Setting Up an English
Limited Company (Ltd) or PLC (Public
Limited Company) in
United Kingdom
1.
Company formation UK Limited (Ltd) or PLC:
Basic Information on Taxation in
United Kingdom
English limited companies (a limited company = a
company with limited liability or a PLC = English public limited
company) are taxed at 21%, the rate for medium-sized enterprises (on
profits of up to 300,000 pounds sterling), thereafter progressively
increasing to 30%. VAT is 20%. As England is a member of the European Union, the EU directive
on parent-subsidiary companies is in effect (tax-free collection of
dividends in the case of associated companies within the EU,
provided that the minimum participation threshold of 10% is reached
and the companies involved are operating as active businesses), and
the EU directive on mergers and/or the EU freedom of establishment.
England has a double-taxation agreement with many countries and,
therefore, in many cases, the shielding effect of a double-taxation
agreement is available. As a rule, an English limited company or PLC
is not suitable as a holding company (one which holds shares in
domestic or foreign companies).
1.1
Company formation UK
Limited (Ltd) or PLC: Basics Information on
United Kingdom
as a Location
From a purely fiscal point of view England, as a
location, stands in the middle ground of the major industrialised
countries. Within the European context countries such as Cyprus and
Bulgaria (with tax rates of 10% on earnings), Madeira or the special
zone of the Canaries (with tax rates of approx. 5%) have tax rates
that are considerably lower. However,
England has something to offer from the point of view of company law.
Thus, in the case of an English limited company the minimum share
capital is one pound sterling and, in the case of a PLC, 50,000
pounds sterling, whereby just 25% requires to be deposited.
Companies (limited companies or PLCs) are liable with their capital
contribution and fixed assets and business assets, insofar as there
are any. There are also, admittedly, situations in England in which
the corporate veil is pierced and liability is enforced on the
director as a natural person. However, these are not comparable with
the regulations in other countries.
2.
Our
“Setting Up a Company (Limited/Ltd or PLC) in
United Kingdom”
Services
Our legal firm sets up
English companies (limited companies or PLCs) on behalf of clients,
including all the necessary or desired services:
-advice on all issues concerning the setting up of
a limited company or PLC in England, and tax advice within the
context of associated companies
-setting up of the company, registration at
Companies House in England, memorandum of association and the
articles of association
-translation of the registration documents into
the language of the country of the client, apostille, certification
of documents by a solicitor
-provision of the registered office in England
-provision of a head office (proper place of
business) in England: company sign, its own telephone number, taking
personal phone calls using the name of the company, fax service,
acceptance and forwarding of mail. In addition, on request: the
renting out of fully-equipped offices and/or the use of conference
rooms
-appointment of a company secretary and the
services of the company secretary (no longer required in the case of
a limited company)
-appointment of a trust director or full-time
director in England (cf. “location of the senior management of the
business” as the location of the business premises, provided there
are no production facilities, no site for the exploitation of
mineral resources or building work being carried out in England
lasting longer than 6-9 months, in which case the business premises
are always in England, irrespective of the location of the senior
management of the business). According to a new law, one director
must be a natural person and be resident within the EU. Therefore,
we will, on request, appoint one who is resident in England as a
director of the company, if the business premises are supposed to be
located in England.
-appointment of a trust shareholder: we will, on
request, appoint a legal person as trust shareholder, who will hold
X-100% of the shares as trustee
-bookkeeping, advance VAT
return and annual accounts
-opening of an account in the name of the English
company, including online banking, cheques and credit card. On the
appointment of a trust director the beneficiary/client will obtain
sole authority over the account.
-registration of a branch office of the English
limited company in another EU country or in Switzerland.
Special services for companies that wish to set up
fairly large business premises in England:
-assistance with the search for suitable offices,
storage depots or production sites, process for obtaining permits
-the director will be appointed by the foreign
company itself and dispatched to England: registration for tax
purposes, nationanal insurance number (social security number),
English national health insurance, assistance with finding somewhere
to live. The same applies to members of staff at the English company
in England.
-Members of staff in England: payroll accounting,
transfer of income tax on earnings and social security
The fees depend on the services. We will gladly
send you a summary of our fees.
3.
Setting Up a Limited Company (Ltd) or PLC
in
United Kingdom
and Company Law
3.1
English Limited Company (UK Ltd)
1.
Establishment
A
limited company may be established without the involvement of a
solicitor. All that is required is to submit an application to
Companies House, the central register of companies in England.
Various documents must be enclosed with this application, such as
inter alia the bylaws of
the company, consisting of two parts: the memorandum of association
and the articles of association. The memorandum will contain the
provisions with reference to the legal relationship with third
parties, whilst the articles govern the internal relationships of
the company.
Companies House (English Register of Companies) only
carries out a formal check and in so doing checks whether
the name of the company is permissible or whether another company
with the same name already exists or whether the intended articles
of association contravene statutory provisions. If there are no
grounds for rejection,
Companies House will issue the certificate establishing the company,
the so-called certificate of incorporation. The date of issue of the
certificate of incorporation is, at the same time, the date of
establishment of the company. From this date onwards it is legally
in existence, can conclude agreements and be the bearer of rights
and obligations. From this moment on liability is also limited to
the assets of the company, provided the articles of association of
the company contain a corresponding clause limiting liability.
Companies House does not check that the obligations with regard to
making deposits have been fulfilled and the ability to freely
dispose of the goods and services of the company.
