A guide to investing. Appendix 10 Choice of business entity

Transcription

1 A guide to investing in Wales Appendix 10 Choice of business entity August 2013

2 Appendix 10 Choice of business entity 1. Principal forms of doing business Business organisations in the UK usually take the form of partnership (unlimited or limited), branch, private (unlimited or limited) company or public limited company. A public limited company is the only company which has shares and debentures that can be offered to the public. Public companies may choose to be quoted on the stock exchange or to be unlisted. Other organisational forms also exist but are less widely used. Most foreign-owned companies organise their activities in the UK as private limited companies or otherwise, they usually establish a UK branch. Both commercial and tax considerations can influence whether a UK company or branch is more appropriate. Requirements of public and private limited companies Capital. Public: Companies must have an allotted capital of at least 50,000 (or the equivalent in Euros rounded to the nearest 100 Euros), 25% of which must be paid up on each share together with any share premium. Capital can be paid up in cash or non cash forms, but non-cash consideration must be independently valued. Private: Same requirements, except that there is no minimum for private limited companies and non-cash consideration does not need to be independently valued. Board of directors. Public: There must be at least two directors and at least one of the directors must be an individual. There are no nationality or residence requirements. Any changes to the board must be reported to Companies House within 14 days. Private: Same requirements, except that the minimum number of directors is one. Company secretary. Public: A public company must have a secretary. There are some qualification requirements. Private: A private company is not required to have a secretary, unless required under its constitution (Articles of Association). Disclosure. Public: A public company is obliged to appoint an external auditor. Annual accounts, Annual returns together with many additional documents and details, must be filed with Companies House ( where they are made publicly available. Accounts will generally include a profit and loss account, a balance sheet signed by a director, an auditors report signed by the auditor, a directors report signed by a director or the company secretary and notes to the accounts. Private: Same requirements, except for some special provisions and exemptions available to small or medium sized entities (SMEs). A company may qualify as small or medium-sized for a financial year if it satisfies any two of the three conditions under the applicable heading in the table below. In practice, a company qualifies as small or medium-sized in its first accounting period if it meets the size test in that first period or in relation to subsequent periods, if it meets the size test for two consecutive years or more. The size for a small or medium sized entity is to meet two or more of the following criteria: Annual turnover Balance sheet total Employees Small 6,500,000 3,260, Medium 25,900,000 12,900, Small companies may be entitled to submit abbreviated accounts including a balance sheet and notes and a special auditors report (unless claiming audit exemption). Audit exemption can be claimed if the company qualifies as a small company. For accounting periods ending before 31 October 2012, the company needs to satisfy both the annual turnover and balance sheet total limits for a small company in that year in addition to satisfying the two of the three criteria above as a small company in the previous year. Medium-sized companies may submit as a minimum a profit and loss account, a balance sheet, special auditors report, directors report and notes to the accounts. Previous Next Back to to contents A guide to investing in Wales August

