The private limited company is the most common form of trading entity in the UK, and for foreign investors, is generally set up as a subsidiary of a foreign holding company or a separate company. The liability of the shareholders is limited to the fully paid up amount of the shares in the company, so unless an explicit guarantee is provided by the parent, the liability of the UK subsidiary does not become the liability of the parent.
The constitution of a private limited company is set out in its articles of association and any resolutions and agreements that affect the constitution. The articles of association, combined with provisions of the Companies Act 2006, set out the internal regulations of the company, the rights and obligations of the shareholders and the duties and responsibilities of the directors.
There are no minimum share capital requirements for a private limited company, or any requirements that the capital has to be paid up. It is increasingly common for private limited companies to have more than one class of shares which directors have the power to issue, unless such limitations are set out in the articles of association. The shares may be re-denominated into other currencies.
A private company can be incorporated with a single shareholder director, and there are no maximum number of directors and there are no legal requirements for any director to be a British resident or national. However a company must have at least one director who is a natural person. Private companies are no longer required to have a company secretary, unless required by the articles of association.
Private companies are not required to hold annual general meetings and can pass resolutions in writing. In order to pass ordinary resolutions, a majority vote is required, and where articles are changed, a 75% vote is necessary.
An English company must have a registered office in England and Wales which can be its principal place of business or the office of its accountants or lawyers. The company must keep its statutory books (including its minute book, registers of members and directors etc) at the registered office or at an alternative location in the UK which must be notified to the Registrar of Companies. Legal proceedings can be validly served on the company at its registered office address.
In relation to the filing and reporting requirements, a private limited company is to submit an annual return (Form AR01 which includes the details of the share capital, the voting rights, shareholders and directors) with the Registrar of Companies every year. Documents filed with the Registrar of Companies, including the financial statements form part of the public record and are therefore open to inspection by the public. Financial statements are filed within 9 months from accounting reference date of a private limited company. In relation to the filing of the first set of accounts which cover a period of more than 12 months, it should be filed within 21 months from the date of incorporation of the private limited company, or 3 months from the accounting reference date, whichever is longer.
Other obligations of a company include: (i) the appointment of auditors, unless its turnover and balance sheet total are below specified thresholds, (ii) to keep a register of its shareholders (known as members), including their names and addresses, the number and class of shares they hold, details of the rights attaching to the different classes of shares and the date when they became members of the company, (iii) keep a register of charges (mortgages and other secured interests), (iv) keep a register of its directors and secretary – (if it chooses to have a secretary), and (iv) a register of directors’ and secretary’s residential addresses.
There are penalties for not meeting these obligations including automatic financial penalties for the failure to file statutory accounts by the due date. Continued non-compliance can lead to the compulsory dissolution of the Company by the Registrar of Companies with potential liability for the directors.