2. The Share Capital of the
English Limited Company (Ltd)
The
limited company needs practically no share capital. It is true that
a nominal share capital must be quoted in the articles of
association and each founding member must assume responsibility for
a proportion of this. However, a share of one penny is all that is
required, in theory. But in practice a nominal share capital of "at
least one pound sterling" is demanded. The provisions concerning the
meeting of the obligation to make an investment are also really
quite liberal which, in view of the fact that only one pound has to
be raised, is no more surprising. Therefore, both cash and
contributions in kind can be invested, whereby services provided by
the partners are also recognised as an investment. The investment
can also be achieved by offsetting the claims of the partner against
the company.
The nature of the investment merely has to be communicated by the
company secretary to Companies House, without an agreement in the
articles of association being required. There is also greater
freedom when placing a value on the contribution in kind. A full
check such as in the case of a German limited company does not take
place.
English law is stricter when it comes to the distribution of the
profits. Only the profit made after offsetting it against losses
carried forward may be distributed. The profit must have been made
after the company was set up. Accounting profits resulting from
re-evaluations are not available for distribution. On the other hand,
undisclosed profit distributions are readily permissible under
English law. Under German law, by contrast, this is not allowed, if
the share capital is affected by the undisclosed profit distribution.
Undisclosed profit distributions only lead to a liability, under
English law, if there is a glaring imbalance between the performance
of the company and the partner.
Considerably more difficult is a write-down of the share capital
of an English limited company which, in view of the fact that is
does not need to have practically any share capital is, however, of
secondary importance. Should, nevertheless, a write-down of the
share capital take place, the consent of the competent court is
required for this. In so doing, the court will check whether the
company has observed the formalities and whether the interests of
the creditors, the shareholders and the public have been
sufficiently safeguarded. A comparable check does not take place in
the case of a German limited company.
3.The Organs and
Arrangements of the English Limited Company (Ltd)
The
English Limited company possesses three organs: the director, the
company meeting and the company secretary.
Insertion:
following an amendment to the law a company secretary is no longer
required in the case of an English Limited company. The manager can
take on these duties.
Every English limited company must have a so-called registered
office in England. This does not involve, in this case, an actual
place of business. But this registered office serves, in particular,
as an official location for the delivery of mail to and the storage
of documentation on behalf of the company. Official communications,
complaints (including legal actions) etc. are delivered to this
address. In addition, the obligatory partners - and miscellaneous
register - must also be stored there. Therefore, the registered
office is not just a letter-box office but actual administrative
activities also take place there.
In England there are professional company secretaries who take
on these duties for many different companies. These company
secretaries also provide the services of a registered office.
4. The Obligations of the
English Limited Company to Publish Information
Even limited companies are obliged to disclose their annual
accounts. At the same time it must be borne in mind that the English
limited company will, of course, have to present annual accounts
that comply with the English balance-sheet standards.
In addition, the director of the limited company, or the company
secretary must submit the so-called annual return to Companies House
once every calendar year. What is involved in this case is a summary
with information on the company, the management, the partners and
the capital structure. In addition, there are further compulsory
communications, all of which can, however, be dealt with by the
company secretary or the director. However, Companies House monitors
very meticulously that these duties of disclosure are being observed.
In the event of these being breached, fines are imposed on those
responsible and, in the worst case scenario, the company can be
officially struck off due to the breaching of duties of disclosure.
5. Piercing the Corporate
Veil in the Case of the English Limited Company
English
law is also familiar with the possibility of making claims against
the partners in respect of liabilities of the company (so-called
piercing the corporate veil). However, the requirements are strict.
Presenting them would break the local mould. All that has to be
borne in mind is that the issue of piercing the corporate veil in
the case of the English limited company can also depend on English
law, even if the company has its registered office in Germany, for
example.
3.2
Setting Up a Company in England: the PLC (Public
Limited Company)
Key Features of
the PLC (public limited company) in England:
- Minimum share capital: 50,000.00 pounds
sterling, at least 25% must be deposited
- at least 2 directors must be appointed
Note:
the place of business for tax purposes is legally defined in the
double-taxation agreement. Thus a natural person who normally
resides in England must occupy the position of senior manager of the
PLC (5 DTA: "Location of the senior management" as the location of
the place of business). Either the client - or a representative -
shifts his usual residence to England and acts himself as a director
of the company or our legal firm in England can appoint a trust
director or full-time director. Since October 2008 only natural
persons are still allowed as managers. Since, when setting up a PLC,
two directors are required, our legal firm can appoint both
directors or just one director, whereby the client - or his
representative - steps in as the second director. It is not
absolutely necessary for the second director to be normally resident
in England.
This rule can be departed from if a production
facility is set up in England, a facility for the exploitation of
mineral resources or construction work is being carried out that
will last longer than 9-12 months. In that case, as far as the facts
of the DTA are concerned, the place of business is always in
England, irrespective of the location of the senior management of
the business.
-a certified company secretary must be
appointed
- at least 2 shareholders must be appointed (these
may be natural or legal persons from home or abroad)
-a PLC is subject to a "compulsory
audit" once a year. We can arrange for an English firm of auditors
to do this.
Sale of Shares in the PLC (quoted off-the-floor and on the stock
exchange)
As far as the sale of shares in the PLC is
concerned, the PLC, as a
Public Limited
Company,
has the choice as to whether and how this should be achieved (through
the stock exhange or "off-the-floor").
Actually publication, that is listing them on the
stock exchange, is very expensive.
However, it is not absolutely necessary for the PLC to "quote
them publicly", they can also be held privately or it can sell
shares directly.
Registration of the PLC with the FSA (Financial
Service Authority) in the UK must be determined following an
examination of the business activities.
We can, on request, assume responsibility for all
the services involved in quoting the PLC on the stock exchange or
off-the-floor. Fees will depend on the services.
