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How to set up a limited company in the UK

This information is brought to you by UKcorporator, the UK's first and only automated online DIY system for the creation of any type of UK company. Click here, or on the 'Back' or 'Continue' buttons at the foot of this page, to go directly to the UKcorporator website home page.
(Note: this page is currently being re-written in view of recent law changes. Some of the information here may no longer be current. UKcorporator's incorporation process however remains perfectly valid and effectual and complies with current law.)

This article deals with formation of limited liability companies in England, Wales and Scotland. It focuses on do-it-yourself (‘DIY’) limited liability company formation. (You can also read our information page comparing various non-DIY company formation methods.)

Limited liability companies may be formed via a DIY method, a company formation agent or via a professional adviser (e.g. an accountant or solicitor).

Generally, as one would expect, do-it-yourself (‘DIY’) methods are the least expensive. Using a professional adviser is generally the most expensive way to proceed. Often, the professional adviser will subcontract the task to a company formation agent and will then charge the client a margin on top.

An advantage of DIY methods (apart from the price advantage) is that you will inevitably be forming a brand new company. So you can be 100% certain that the company has no previous trading history - e.g. tax obligations or other lurking debts. Also, the company’s first annual return should not be due for the maximum permissible period - usually 18 months.

Formation of a limited liability company involves lodging certain documents at Companies House, which is the government agency responsible for registering companies. There is also a legal requirement to create and maintain certain registers (this is discussed further below). Generally there are four documents required to be lodged at Companies House, namely, the Companies House form 10, the Companies House form 12, the Memorandum of Association and the Articles of Association. In some rare cases (e.g. where special permission from some other agency is required in respect of the proposed company’s chosen name) other documents may need to be lodged also.

The forms 10 and 12 can be obtained from the Companies House website www.companies-house.gov.uk. However, it should be mentioned that they are not the easiest forms to follow and if completed incorrectly, Companies House will normally reject the documents, which will necessitate that they be corrected and returned to Companies House. The Form 12 takes the form of a statutory declaration, which must be witnessed by a Justice of the Peace, a Notary Public, a Solicitor or a Commissioner for Affidavits. If the documents are rejected by Companies House, it is usually necessary to have the Form 12 declared again (before a witness meeting one of the descriptions just mentioned) and then to have all of the documents re-lodged at Companies House.

Most people attempting DIY company formation struggle with the company’s Memorandum of Association and the company’s Articles of Association. These documents are very important - they describe the company’s objects and also deal with the way in which the company’s internal affairs are regulated. For example, the Articles of Association deal with such things as the transfer of shares, the conduct of directors’ and members’ meetings, the declaration of dividends and the directors’ indemnity from company assets.

The format of the Memorandum of Association and the Articles of Association may be found in The Companies (Tables A to F) Regulations 1985. This legislation contains a ‘model’ example of a Memorandum of Association and Articles of Association. A copy of these regulations may be obtained from The Stationery Office Limited (the privatized publishing arm of Her Majesty’s Stationery Office). The Stationery Office Limited has an office at Nine Elms, London and at the time of writing could be contacted on ph. 0870 600 5522. It has a website at www.tso.co.uk. (In general, statutory enactments going back to 1989 may be obtained free of charge from www.hmso.gov.uk. Unfortunately, The Companies (Tables A to F) Regulations 1985 are not available from that source as they were passed in 1985.)

But even armed with The Companies (Tables A to F) Regulations 1985, the process of forming a company has complications. The ‘model’ set of Articles of Association (known as ‘Table A’) found in these regulations has undergone little change since it appeared in earlier legislation in 1948 and is unsuitable in many respects for modern companies. (For example, the meeting procedures are cumbersome, the provisions for compulsory rotation of directors are usually unsuitable, the provisions requiring directors to keep minutes are usually considered to be drafted in a manner which is too onerous on directors and there are no satisfactory pre-emption rights in relation to shares. Many other examples could be given.) Although it is possible to adopt Table A in full (e.g. by writing a letter to Companies House at the time of lodging the other documents) thereby avoiding the need to prepare any Articles of Association, this is rarely a good idea in practice.

Also The Companies (Tables A to F) Regulations 1985 give no guidance as to how the Articles of Association should be signed. In practice, they are usually signed by the subscribers (initial members / shareholders) in the presence of a witness who signs also.

There are more hurdles after lodging the correct documents at Companies House. Various sections of the Companies Act 1985 require limited companies (and indeed other types of companies) to keep proper registers - e.g. section 352 (Register of Members), section 288 (Register of Directors and Secretaries) and section 407 (Register of Charges). If these registers are not kept, the company and every director and company secretary commits an offence and is liable to a fine. The registers are not in a specific format prescribed by legislation. Rather, each company register may generally be set out in whatever format is convenient, so long as all of the information required by the legislation is included.

In addition to the company registers, a limited liability company will usually wish to issue share certificates to its initial members / shareholders shortly after it is formed. Again, share certificates are not in a specific format prescribed by legislation.

So in summary, the process of limited company formation (with all of the legally required registers etc.) can be quite difficult and time-consuming, even after carrying out a good deal of research into primary materials such as the Companies Act 1985, The Companies (Tables A to F) Regulations 1985 and the requisite Companies House forms as prescribed by legislation.

In response to this situation, UKcorporator (the provider of this information) has developed a website which it believes fills a niche for people wishing to achieve the savings of a DIY method, but without the time-consuming problems of finding a precedent for documents such as Articles of Association, Memorandum of Association, etc. UKcorporator is an easy-to-use, plain English website which provides the user with a simple online automated Q and A process. Extensive context sensitive guidance is provided in relation to nearly every question. At the end of the Q and A process, the user may, if he / she elects to proceed, pay the amount mentioned on the home page by secure encrypted credit card system (via www.worldpay.com). UKcorporator will then immediately and automatically generate, and immediately and automatically electronically deliver, all of the legally required documents for the incorporation of the proposed company, and all other documents which are legally required immediately following the formation of the company. (The documents will be duly filled out and need only to be signed, witnessed in some cases, dated and in the case of certain of them, lodged at Companies House).

If you would like to test-drive the UKcorporator website (and without any need to pre-register or pre-pay), simply click here, then click on the ‘Start using or test-driving UKcorporator Now’ button.

If you would like further information as to a company's memorandum and articles of association, and how you can obtain a suitable version of them (for a company to be incorporated in England, Wales or Scotland) inexpensively and quickly via the internet, simply click here.

If you would like information on different aspects of company structures, click here.

Also, for information about whether your proposed company name is available, click here: Check Company Name Availability - Available Company Names

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