Small business blog from Farringford Legal

At the end of the 2024 financial year, there were 5.3m companies registered at Companies House. Over 95% of these are private limited companies, and this statistic has remained the same since 2005. As private limited companies are overwhelmingly the most popular choice of business vehicle, burgeoning business owners must be aware of the regulations in place for forming a company, and the ramifications of doing this incorrectly.

Private limited companies are the most popular form of business vehicle because their members are afforded limited liability, and they have a lower administrative burden than public companies. Private companies are usually ‘limited by shares’; there is the option to be limited by ‘guarantee’ instead, but this is most commonly used to set up non-profit organisations. If you are looking to set up a non-profit organisation or charity, please reach out for further details.

The most important document for incorporation of a company is Form IN01, which you can access at Companies House. This is used to register a company, and it contains all of the information you will need to form your business; therefore, it is important that you have had a look at this beforehand, and made the appropriate decisions about the structure of your business. The form will contain:

• The company’s proposed name: this must end in ‘limited’ or ‘ltd’, and it must pass the necessary requirements for an appropriate name
• The type of company and its intended principal business activities: the form must state that the company is ‘a private company limited by shares’, and reference how your company will earn profits.
• A statement of lawful purpose
• Country of registered office and an appropriate registered office address: i.e. a PO Box is not an ‘appropriate’ address.
• Appropriate email address: this came into force on 4 March 2024, and will enable email communication with the Registrar of Companies.
• Statutory registers: it must either be stated that these are kept at the company’s registered office, OR you must fill out Form AD02 (notification of a Single Alternative Inspection Location (SAIL))
• Proposed Articles of Association: if you are using Model Articles, this must be indicated – if you are using bespoke articles, a copy of these must be sent along with the form (see below for more details)
• Details of first directors and secretary (if any): this must include their full and former names, date of birth, country of residence, nationality, occupation, and service and residential addresses. Private limited companies are not required to appoint a secretary.
• A statement of capital and initial shareholdings: this must set out the total number of shares taken by the subscribers at the formation of the company, the aggregate nominal value of those shares, and the total amount to be unpaid on those shares. It must also include the classes of shares in the company, the number of shares in each class, the aggregate nominal value of each class and detail the rights attributed to each class of shares in the company (e.g. voting rights, rights to dividend).
• A statement of initial significant control: this statement must identify any person who qualifies as a person with significant control (PSC: i.e. anyone that owns more than 25% of the shares or voting rights in the company), and include information for the company’s PSC register.
• Statement of compliance

Companies House also requires fees for incorporation, which varies based on whether the incorporation is done online or on paper, and whether you choose to have a same-day service (software only).

A document detailing the company’s Articles of Association is also something you need to have carefully considered before incorporation. The articles determine the internal rules of the company, such as how meetings of shareholders and directors will work. You must decide to either: 1) use the Model Articles supplied by the Companies Act 2006 (these will apply by default by legislation unless amended), or 2) create bespoke articles tailored to your specific company, with help from a lawyer. If you are happy with Model Articles you can simply indicate this on the form, but bespoke articles must be sent with Form IN01.

If you complete Form IN01 incorrectly (e.g. missing information, not checking that the proposed name is available, inclosing the wrong fee, etc.), Companies House have the right to simply return forms, and not incorporate the company. In this case, you will need to re-submit the relevant page with the correct information and a different form (Form RP04) before your incorporation will be completed. Thankfully, this is provided free of charge so you will not have wasted your fee. Remember: until you receive a certificate of incorporation from Companies House, your company has NOT been successfully registered! 

Small mistakes or typos in the proposed company name or directors’ names and dates of birth will also require correction via a ‘second filing’ form sent to Companies House, or a confirmation statement (Form CS01). Bigger mistakes such as issuing too many shares are more complicated to fix – in this case, you will need to issue a special resolution to change these details, and any reduction in share capital will require a solvency statement and a statement of capital (Form SH19). If you mistakenly form a private company limited by guarantee instead of limited by shares, it is not possible to correct this, so you will likely have to dissolve the company and incorporate a new one.

As such, it is of paramount importance that you check over this information carefully, ideally with a lawyer. 

Farringford Legal can advise on the correct set-up of all types of business and will be your legal partner as you embark on your growth journey.

Farringford Legal is a partner for growth, providing affordable, expert legal services in Surrey and across England & Wales with a client-centric, entrepreneurial approach. We are not just lawyers; we are allies in your business journey, adapting as your business evolves, deeply trustworthy, always responsive.

www.farringfordlegal.co.uk  |  info@farringfordlegal.co.uk  

This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published