In order to establish a private company, there are a number of issues that need to be considered. These include not only creating (incorporating) the company itself, but also running its records once the company is incorporated.
In recent years it has become increasingly popular for the leasehold owners of flats to join together and buy the freehold of their building in order to obtain control of the management of their building or grant themselves new leases extending the length of their lease terms. If certain qualifying criteria have been met, the statutory procedure for collective enfranchisement has been complied with, purchase price has been agreed and all relevant fees and costs paid, the completion then takes place in the name of the company incorporated for this purpose.
A private company limited by shares or guarantee?
The first step would be to choose whether you wish to set up a company limited by shares or a company limited by guarantee. Both are similar in the way they are incorporated and run on a day-to-day basis. However when the company limited by shares is incorporated, it must issue at least one share to each of its initial shareholders. The value of such shares may vary starting from as little as a hundredth of a penny. The total funds raised by the company in exchange for shares form the capital (share capital) of this company. Generally and for ease of incorporation and housekeeping, the initial shareholders are issued with 1 ordinary share with a value of say £1.00 each (this can be further increased or sub-divided should this become necessary). The company limited by guarantee on the contrary does not have share capital or any shareholders. It only has the members who control the company and who act as guarantors. Each guarantor gives an undertaking to contribute a nominal amount – again from as little as a hundredth of a penny – in the event of the winding up of the company.
One of the main considerations for the flat owners when setting up a company would be the extent of their personal liability if something goes wrong. Whether it is the company limited by shares or the company limited by guarantee, it provides their members protection from liability. In the case of the company limited by shares, the shareholders liability is limited to the amount they paid or they are due to pay for the shares and they are not personally liable for any company’s debts and/or liabilities. Where the company is limited by guarantee, the liability of its members is limited to such amount as they undertake to contribute to the assets of the company if it is being wound up. Such amount is usually nominal and is likely to be limited to £1.00 only.
Once the limited company is incorporated, the directors must comply with the company’s Articles of Association as well as the statutory obligations imposed by the Companies Act 2006. The directors must keep records of all legal and statutory matters relating to the Company.
It is the directors’ responsibility to file a confirmation statement every year with the Registrar of Companies / Companies House. There are strict penalties which are imposed by the Registrar for late filing of accounts, failure to submit accounts, failure to file the confirmation statement, notify any changes of the officers within the prescribed period or failure to inform about amendments to the Articles and other companies matters. These penalties include fines up to £5,000 and/or dissolution of the company and/or disqualification from the role as a director.
The Company Secretary
In order to ensure the efficient administration of a company, the directors may choose to undertake the legal and statutory obligations themselves or may choose to employ a Company Secretary who will be responsible for compliance with regulatory and statutory requirements (including maintaining statutory books, organising general meetings and board meetings, drafting necessary resolutions, preparing agendas, taking minutes and arranging the necessary filings at the Companies House).
We at Bishop & Sewell LLP have excellent knowledge and expertise on all things related to creating and maintaining a company.
Should you require any assistance or advice on any aspect, whether it is incorporation or administration of a company, please contact the Company Secretarial Department of Bishop & Sewell LLP on +44 (0)20 7631 4141 or email us on firstname.lastname@example.org and we will be delighted to assist you.