar to another company already trading, or a "passing off" action may result. There are certain words and expressions that are prohibited, except with the express consent of the Secretary of State. The name cannot be abusive or offensive.

Number of directors - a private company must have one director. There may be as many directors as the company's articles of association permit.

Directors - directors are responsible for the day to day management of the company. Their actions are regulated by the articles of association but generally they must act in the best interests of the company and not in their own self interest and they must not secretly profit from their position with the company. Directors are not expected to be experts in every field and can take external advice as necessary. Their duties are codified in the Companies Act 2006.

Not everyone can be a director, undischarged bankrupts and those disqualified by the courts for example, are prohibited from acting. There is also an age restriction. A director must be over the age of sixteen. In addition, the director has to be able to consent to their appointment. In a public company the consent of the members is required if a director is to remain in office after age 70.

Registered Office - every company must have a registered office notified to Companies House. A company registered in Scotland must have its registered office in Scotland and a company registered in England and Wales must have its registered office there. The registered office may be changed within its country of incorporation, but a company registered in Scotland cannot change its registered office to a location outside Scotland, for example. The location of the registered office does not limit where the company can trade.

The registered office is the usual place for service of documents etc and is where a company usually keeps its statutory records.

Memorandum of Association - this sets out what the company can do, its "objects". It also states the company name and its share capital. A company cannot state as its objects any illegal activity or anything likely to promote an illegal activity.

Articles of Association - these set out how the company should be administered and is generally based on statutory, "model" rules. These model rules are tailored to meet the requirements of the particular company. Changes can be made to the Articles, with the consent of the members.

Share Capital - the amount of the company's share capital and the value of each share have to be decided. The authorised capital is the amount of capital available to be issued as shares. A recommended initial capital for a new company could be either £100 or £1,000 divided into £1.00 shares, meaning that up to 100, or 1,000, shares can be issued. The company could also have "penny" shares. The initial capital is decided at incorporation, though it can be increased as often and by as much, as the members consent to.

There are more specific share capital requirements for public companies. A public company must have a subscribed capital of at least £50,000.

Different types (classes) of shares can be created, either at incorporation or later with the consent of the members, in order to meet different purposes, eg non-voting shares, shares giving a preferential right to dividends or perhaps shares which carry weighted voting rights.

Once subscribed for, shares cannot normally be returned to the company, unless they are redeemable shares, or cancelled without the consent of the Court, so care should be taken on the amount, and type, of shares to be issued.

Disclosure of Information - a registered company must note on its stationery its full registered name, its registered office address, its registered number and place of registration, ie "England and Wales" or "Scotland". It is not necessary to list the directors names on the stationery, but if one director is named then all directors should be named. "Stationery" includes letterhead, order forms, invoices and receipts, etc. The company must also display a name-plate outside its registered office.

VAT Registration - a VAT registered company has to charge VAT on all its taxable supplies but can also reclaim VAT on any purchases made. Once registered, regular returns have to be made, which can be quite onerous for smaller companies.

A New Company?

After the company is incorporated, there are several obligations that have to be met. Directors have a personal responsibility for making information about the company's structure, management and activities available to the general public, via Companies House, as well as to its own shareholders.

If a company is persistently late filing documents with Companies House, the directors may be prosecuted for a criminal offence. It is therefore vital that these obligations are recognised and understood.

Company Accounts

Every company, whether trading or not, must file accounts for each accounting period. The first accounting period commences on the day the company is incorporated and ends on the last day of the same month one year later. The accounting period can be altered by the company, but can only extend its accounting period once in any five year period, unless there are special, qualifying circumstances. Any single accounting period cannot be longer than 18 months in length. A company can shorten its accounting period as often and by as many months as it chooses.

A private company currently has 10 months from the end of its accounting period to deliver accounts to Companies House. The deadline for a company's first accounts is slightly different: accounts should be delivered within 22 months of incorporation or 3 months from an extended accounting reference date, whichever is the longer.

There is presently no fee for filing accounts, but Companies House will impose automatic penalty fines if they are delivered late.

Annual Return

The Annual Return contains a summary of the company's position with regard to directors, secretary, shareholders etc and must be delivered to Companies House every 12 months. The Registrar charges a fee, currently £15.00, to lodge the Return electronically, £30 for a paper copy.

Directors and Secretary

Companies House must be informed of all changes to the directors or secretary of the company. These changes include appointments, resignations and changes to personal details such as address. Companies House must be advised of such changes using one of their own forms.

