This blog details the paperwork and processes required to form a company and keep right with Companies House. Although you can set up a company formation on your own, it is normally advisable to use a specialist formation agent. You first need to decide on the following:
- Whether the company is to be a private or public company limited by shares, or a private company limited by guarantee
- The purpose of the company and its capital requirements
- Whether the proposed company name is available and acceptable
Company formation and incorporation procedures
You will need to complete the following forms before you can start your company formation:
- Statement of first directors, secretary, and registered office (Form IN01 – Application to register a private or public company)
- Memorandum of Association, including details of the subscriber(s)
- Articles of Association, including relevant rights and restrictions on shares of each class (if more than one), and conditions relating to directors
Send the completed forms to Companies House with a cheque for the necessary fee, and the certificate of incorporation should be issued. A private company may begin trading activities from the date of issue of this certificate.
If formation agents have been involved, they will normally provide copies of the relevant documents, together with suggested minutes for the directors’ meeting, a form AA01 – change of accounting reference date, and forms SH01 (Return of allotment of shares). They usually also supply the Statutory Book – a combined register, and minute book (in loose leaf or bound form), and some blank share certificates.
Company formation and post incorporation matters
First meeting of directors
Once you receive the Certificate of Incorporation, you should hold a first meeting of directors to deal with the following matters:
- Appointment (if appropriate) of a chairperson, managing director, and any additional directors, and approval of any employment contracts
- Appointment (if appropriate) of auditors
- Issue of share certificates and, if appropriate, allotment of further shares
- Approval of banking arrangements, including agreeing authorised signatories in respect of the company’s bank account and passing the resolutions required by the bank
- Approval of any business contracts
- Disclosure by directors of their interests in any contracts made with the company
- Disclosure in writing by the directors of their interests in shares or debentures of the company and associated companies
- Adoption of an accounting reference date
- Convening of a general meeting (if required)
First general meeting
A first general meeting of the company will be required:
- To approve any substantial property transaction between the company and any of its directors
- To approve any directors’ service contracts to be entered into for terms exceeding five years
After the first board and general meetings, you should make the following returns to the Registrar of Companies:
- Form SH01 (Return of allotment of shares)
- If necessary, Form AA01 (Change of accounting reference date). Failure to notify a change will result in the company’s accounting reference date becoming the anniversary of the end of the month of incorporation
In special circumstances you might have to make the following returns:
- Form 123 (Notice of increase in nominal capital) and a copy of the resolution authorising the increase
- A copy of any new or altered Memorandum or Articles, and special resolutions passed
- Form 318 (Notice of place where copies of directors’ service contracts or memoranda thereof are kept) (UK companies only).
- Form 325 (Notice of place where register of directors’ interests in shares etc. is kept) where appropriate (UK companies only).
Company formation and other matters
- Minutes of the first board and general meetings should be prepared
- The company should issue share certificates
- The company’s statutory books should be written up
- Shareholders should pay their share capital into the company’s bank account
- Consider proposing elective resolutions to dispense with the need for annual general meetings and the laying of accounts and reports before a general meeting
- Consider using written resolutions in place of general meetings
- Don’t forget to register for VAT, if appropriate
- Register the name under the 1985 Business Registration Names Act
- Notify HMRC within three months of starting trading or receiving interest on a bank account, or other taxable income. There is a fine if you are late.
There are a plethora of issues that could be detrimental to your finances and your company if you get the formation process wrong. We can’t stress how important it is to have a subject matter expert walk you through the process.
At Condies we’ve been supporting Scottish businesses with their company formations since the 1920s. Get in touch to find out how we can help by emailing firstname.lastname@example.org or calling us on 01383 721421.