3 A company subject to accounting exemptions is still obliged to submit full accounts to its shareholders. Some exclusions apply such that some companies are not eligible as a small or medium sized entity, these exclusions include public companies. The above is very much a high level overview and advice should be sought regarding the specific criteria and qualification for a small or medium sized company, the exemptions available and also the accounting standards to be applied in preparing statutory accounts. Types of shares. Public: Ordinary, preference and cumulative preference shares are the most common form in which corporate securities are issued. The rights attaching to different classes of shares are set out in a company s Articles of Association. A company must maintain a statutory register which would include details of its shareholders, together with details of secretaries and directors, mortgages etc. Private: Private companies are not permitted to offer their shares or debentures to the public. Control. Public and private: A majority of shareholders votes (more than 50%) is required for ordinary resolutions; 75% of shareholders votes are required for special resolutions which would include a change to the Articles and liquidation. 2. Establishing a branch If a non UK company establishes business in the UK which has a degree of permanence in the UK as a branch, it is required to file various particulars and documents with the UK Registrar of Companies to register that branch within one month of establishing business. The registration application would include the name of the non UK company, its business form, country of registration, company number, details of directors and secretary, addresses of the non UK entity and branch, details of UK representatives, date it was opened etc. Additional disclosures are required for non-eu companies. It must also file copies of its constitution including a translation into English. If the company is required under the law of the country in which it is incorporated to prepare, have audited and disclose financial statements, the company must file for public inspection in the UK a copy of those financial statements that are disclosed under that foreign law, including, if appropriate, a translation into English. If the foreign company is not required to prepare and file such accounts, accounts must be prepared as though it were a UK company (with various modifications) and filed for public inspection. 3. Setting up a company Incorporation is the process by which a new or existing business is registered as a limited company in the UK. A company cannot operate as a limited company in the UK until it has been incorporated at Companies House. The registration application includes an application form and fee, memorandum of association and articles of association. The articles of association are the company s internal rulebook within the law and will set out how decisions are taken by members and directors in addition to various matters concerning share capital. The application form would record a number of particulars including the proposed company name, whether the company will be private, public or unlimited, the situation of the registered office (England and Wales, Wales, Scotland or Northern Ireland), address of UK registered office, details of officers (secretary and directors), statement of compliance or guarantee. Public companies must include the words public limited company or the abbreviation plc as an integral part of the company name, to be used on all official documents, general stationery and nameplates. Private limited companies use the word Limited or the abbreviation Ltd, subject to some exemptions available. There is also some flexibility in being able to use some Welsh equivalents in a company name where the registered office of the company is in Wales. A limited company can be usually be registered in the UK within 24 hours of application to the Registrar of Companies. Different fee rates apply depending on whether the application is made in paper form, electronically, by same day application etc. The current incorporation fees do not exceed 100. A company would typically incur additional costs associated with the process of registration, including the drafting of constitution and minutes, registration of first officers and shares, writing up of statutory book etc. The level of these additional costs is very much dependent on the proposed structure of the company and any complexities identified. A company could budget for additional costs in the region of 1,000. Previous Next Back to to contents A guide to investing in Wales August

4 An application for registration would include a form declaring compliance with company legislation, to be signed before an authorised person such as a solicitor or commissioner for oaths. This document is typically arranged by formation agents and is included in the budgeted costs noted above. Corporate and business names It should be stressed that there are a number of restrictions on the use of corporate names. The Registrar will not allow a company to be incorporated with a name identical to one already on the register or so similar to a name already on the register that it would cause confusion. There are a number of words and expressions that the Registrar would disregard in a company name to ascertain whether a proposed name is the same as a name already on the register. Certain words and expressions in a company name are considered to be sensitive and may first need approval. In some cases, specific permission is required from the Secretary of State or a relevant authority and, in others, justification must be provided to the Registrar for the use of a restricted word. The following are just a few examples of such restrictions: words that imply royal or governmental connection (e.g. Royal, Prince ); words that imply national pre-eminence (e.g. National, British ); words that imply connection with certain regulated fields (e.g. Pharmaceutical ); and words that imply a particular corporate form or structure (e.g. International, Group or Holdings ). These restrictions apply equally to Branches of a non UK company and business names. It is recommended that advice be taken on whether a particular proposed corporate name is likely to be accepted for registration by the Registrar, before any documents are submitted to Companies House. Contact: Sarah Delaney Senior Manager Tax Deloitte LLP Telephone: +44 (0) Mobile Phone: +44 (0) sadelaney@deloitte.co.uk Previous Next Previous Back to to contents A guide to investing in Wales August

5 Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited ( DTTL ), a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of DTTL and its member firms. Deloitte LLP is the United Kingdom member firm of DTTL. This publication has been written in general terms and therefore cannot be relied on to cover specific situations; application of the principles set out will depend upon the particular circumstances involved and we recommend that you obtain professional advice before acting or refraining from acting on any of the contents of this publication. Deloitte LLP would be pleased to advise readers on how to apply the principles set out in this publication to their specific circumstances. Deloitte LLP accepts no duty of care or liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication Deloitte LLP. All rights reserved. Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom. Tel: +44 (0) Fax: +44 (0) Designed and produced by The Creative Studio at Deloitte, London A Previous Back to contents