Shares

If a company issues new shares, the details must be notified to Companies House using one of their own forms.

Mortgages and Charges

Any mortgages or charges created by the company must be notified to Companies House within 21 days, using one of their own forms. Companies House charge a fee, currently £13.00, to lodge each notice.

Registered Office Address

Every company must have a registered office notified to Companies House. This is where Companies House will send any reminders, notices etc and where documents may be served on the company. The registered office is where a company usually keeps its statutory records. Any changes to the location of the registered office must be notified to Companies House on their own form.

Companies registered in Scotland must have their registered office in Scotland and likewise, companies registered in England and Wales but have their registered office there. The location of the registered office does not limit where in the UK the company can trade.

Company Decisions

Decisions made by a company should be recorded by directors' resolution, or a board minute, and kept with the company's statutory books. Certain decisions must be notified to Companies House to be valid.

Non-compliance

If these continuing obligations are not complied with, the company and its directors may be liable to further action.

Penalties for late filing of accounts, for example, are automatic and accrue the longer the accounts are outstanding.

Non filing of the Annual Return may lead to the Registrar taking action to remove the company from the Register.

Persistent non-compliance by a director may lead to prosecution and can lead to fines and/or disqualification as a director.

Getting Help

Companies House can answer most general queries on procedural or filing requirements but will not give legal or accounting advice. A solicitor or accountant should be consulted on specific matters where advice and guidance is sought.

Articles of Association

"Articles of Association" are the administrative rules, or constitution, of a company, defining the power and duties of the directors, shareholder rights etc. Most Articles are variations on "Table A", which is a model set of rules incorporated into the Companies Acts. Where a particular company's Articles are "silent" on any issue, then the rules in Table A will prevail.

No two company's Articles will be identical and Table A is not reproduced in full in this text. The following is therefore a brief description of the main points of interest in a typical set of Articles.

Shares

The total number and value of shares the company can issue will be stated. In modern Articles, shares will usually have a "nominal" value of £1.00 each - this is not necessarily the market value of the shares, but is the amount of money the company originally received for them when they were first issued.

There can be more than one "class" of share, each class entitling the holder to the specific rights attaching to that particular class. Different classes are appropriate if not all the shares issued are to have identical rights as to voting and dividend payment etc. If different classes of shares are permitted, the Articles should detail the rights attaching to each class and regulate the alteration of those rights.

Shares can be issued either fully, or partly "paid". "Fully paid" means the full issue price has been paid to the company and the company is due no more. "Partly paid" means only a portion of the issue price has been paid. For partly paid shares the company has a right to "call" for payment of the outstanding amount, at any time or at a time agreed when the shares were issued. In such situations, the company is said to have a "lien" on any unpaid balance on which the call has been made. If payment of the balance is refused, the shares may be forfeit. Partly paid shares will receive any dividend payable pro rata to the amount paid up.

Where justified by commercial circumstances, shares can be issued at a premium. This is an amount in excess of the par value of the share.

Once the shares have been subscribed for, the holder cannot get his money back from the company unless the shares are redeemable shares, or a reduction in capital is authorised by the court.

Transfer of shares

There are occasions when restricting the power to transfer shares would be prudent; the company may be a family business and a transfer outside the family is undesirable, or perhaps the members would like some control over who else should join them as members. These issues will be regulated in the Articles and are referred to as "pre-emption rights". The Articles will state when the transfer of shares is without restriction ("permitted transfers", normally to other family members), and what the procedure should be for all other transfers.

There are many "levels" of pre-emption rights but at their most basic, mean that shares first have to be offered for sale to the existing members. This prevents shares being transferred without the knowledge of the existing shareholders, giving them the opportunity to prevent "undesirables" becoming members by buying the shares themselves. The Articles will frequently include a valuation formula for such shares.

There may also be occasions when a transfer of shares is both desirable and compulsory, eg an employee or director, who is also a member, is required to give up his shares if he ceases to be an employee or director. Events surrounding compulsory or "deemed transfers" will be defined and regulated by the Articles.

Pre-emption rights generally give the directors an absolute veto on who should be registered as members. The market for shares in a private limited company is therefore very limited.

Pre-emption rights are a complex area requiring careful drafting in order to be most effective. Peterkins has wide experience in drafting such provisions and ensure the correct rights are included to best meet the company's needs.

General Meetings

"General" meetings are meetings of the members of the company, either of different classes of shares (class meetings), annual or extraordinary general meetings. The Articles will state who can call general meetings and in what circumstances, the procedure for convening a meeting, how many members will constitute a valid meeting and how that meeting should be conducted, including the procedure for voting. The Articles should also state what happens if insufficient members are present. In these circumstances the meeting is said to be inquorate and may have to be adjourned until a quorum is available.

Directors

Any minimum and/or maximum number of directors that can hold office at the same time will be stated together with what their powers are and how and when they should retire or cease to hold office. Provision will be made concerning directors' remuneration and expenses and any outside interests they might have including what should happen if these interests are in conflict with the interests of the company.

Directors are not expected to be experts in every field and a company may frequently effect Directors Errors and Omissions Insurance.

Board Meetings

The Articles state the procedure for meetings of directors. Issues addressed include how many directors should be present, who should receive notice of forthcoming meetings, appointment of a chairman, what happens if any director is repeatedly absent from meetings and how decisions are made and recorded. Provision for meetings held by electronic means, ie tele/video conferencing, should be made.

Miscellaneous

Good Articles will cover many other aspects of the company's administration. They may help prevent disputes arising amongst and between directors and shareholders and, if disputes do arise, may help to resolve matters.

Directors' Duties

THE FOLLOWING IS A BRIEF INTRODUCTION TO YOUR RESPONSIBILITIES AS A DIRECTOR. IF YOU ARE IN ANY DOUBT AS TO THE EXTENT OF, OR YOUR ABILITY TO FULFIL THESE OBLIGATIONS, THEN YOU SHOULD SEEK INDEPENDENT LEGAL ADVICE.

The powers of a director are those delegated to the directors by the Memorandum and Articles of Association of the company, or where appropriate Table A of the Companies Act ('the constitution of the company'). In practical terms a director can do anything that the company can do and the powers of the company are defined in the Memorandum of Association and contained in what is known as the Objects Clause.

As the company has no tangible existence, the management of its affairs is entrusted to its directors. The directors are therefore said to be both trustees, and agents for the company.

Principal Duties

1. Duty to act within their powers

This codifies the common law rules that directors should exercises their powers under the terms that they were granted for a proper purpose. A director's powers are normally derived from the company's constitution, i.e. its memorandum and articles of association.

2. Duty to promote the success of the company

This duty is set out in section 172 of the Act. This is a new duty developed from one of the principles of the fiduciary duties, i.e., duty of good faith to act in the company's best interest.

3. Duty to exercise independent judgement

4. Duty to exercise reasonable care, skill and diligence

This duty is set out in s174(1). It codifies the common law rule of duty of care and skill. s174 (2) prescribes the degree of "care, skill and diligence" expected from a director; that is: care, skill, diligence that would be exercised by a reasonably diligence person with-

a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company; and

b) the general knowledge, skill and experience that the director has

This is the same dual test imposed under s.214 of the Insolvency Act 1986 in the context of a director's wrongful trading. The first element of the test sets out a minimum objective standard (a hypothetic reasonable person) expected of any director.

The subjective test requires a director to carry out his duty with the general knowledge, skill and diligence he in fact possess. Therefore, a director who has more experience, knowledge and skill will have a higher threshold in discharging this duty.

5. Duty to avoid conflicts of interest

The conflicts of interest provisions are previously contained in Part 10 of the Companies Act 1985 and are quite complex. The Act restates, amends, and simplifies these provisions to make them more accessible and with a view of assisting modern business practice.

Note that this duty applies to a transaction between a director and a third party, such as the exploration of any property, information, opportunity. In other words, the duty does not extend to a transaction between a director and his own company, in respect of which, different rule applies which requires a director to declare his interest to the other directors.

The Act makes it easier for directors to enter into transactions with third parties when directors' interests conflict with company's interests. Previously, shareholders' approval is required to enable directors to enter into transactions with third parties. Now, such transactions can be authorised by the non-conflicted directors on the board provided that certain requirements as listed in s175 (5) (6) including who can participate and vote on such authorisation are complied with.

6. Duty not to accept benefits from third parties

This reinstates the existing rule known as "non profit" in that a director is not permitted to accept a benefit from a third party by reason of (a) his being a director or (b) his doing or not doing anything as a director.

Benefits cover both monetary and non monetary including for example, non executive directorship and even corporate entertainment. However, a director will not be in breach of this duty if the acceptance of such benefit cannot reasonably be regarded as likely to give rise to a conflict of interest.

7. Duty to declare interest

Section 177 of the Act reflects s.317 of the 1985 Act in that it requires a director to disclose his interest to the board of the company when a transaction is proposed between a director and his company. However, it goes further than the requirement of s.317 of the 1985 Act by requiring a director to declare the nature and the extent of the interest to the other directors. Further, disclosure must be made where a director is considered "ought reasonably to be aware of" (s.177 (5)) the conflicting interest. Disclosure also extends to a person connected with the director, for example, his wife and children.

The requirement for disclosure is dispensed in circumstances where the interest cannot reasonably be regarded as likely to give rise to a conflict of interest or if other directors are already aware or "ought reasonably to be aware" of the director's interest.

A director may have additional obligations or duties based on the terms of his service agreement.

Insolvency

A director has additional obligations where a company becomes insolvent, that is where its liabilities exceed its assets or where the company is unable to discharge its liabilities as they become due. There is of course a difference between the company becoming insolvent and the company entering into a formal insolvency process. When a company becomes insolvent the directors need to do everything they can to limit losses to creditors if it appears that there is a prospect of insolvent liquidation. In such a situation a director should not incur further credit. Where wrongful trading can be established, a director will be exposed to the possibility of disqualification from acting as a director and also to the possibility of having to contribute to the amount of any deficiency.

Company Accounts

Adequate accounting records must be kept. The records must be sufficient to explain the company's transactions and to disclose with reasonable accuracy at any time the financial position of the company and enable a profit and loss account and balance sheet to be prepared. In particular, the accounting records must contain entries from day to day of all money received and expended with details of transactions, and a record of assets and liabilities. The directors must present the company's Report and Accounts to its Annual General Meeting each year, except where "elective" resolutions have been passed to exempt the company from doing this.

The directors are also required to deliver the Report and Accounts to the Registrar of Companies within the time period permitted, although a company does not have to file an auditors' report where its turnover in that year is less than £5.6 million or its balance sheet total for that year is less than £2.8 million. Failure to comply renders the directors liable to a fine. The period allowed for delivering the Report and Accounts to Companies House is currently 10 months after the financial year-end, for a private company. Where it has interests outside the UK, the directors can give notice to the Registrar and claim a further three-month extension. A public company currently has 7 months from the financial year-end to deliver its Report and Accounts to the Registrar.

Medium and Small Sized Companies

A company qualifies, under the Companies Act, as medium or small sized, where it meets specified criteria over a period of time. A company has to comply with at least two of the following criteria concerning annual turnover, balance sheet totals and the average weekly number of employees:

Small Sized: less than Medium Sized: less than
Annual turnover £5.6m £22.8m
Balance sheet total £2.8m £11.4m
Average weekly number of Employees 50 250

Form and Content

The Companies Act establishes the general rules in relation to the form and content of the company's accounts. It requires that one of the prescribed formats (four for the profit and loss account and two for the balance sheet) should be used and adhered to year on year, unless there are special reasons justifying a change, although some flexibility is allowed. Comparative figures for the previous accounting period must be shown and individual items may not be set off against each other.

Small Company Exemptions

"Small" companies need only file an abbreviated balance sheet that complies with the Companies Act. This means that certain items can be aggregated under each of the main balance sheet headings, though the aggregate amounts of debtors and creditors have to be divided between amounts receivable and payable within one-year and those receivable or payable beyond that period.

Small companies may also present to shareholders a full profit and loss account together with an abbreviated balance sheet.

Notes to the financial statements

Information that cannot be accommodated in the model formats has to be disclosed in notes to the financial statements. These notes may be contained in the accounts themselves or in a separate document annexed to the accounts.

By way of general note, the accounting policies used by a company must be disclosed, in particular indicating the depreciation and foreign currency translation methods employed (as appropriate). There must also be a statement that the accounts have been prepared in accordance with applicable accounting standards.

The following details must be disclosed by way of notes to the balance sheet:

  1. Share Capital and Loan Stock;
  2. Reserves and Provisions;
  3. Fixed Assets;
  4. Investments;
  5. Creditors;
  6. Financial Commitments;
  7. Loans for Purchase of Company Shares;
  8. Credit Transactions with the Directors.

The following details must be disclosed by way of notes to the profit and loss account:

  1. Segmental Analysis:
    Trade;
    Geographical Market;
  2. Extraordinary Items;
  3. Taxation;
  4. Specific charges against income;
  5. Employees and their remuneration.